Taxpayer funded bank inquiry a 'waste of time'

Taxpayers will be called on to fund an opposition inquiry into bank interest rates that one independent banking expert describes as a waste of time.

Labour’s finance spokesman David Cunliffe has announced that if the government won’t commission an inquiry into the interest rates banks charge, then Labour, the Greens and Progressives will.

Mr Cunliffe said it would be the equivalent of a parliamentary select committee inquiry into bank profits, because of public concern at ‘high’ interest rates.

He said there could potentially be a billion dollars of margin at stake.

“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.”

Mr Cunliffe confirmed to NBR that other parties’ participation will mean shouldering a proportionate share of costs, with commitments already from the Greens and Progressives, although ultimately the money being sought is from taxpayer funds.

Although he can’t give a number on how much he expects this exercise to cost, “because that will depend in part on what the parties collectively think is a good process”, Mr Cunliffe has sent a letter to the Speaker seeking parliamentary logistical support for the inquiry.

It “certainly won’t” cost $200,000 he told NBR this morning.

“In terms of taxpaying funding, it is of course appropriate that the work of Parliament comes from Parliamentary funds. That would be to the extent that costs are required, that would be met through a process that’s yet to be determined from the parties participating, if not supported directly parliamentary allocations as decided by the Speaker.”

Massey University director of banking studies David Tripe however, held the idea in contempt.

“I can think of other things to waste time on. I’m not even altogether convinced the banks have room to move on short term rates in any case, because there is a lot of lower cost funding which has not moved down by anything like the amount the OCR has moved down. If you had some funds in some sort of card accessible account which pays some interest, I don’t think you’ll find that the interest rate on that has fallen by 5.75%.

“It’s good politics on the opposition’s part, but that’s all it should be seen as. Don’t count me as being in favour of it.”

Mr Cunliffe was careful to emphasise that the primary focus of the enquiry would be on short term interest rates, which the Reserve Bank has previously said may have some room to move, in contrast to long term interest rates, which seemed reasonably aligned with funding costs.

Mr Cunliffe is attempting to get all parliamentary parties to participate in the inquiry (partly because it will assist in funding the inquiry) as well as getting a cross-section of New Zealand organisations and businesses, including banks to participate.

“We have also asked [Reserve Bank governor] Alan Bollard to consider asking the finance minister for approval to attend and give evidence at the inquiry,” he said, “I think there is a win-win that all interested parties are able to get their views on the table – that serves the public interest in itself.”

Further details will be announced in a week or so Mr Cunliffe 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."

“I think there’s a prima facie case for lower interest rates in New Zealand. We’ve had some 575 basis points of OCR cut in the last year or so. I’m advised that around 250 of those have flowed through to short term business loans, and that there is an additional margin increase of around 75 basis points on short term mortgage loans. So there could be potentially up to a billion dollars of margin at stake.”

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17 Comments & Questions

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CUNLIFFE's says Kiwibank a failure.

Wasnt Kiwibank launched to keep those nasty Aussie banks from ripping off NZers?

Fine, lets have a review... and I am sure it will cost less than the tens of millions of dollars the Labour Government had us pour into Kwikibank (thats an intentional typo).

By demanding a review the Labour party are saying Kiwibank is a failure.

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Its a splendid idea!
This Labour coalition inquiry idea would really rank right up there amongst the most loopy, useless, taxpayer waste of time and money we've had since last week.
Its a complete sitter for a serious Reggie Perrin Grot Award.

How much time did it take the Labour 'strategists' to work this little charmer up at taxpayer expense?

To ensure nomination for The Grot Brown Paper Bag [with-an-hole-in-it] Award, will Mr Cunliffe be shortly confirming Winston Peters has been relectantly persuaded to chair the 'inquiry'?

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A worthwhile focus to keep the Aussie Banks honest, the cost will be a fraction from $2bn plus of stolen tax money coming the Governments way.

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This whole inquiry nonsense is Labour at it's best. John Key is totally right - it's a waste of taxpayers money that won't achieve any tangible results. The actual issues at play with Banks and interest rates are well known, so what good will another inquiry do? The inquiry will produce a pile of paper that needs to go straight in the bin.
Labour need to realise that they were voted out for their endless parade of reviews, inquiries, committees etc etc.
NZ needs results!

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Over the last couple of weeks Labour has really started to show that they still think our country has an endless pit of money that can be wasted on little ventures like this.

Phil Goffs call for the doll to be paid to all workers made redundant yesterday is another example of Labour frivolous spending.

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Taxpayers are already funding the excess' of Labour, why do we need to fund this. If it is such a good idea David C can get out on the hustings and raise money from the public that way.

