7. Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this
to the Minister of Finance
Does he agree with the statement of the Prime Minister—whom he is lovingly looking at—
Mr SPEAKERI invite the honourable member to reflect on how that actually assisted the good order of the House. It is bound to lead to disorder, and is not helpful. I ask the member to start again.
Hon DAVID CUNLIFFE Link to this
Does he agree with the statement of the Prime Minister that, with respect to bank interest rates, “We have an impasse now. If there is something that should be done, let’s act.”; if not, why not?
Hon BILL ENGLISH (Minister of Finance) Link to this
Yes, I do agree with the Prime Minister. He quite correctly was saying that we have a range of mechanisms that monitor the financial system. When one of those mechanisms alerts the Government to the need for policy action, we will act. In this case, in respect of bank interest rates, the Reserve Bank has made a careful study of the issue. It has published its findings, but has not recommended any particular action to the Government, probably because it is not obvious what action the Government could take to deal with bank margins on interest rates.
Hon David Cunliffe Link to this
If the Prime Minister believes that further action is required, does he agree with the New Zealand Manufacturers and Exporters Association that “a 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.”; if he does, why has his Government not taken seriously the concerns of New Zealand’s hard-working exporters?
The Government does take seriously the concerns of hard-working exporters, and they are all very glad that we are acting on their concerns, which were built up under 9 years of mismanagement by the previous Government. That member should also advise the House that when he was a Minister in a Government, banks made record profits, they had record interest rate margins, and interest rates were at much higher levels than they are now—a set of facts pointed out by the Hon Jim Anderton in the media yesterday and today. So how will he explain his expertise in getting bank profits down, when, under him, they were at record levels?
Aaron GilmoreThere are any number of people who have contributed to the debate about interest rate margins—in particular, the independent assessment of the Reserve Bank. It has published its finding. I think it is important that those who are invited to some meeting of the Opposition caucus know that what they are being invited to is not an inquiry. The progress of it is utterly predictable: people will turn up; they will complain about the banks, as we all do; the Opposition will issue some report using extravagant rhetoric; and we will be exactly where we started.
Hon David Cunliffe Link to this
If the Minister does not believe that the public deserves the right to look into this issue and see the facts, has he heard reports that Kiwibank will “willingly participate with the banking inquiry”; and does he not agree with Rod Oram that banks have not so far made an entirely transparent case as to what the funding pressures on them actually are?
The facts that can be ascertained on this issue are already public. The Reserve Bank did a thorough job of looking at the margins. Some of the major banks, like Westpac, have already published their analysis. Members of the general public can look at the interest rate picture by going to www.interest.co.nz and looking at the updated rates—they are updated every 6 minutes—and can make up their own minds about it. An MPs’ inquiry will make no difference. The member should be talking about the real issue, which is what combination of regulatory supervision will ensure that the banks do not make excessive profits. I welcome any contribution that the Opposition caucus would like to make to that debate, rather than stunts and grandstanding.
Hon David Cunliffe Link to this
If the Minister would, as he says, welcome a reasoned contribution, why does he say there is no need to act on calls from the New Zealand Manufacturers and Exporters Association, Federated Farmers, the Productive Economy Council, unions like the financial services union and the Council of Trade Unions, banks like Kiwibank, and a range of economic commentators, who all believe there is real merit in questioning the pass-through of the official cash rate into short-term interest rates?
If those organisations thought that member’s meeting with Jim Anderton was the answer to our economic problems, they would have voted for him, but they did not, rather decisively. We know what can be known about the pass-through. We think bank margins might be too high. The simple question is what can be done about them, and I am open to the member’s propositions. The Reserve Bank has not been able to come up with a solution; perhaps that member will.