Aussie Bank Slips on Banana Analogy

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Westpac – Full Transcript of “Cool Bananas”

Once upon a time there were big lush fields of banana crops, but one day a terrible storm rolled in and hit the banana fields. So the crops were damaged and there were not enough to go around. Because of the devastating storm, the price of bananas went up and it cost more to make a banana smoothie, that’s why the price of smoothies increased by 50 cents. The end.

We all understand this story right? A plus B equals C. But the same formula seems so much harder to understand when it comes to talking about money, about lending, about mortgages, and about banking.

In some ways a bank is really just like the company that sells banana smoothies, a bank is a business that buys and then sells something, only in the bank’s case, that something is money.

When an Australian family wants to buy a home, they borrow the amount of money they need from the bank, and the bank ‘sells’ them the money, and they buy the house.

Now here’s the thing. One of the bank’s biggest secrets is that they don’t have all the money they need to do this, so they borrow it from somewhere else. And then suddenly, there was the equivalent of a terrible storm.

In 2007, the world of money changed. The money that banks needed to buy started to cost them a lot more, just like the bananas for the smoothies. All across the world, there was tremendous worry and fear. This created a ‘knock on’ effect, and soon, money to buy at any price was in very short supply.

The fear and worry continued to grow, and move all around the world until the unthinkable happened when some of the biggest, most respected institutions went down and the governments did not come in to bail them out. This increased the fear that the global financial system might actually collapse.

Belts got tightened. Banks stopped lending to each other. And governments finally had to step in and help in the hope that things could be saved.

As Australians first bank, Westpac has always held close the need to do the right thing by our customers — today, and every day, but not at the risk of harming tomorrow. When a storm blows in, we have to ask ourselves some very serious questions. We need to batten down the hatches but still ensure our foundations are safe for future storms.

There is a bottom line: The money that we buy has become more expensive. That means we have to charge more for it, and that can mean rates will go up. When we make rate increases, we do so because there really is no other option. By not taking this action, we risk the future of our business. And the future of our business has repercussions for all Australians.

Many Australians dream of owning their own home, and we don’t take that lightly. Our dream is to make sure Westpac can weather any storm, so that we can turn dreams into reality for Australian families. At times, we have to make decisions that make us unpopular, but being popular is not our focus. Our focus is to ensure that we remain a healthy Australia business, so that we’ll there for Australian families when they need us. And that means being there for today and tomorrow.

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