Union provides four recommendations to banking inquiry to fight what it calls 'bankflation'

Bank workers' union First Union is calling for staff from across the big four banks to be allowed to bargain together, banks' net interest margins to be regulated and a levy on bank profits to combat "bankflation."

First Union makes these suggestions in a submission, with the ActionStation community campaigning organisation, to Parliament’s Finance and Expenditure and Primary Production committees' bank inquiry.

The union notes interest rates are the key tool the Reserve Bank uses to control inflation. However, it argues rising interest rates "create a possible cover" for banks to increase profits through rising margins.

"As the cost-of-living crisis continues, surging bank profits impose costs across the economy, a dynamic we call 'bankflation'," First Union says.

"Cumulative 'big four' bank profits have increased 80% in the last decade. Over that period, average annual profit increases have been running at triple the rate of average annual wage increases negotiated in bank worker collective agreements."

"NZ banks’ net interest margins, the difference between lending and borrowing rates, are now at their highest level in 17 years. This means mortgagors, businesses and consumers endure relatively high borrowing rates, while depositors receive relatively low deposit rates," says First Union.

To end "bankflation" it's calling for industry bargaining, increased competition, regulation, and windfall taxes and levies.

"Workers from across the 'big four' [ANZ, ASB, BNZ and Westpac] need to be able to bargain together to get the increases they need. This could be by way of a Fair Pay Agreement or a Multi-Employer Collective Agreement. The money is there, the 'big four' just need a reminder of who it is that earns it for them," First Union says.

It supports calls for the structural separation of the big four banks, but suggests common shareholdings may undermine a more competitive market.

"The entry of other major international players into the NZ banking industry may therefore be preferable," First Union says.

It goes on to say when bank margins surge during a cost-of-living crisis, banks exacerbate that crisis.

"The Reserve Bank already keeps quarterly data on banks’ net interest margins. Government should consider establishing a regulatory framework that allows for the limiting of net interest margins to support living standards."

First Union says when the parliamentary banking inquiry was first announced, it called for an immediate 5% levy on bank profits.

"Despite Treasury’s opposition to a windfall tax, the surge in bank profits experienced since the Reserve Bank began hiking interest rates shows a clear set of events. We believe the case for additional taxes and levies on the big four banks remains strong," says First Union.

Chart from First Union's submission.

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