The Consequences of Low Interest Rates for the Australian Banking Sector

Anthony Brassil

RBA Research Discussion Papers from Reserve Bank of Australia

Abstract: There is a vast international literature exploring the consequences of low interest rates for various banking sectors. In this paper, I explore how this international literature relates to the Australian banking sector, which operates differently to other jurisdictions. In the face of low rates, the profitability of Australian banks has likely been less adversely affected than what the international literature would predict, but the flip side to this is that the pass-through of monetary policy to lending rates may have been more muted. I then use a recent advance in macrofinancial modelling to explore whether pass-through in Australia could turn negative – the so called 'reversal rate' – and find that the features of the Australian banking system mean a reversal rate is highly unlikely to exist in Australia.

Keywords: banking; interest rates; monetary policy (search for similar items in EconPapers)
JEL-codes: E43 E52 G21 (search for similar items in EconPapers)
Date: 2022-12
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.rba.gov.au/publications/rdp/2022/pdf/rdp2022-08.pdf (application/pdf)

Related works:
Working Paper: The Consequences of Low Interest Rates for the Australian Banking Sector (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:rba:rbardp:rdp2022-08

DOI: 10.47688/rdp2022-08

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