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.”