Going Bananas About Banking

Last Updated Dec 8, 2009 11:37 PM EST

I know I'm bad at maths and I'm definitely not in the banking business. But even with the "simplified" video explanation Westpac bank has gone to the trouble of creating, I still don't get it.


Bananas go up in price from $2 to $3 --- that's a 50 percent price increase. This pushes banana smoothies up from $4 to $4.50, but that's only a 12.5 percent increase in price to the customer.

Now, granted, there are other ingredients in a smoothie, and that probably helps keep the final price down. But how does this example explain the fact that Westpac took a 25-basis-point increase (from the Federal Reserve Bank) and turned it into a 45-basis-point increase for the customer? Someone is definitely going a bit bananas.