The three opposition parties in parliament, Labour, the Greens, and the Progressives, announced they would set up the "equivalent" of a parliamentary inquiry into bank profits to try and discover whether customers are "getting a fair go or not" by banks in New Zealand. (Updated with comments from NZMEA supporting the inquiry) "Kiwis believe they are paying higher interest rates than they should be paying. Banks believe interest costs are justified. The facts should be put on the table fairly and openly so that people can see whether they are receiving a fair deal," Labour Finance spokesman David Cunliffe said. Cunliffe has repeatedly called for an investigation into the profits made by New Zealand's four Australian-owned banks, and their interest rate margins through the recession following the Finance and Expenditure Committee's report in June which slammed the Australian-owned banks for not passing on the 50 basis point cut in the Official Cash Rate on April 30 to short term mortgage rates. Cunliffe said they will write to all parties asking them to participate in the inquiry, and that a letter had been sent to Speaker Lockwood Smith for "appropriate parliamentary logistical support." A website has been set up for the inquiry at http://www.bankinquiry.org.nz/home. Cunliffe told interest.co.nz in an interview that he had spoken to RBNZ Governor Alan Bollard to see if he would participate in the inquiry, but that Bollard's involvement would be a decision for the Finance Minister Bill English.
The MPs behind the inquiry had yet to meet to sort out of the details, but it was envisaged the inquiry would take place in July and August. He said it would not have the usual select committee powers to subpeona people for submissions, but he hoped it could be held in Parliament's committee rooms. The inquiry could potentially look at business lending, credit card lending and variable mortgage rates, but would not look at the tax issue, which was subject to court deliberation and too complex for Parliament, he said. Earlier Prime Minister John Key was quoted as saying in the NZ Herald that he wanted ideas from the Reserve Bank to break the impasse and an inquiry was pointless.
"We have an impasse now. If there is something that should be done, let's act. We don't need another inquiry, let's do something about it. But to do something about it, we need some suggestions."
English was quoted as saying the inquiry was more of a meeting of the opposition than an inquiry.
"This discussion is more about politics than it is about the economy."
What do you think? Will this equivalent inquiry achieve anything, or just lead to a lot of hot air? What needs to happen for the inquiry to be successful and have an impact on how the banks operate? We welcome your comments below. Here is the full statement from Cunliffe:
The Labour Party, the Greens and the Progressives will hold the equivalent of a parliamentary select committee inquiry into bank profits, says Labour finance spokesperson David Cunliffe. "Kiwis believe they are paying higher interest rates than they should be paying. Banks believe interest costs are justified. The facts should be put on the table fairly and openly so that people can see whether they are receiving a fair deal." David Cunliffe said Labour and the Greens were disappointed that the Finance and Expenditure Select Committee had decided not to proceed with its own inquiry despite the view of Reserve Bank Governor Alan Bollard that banks have set their interests higher than needed. The inquiry being announced today would have a similar primary focus as that originally agreed by the select committee, he said. "It will be an inquiry into the relationship between the Official Cash Rate and short term interest rates, in the context of matters raised by the Finance and Expenditure Committee in its report on the Reserve Bank of New Zealand's financial stability report." David Cunliffe said Labour and the Greens wanted the inquiry to be cross-party, he said. "We are writing to the leaders of all parties in Parliament asking them to participate. We have also written to a cross-section of New Zealand organisations and businesses, including banks, inviting them to participate, and expect a significant number of positive responses. "We want ordinary New Zealanders to share views with us. We will ensure their views get the wider audience they deserve. We have also asked Dr Bollard to consider asking the Finance Minister for approval to attend and give evidence at the inquiry." A letter had been sent to the Speaker seeking appropriate parliamentary logistical support for the inquiry, David Cunliffe said. "This is a serious inquiry by parliamentarians on behalf of New Zealanders. We believe it is appropriate support, including a venue, is made available, so that the public and media can attend." David Cunliffe said further details of the inquiry, including a starting date, would be announced in the next few days. "The committee will be supported with high quality expert advice to help the committee come to robust and considered conclusions. "We want to get started as soon as possible. New Zealanders deserve that," he said. "Our aim, at the end of the inquiry, is that New Zealanders have had the opportunity to learn why banks are making the decisions they are making, and to discover if customers are getting a fair go or not". The bank inquiry website is at: http://www.bankinquiry.org.nz
The New Zealand Manufacturers and Exporters Association said it supported the inquiry there were issues much wider than banking margins.
The failure of monetary policy to serve the interests of the tradeable economy lies at the heart of New Zealand's poor economic performance delivering uncompetitive interest rates, an overvalued exchange rate, and hindering real growth and wealth creation. NZMEA Chief Executive John Walley says, "Proper debate on bank margins will be helpful because, as Alan Bollard has already noted, short term margins are too high and generally margins have increased since the financial crisis. However, the inquiry needs to go further than this and look at why New Zealand's interest rates are consistently higher than the rates of many of our competitors and how this is affecting our economic performance."