Banks $112 billion profit from Reserve Bank Australia interest rate hikes

Greedy banks are fuelling the cost of living crisis by sucking $112 billion a year out of the economy on the back of the RBA’s interest hikes as CEOs trouser muti-million-dollar bonuses.

Greedy banks are fuelling the cost of living crisis by sucking $112 billion a year out of the economy on the back of the Reserve Bank of Australia’s string of interest hikes.

Expert analysis shows that if the RBA bumps up interest rates by another 25 basis points on Tuesday the banks would pass it on and suck another $6.6 billion out of the economy.

While everyday Aussies struggle to pay their bills, the subsequent $17.2 billion in naked extra profit for the banks has seen the chief executives of the big four trouser bonuses of more than $3 million each.

Commonwealth Bank chief Matt Comyn, the best paid of the banking fat cats, last year received a bonus of almost $4.7 million on top of his $2.5 million base salary.

David Richardson, Australia Institute Researcher, said $77 billion of the extra cash sucked out of the economy by the banks came from homeowners with a mortgage.

“The banks have been pushing up the cost of living for everybody else through the mortgage interest rate and are getting rewarded for giving everyone else misery,” he said.

The figures show that passing on a new 25 basis point rate increase would mean payments on the average home loan of $620,000 would go up an extra $112 a week on top of the existing $1,148 a week mortgage.

“The RBA’s decisions to increase interest rates inflict the worst damage on recent home buyers and inflict unemployment on people in precarious work,” Mr Richardson said.

“Even those on pretty good incomes are not immune when the average new homebuyer has to find 61 per cent of the average wage to service a mortgage.”

CBA CEO Matt Comyn received a bonus of $4.7 million last year. Picture: NCA NewsWire / Damian Shaw

Westpac CEO Peter King’s total pay jumped by 14.5 per cent to $5.7 million last year. Picture: NCA NewsWire/Tertius Pickard

Not among those suffering are Westpac boss Peter King who saw his total pay jump by 14.5 per cent last year to $5.7 million and ANZ chief Shayne Elliott whose total pay jumped 12.7 per cent to top $6.1 million.

However Mr Elliott may have to hand back some of his $3.6 million bonus over allegations his traders manipulated the market in a $14 billion government bond sale in April 2023.

ANZ CEO Shayne Elliott. Picture: AAP Image/Joel Carrett

NAB chief executive Ross McEwan. Picture Dean Martin

The RBA is considering whether to increase the cash rate from a 12-year high of 4.35 per cent after June quarter inflation figures showed an increase in the annual rate to 3.8 per cent.

Greens senator Nick McKim said there was “simply no case” for the RBA to raise interest rates and to do so would be “an absolute disaster” for millions of Australians but a “bonanza” for the banks.

“Young Aussies who aren’t responsible for the spike in inflation are being punished, while older people with savings are spending like drunken sailors,” he said.

“The RBA’s rate hikes hit those in debt hardest, with some young folks skipping meals just to survive,” Mr McKim said.

“Meanwhile, banks and big corporations are making a killing through price gouging and higher loan margins.”

Originally published as Banks $112 billion profit from Reserve Bank Australia interest rate hikes