How a rate hike could save the banks

The big four are clearly betting on a lower cash rate to help fill a funding gap. But if they want to fix the problem permanently, they'll have to lift their own rates.

Australia has one of the strongest banking systems in the world because our banks didn’t play the silly overseas banking games of lending to people, organisations or governments who were unable to repay loans. But we have a weakness – our so-called ‘funding gap’ – and it's time to bring that weakness into the open, given that ANZ is this week deciding whether to lift mortgage interest rates.

Australian banks’ funding gap is the money they need to raise from the expensive overseas inter-banking market. It’s expensive because global banks no longer trust each other, as no one knows the extent of bank exposure to high-risk securities.

{{content.question}}

SMS Code Sent…

Hi {{ user.FirstName }}

Looks like you've already taken a free trial

Please enter your payment details

We have sent you a code via SMS to {{user.DayPhone}}

please enter this code below to activate your membership

If you didn't receive SMS code please

Looks you are already a member. Please enter your password to proceed

Please untick this box when using a public or shared device


Verify your mobile number

Please sign up for full access

Updating information

Please wait ...

  • Mastercard
  • Visa

Related Articles