That is crystal clear in the latest bank profit results. Our largest bank effectively became the biggest weapon in the Reserve Bank’s “wealth effect” arsenal. Why bank profits rise when interest rates riseThe key detail for any banker is that rising interest rates allow banks to increase their profit margins on lending. This is partly due to banks’ interest margins tending to rise when short-term interest rates are rising, as this June 2020 paper from the University of Waikato found. So why isn’t there a bank profits windfall tax to soften the blow to come of rising unemployment and higher living costs for those who don’t own homes or bank shares?

Source: Stuff October 30, 2022 16:24 UTC