The $billion of margin that might be available could be offered on a pro-bono basis.

I'm afraid interest rates in NZ are not going to go down, but that is because we continue to want to borrow our way to prosperity. When Nzers start to save more, invest wisely, stop borrowing off Japanese housewives to buy our neighbours home the sooner interest rates will drop.

We are a small country far far away from the rest of the world (out of mind) and whilst we continue spend more than we earn in every sector of the economy we are going to be punished.

David could spend his time far more profitably investigating why Government expenditure has grown at a rate far above inflation and delivered nothing (that anyone is prepared to pay for).

By the way David, if you want people to learn why banks charge higher interst rates to small economies, encourage them to study economics, finance and some business studies. That way the Universities will get some paying students and we will get a higher educated populus.

Damian, great comment, NZ needs people to do stuff that is valued by others (especially those overseas) and in exchange for some of that stuff we get paid. Hopefully that very simple message will get through to the oposition benches and they will start doing stuff that is valued, well we can live in hope can't we.

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I suggest before we look at producers ,lets have an inquiry into the 3 crappy parties who are sucking off the public purse eg Anderton who has been a has been or never was, Norman whose claim to fame is he is a watermelon and left Australia to tell the Kiwis HOW TO RUN THEIR LIVES,AND LAST OF ALL BUT NOT LEAST IS THE GOFF PARTY who got NZ into the now recession with their financial stupidity over 9 years. Reminds me of the 3 monkeys, see no logic ,hear no logic, speak no logic .

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I find it amusing that you think a tiny little government in NZ is remotely responsible for the GLOBAL recession.
You are an idiot.

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If there is any question of an exertion of market power, then the appropriate body to investigate is the Commerce Commission. The Commission has both the mandate and the expertise to conduct an inquiry (not to mention a budget already committed to investigation of issues of alleged anti-competitive behaviour averse to the interests of New Zealand consumers). Furthermore, a Commerce Commission inquiry will analyse and assess the economic issues and not simply provide a forum for vested interests to publicly air opinions and perceptions in front of a panel of comparatively (vis-a-vis Commerce Commissioners) economically-uninformed politicians acting as judge and jury at a select committee.

That the Commission has not, to date, instigated such an inquiry could be interpreted as a signal that, amongst all the other potential calls upon its investigation budget, other potential exertions of market power are any one or combination of more pressing, more material, or more likely to be found in the affirmative than the allegations swirling around about banks.

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wasat nomonkey still defending the indefensible ,your brain cell is polluted.

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The 3 parties grandstanding could be represented as the 3stooges or better still 3 BLIND MICE,plus a Labour Party sycophant hiding under the name NO MONKEYS HERE ,yeah right.

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...and even if there was an issue (and I doubt it, otherwise, in the case of banks, why isn't the Govt's bank deemed to be part of the problem), what's the Govt expected to do about it, legislate prices ? Interesting to hear Labour wanting a Muldoon back.

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Which side is Goff and his bunch of idiotson -they are doing a great job of increasing support for National- maybe they are infiltrators!!!!

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Hey there Jimmy Anderton! You in the sleepy corner - you created this great people's watchdog, Kiwibank - to keep the banks honest. Remember? Where are you now, Jimmy? Shouldn't you and David Cunliffe and Fill Goof be now screaming at Kiwibank to show the way??? You bunch of insincere vote catchers - get real, and tell Kiwibank to take the lead here.

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Don't be too hard on Goff and the Labour party they still think they are in power. And their is a money tree growing in every tax payers garden.

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Yep, that Kiwibank sure was a waste of time, what do you reckon the aussies would be gouging right now from you if there wasnt some real competition?

Agree enquiry waste of time, no doubt the scope will lead to whitewash on the usurers.

A lot of anger in the comments, wonder how angry they will be when they finally realise John Key is a red in blue clothing?

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I cannot believe the 'waste of money' and character assassination attempts blogged to date. It has been 32 years since Piggy gave up on the honesty and NZ Banks and introduced Keyensian Interest Rate Controls to get the country through a tough economic period. When he lifter them it's a pity he did not cap or index future Bank profit margins to indexed inflation or introduce anti-price (rate) matching legislation to enforce competition. The taxpayer public is entitled to honest answers to their questions as to inflated bank interest rate pricing and greedy profit margin targets as it was they who funded the banks late last year through RBNZ tenders and still underwrite the ongoing Government $200k deposit guarantee scheme. Get real! I bet if John Key was still in opposition he would be calling for such an enquiry! Unfortunately, he appears to have lost his democratic balls on several public concern issues and will fast lose his popularity!

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