The Opposition inquiry into the banking sector found the big four Australian banks didn't pass on between 50 and 70 basis points to customers after the central bank embarked on its steepest series of cuts to the country's benchmark interest rate to shore up the economy's financial stability. It questioned the use of manipulating the OCR to manage monetary policy, and pushed for greater powers for the Reserve Bank.
"It appeared that to some degree the banks have also retained an additional margin on borrowing costs in order to offset other factors reducing their profit levels," though increased costs of borrowing money from offshore absorbed some of this difference, the parliamentarians' report said. "The present monetary policy framework was seen to have serious unintended consequences for the New Zealand economy."
The inquiry was held after government MPs and their supporters blocked Parliament's Finance and Expenditure Committee from pursuing concerns it raised about the banking sector's response to the recession in June.
The report called on the government to inject capital into state-owned Kiwibank as a way to "promote more effective competition on bank lending margins and contribute to a greater share of local funding lending."
Green Party co-leader Russel Norman said the inquiry found New Zealand "does not have a competitive banking sector" and the "lack of competition has cost their customers up to $2 billion of additional interest rate expenses."
"With four banks controlling 90% of the banking assets here, we have effectively lost control of the lifeblood of our economy," he said in a statement. "The government needs to seriously invest in Kiwibank to bring it up to the point where it can compete effectively with the big four Australian-owned banks."
The report said tax policy favoured investment in housing and "discriminates against businesses investing to produce goods and services" creating an imbalance of resources in the economy.
Businesswire
