How Okun’s Law affects New Zealand

Professor Christoph Schumacher
National Business Review
10 April, 2023

So much has happened in the past few weeks that I am spoiled for choice of topics to discuss. In the US, two banks collapsed, causing the biggest bank failures since the GFC. This had a ripple effect that toppled Credit Suisse. Swiss banking giant UBS came to the rescue, which may have prevented the evolving crisis from exploding, but the takeover created a new set of potential problems – Switzerland now has a bank with a balance sheet twice the country’s GDP. 

Meanwhile, banks in New Zealand made record before-tax profits of $8.83 billion in 2022, which is not a bad thing, as we do want our banks to be profitable (when banks collapse, economies struggle). Yet, calls for a Commerce Commission inquiry are being heard, not because their return on equity seems high (the opposite is true) but because their returns are much higher than other banks worldwide.

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