5. Hon DAVID CUNLIFFE (Labour"”New Lynn) to the Minister of Finance: Does he stand by his statement that "We made it clear right through with the banks that with taxpayers supporting them and their depositors and their overseas borrowing, we expect that they will give borrowers a fair go."?
Hon David Cunliffe: Why, then, did his Government block its own MPs' proposal for a Finance and Expenditure Committee inquiry into pass-through of official cash rate cuts to short-term interest rates, having simultaneously criticised the major banks for failing to pass through cuts and appealed to the Reserve Bank to take action?
Hon BILL ENGLISH: Our top priority is that banks keep lending, because when banks stop lending people lose jobs. In respect of the relationship of the short-term cash rate and the overnight cash rate, as we have said many times, customers of banks have the opportunity to choose lower rates than the floating rate, being the fixed 6-month and 1-year mortgage rates. I might say that when customers make that choice it will have a much bigger effect on the banks than a meeting of Opposition members in a phone box with all their supporters.
Aaron Gilmore: Has the Minister seen any reports about competitive pricing within the banking sector?
Hon BILL ENGLISH: Yes, I have. Here is one: "To reduce the cost of mortgages to homeowners on a permanent basis the Government has to deal with the high overexpenditure in level of borrowing of Government." The second one states: "To reduce interest rates it is necessary to tackle the causes rather than simply to try, by regulation, to disguise the symptoms." Both of those statements were made by Phil Goff.
Hon David Cunliffe: Can the Minister confirm whether he has received any correspondence or indications from New Zealand's major banks that they are reluctant to continue current levels of lending if an inquiry into interest rate pass-through should proceed; if not, why does he not now support an open, transparent, cross-party parliamentary inquiry that will allow New Zealanders the opportunity to voice their concerns and get the facts on the table?
Hon BILL ENGLISH: No, I have received no such correspondence. It is a bit rich getting lectured about interest rates by members who were part of a Government that presided over record interest rates in New Zealand at a time when bank margins"”
Hon David Cunliffe: It was the Lange Government, not the Clark Government. That's almost as old as Don Brash!
Hon BILL ENGLISH: The member should listen to this. Under Labour, bank margins reached record levels. They are currently 30 percent lower than they were when that man was a Minister.
Hon David Cunliffe: Can the Minister tell the House why the Prime Minister has now asked the Reserve Bank to come up with suggestions for his Government, and is it the case that after a few months in office he has already run out of ideas when just a couple of weeks ago he was telling the Reserve Bank that it was all its responsibility to fix the mess?
Hon BILL ENGLISH: Most of the things that can be known about banks passing on interest rate cuts are already known. The Reserve Bank did a very thorough and insightful report into the gap between the floating rate and the overnight cash rate. The next question is what can be done about it. The Prime Minister, quite reasonably, has asked the Reserve Bank for suggestions about what can be done about a well-known set of information.