A union for bank staff says New Zealanders are enduring “higher rates of profit extraction” from our banks and there should be a 5% levy on bank profits.
First Union said a levy on excess bank profits could have raised more than $300 million in revenue in 2022.
The union said in a press release that it also supported an enquiry into bank profits.
Commerce Minister Duncan Webb has said no decision has been made on a banking market study by the Commerce Commission, but it is widely expected one will be announced.
First Union, which represents bank workers, said an excess profits levy could be used to fund the establishment of a Ministry of Green Works.
The bank profit debate got new life this month after KPMG released its annual survey of the sector which found the banks made more than $7 billion profit for the first time.
First Union researcher and policy analyst Edward Miller said that a decade’s worth of data showed New Zealand banks’ returns on equity were among the highest of comparable countries. (See First Union's chart below).
"While the big four banks’ 2022 return on equity figures clearly trumped those of their Australian parents, our analysis of World Bank data shows New Zealand banks have some of the highest return on equity figures in the developed world.”
New Zealand’s banking sector is dominated by the Aussies, with about 90% market share held by ANZ, BNZ, ASB and Westpac.
Miller said bank profits are extracted from New Zealand communities.
“It is unclear why we have to endure higher rates of profit extraction than Australian, British, Dutch, Japanese or Spanish citizens."
The return on equity of the NZ banking industry was 13.4% in 2022, data from the World Bank showed. Only Canada’s banks were more profitable.
There have been growing calls for a deep dive into bank profits and competition in the sector, including from anti-monopoly campaigner Tex Edwards. The Green Party has also called for a levy on bank profits.
Green MP Julie Anne Genter last month said; "A 10% levy on the banking sector’s record profits would raise over half a billion dollars which could be used to support people."The New Zealand Banking Association has previously said this was a matter for the Minister.
New Zealand Banking Association chief executive Roger Beaumont said bank profits look big because banks are among New Zealand's biggest companies.
He said New Zealand's banks were profitable, well-regulated and resilient, and that was important in the current economic climate.
“Last year banks made a net contribution to our economy of $1.92 billion. They spent $9.1 billion running their businesses and paying tax in New Zealand, compared to combined profits of $7.18 billion ... Our banks’ average return on equity is 13.4%, which falls in the middle of the pack when compared to other major New Zealand companies."
The Commission has completed market studies into residential building supplies and the supermarket sector. The Banking Association has previously said a market study into banks was a matter for the Minister.
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