Thursday, July 9, 2009
New Zealand banking inquiry scuppered
To understand these cartoons*, you have to know something about the background. The following article by Adam Bennett, headlined Cunliffe hits out over bank inquiry, appeared in the July 2, 2009, edition of The New Zealand Herald:
National, Maori Party and Act members of Parliament's finance and expenditure committee voted against an inquiry into the margins banks are charging on variable rate mortgages and short-term business lending, Labour's David Cunliffe says.
Chairman and National MP Craig Foss said following a briefing from the Reserve Bank, the committee yesterday voted against either an inquiry into the relationship between the official cash rate and short-term interest rates or a wider investigation into "recent banking practices including a particular focus on retail interest-rate margins".
Labour Party finance spokesman Cunliffe told the Business Herald his party had favoured the broader inquiry covering margins on medium-term rates and credit-card borrowing as well as short-term rates.
However, on being informed by the Reserve Bank that it was reasonably happy with the medium-term picture, Labour's position was that it would have been satisfied with a narrower inquiry. That was an approach Government members had given "every indication" of supporting.
Not only does that mean there will be no further action on it from the committee, but it also in my view calls into question the integrity of the process.
"We went through an exploration, the prima facie case was established by the Reserve Bank, and Government members voted against it anyway.
"Thousands of New Zealand homeowners, businesses, farmers and exporters have every reason to ask why Parliament's watchdog on the economy is, by a majority vote, choosing to stay muzzled," Cunliffe said.
Federated Farmers' economics and commerce spokesman, Philip York, said his organisation had also gained the impression there was cross-party support for an inquiry and was now disappointed with the committee's decision.
Foss said yesterday's decision was made following "various briefings", including additional presentations from the Reserve Bank.
"I think the committee has a lot more information at hand to reach the conclusion by majority that it did today, but I'm sure all members will be looking forward to the next Financial Stability Report and the next Monetary Policy Statement from the RBNZ."
Foss also echoed Prime Minister John Key's comments last month that an inquiry was of limited value.
"At the end of the day an inquiry could only ever inquire. Could it affect and impact on actual interest rates or effect change? Obviously it can't."
Campaigns director Andrew Campbell of bank workers' union Finsec said the decision "shows the Government is either impotent or on the side of Australian-owned banks".
"The mere thought of the taxpayer having a look at how they set interest rates is seen as too much. That is a blow to transparency," he said.
Calls for an inquiry into short-term interest margins came after the RBNZ repeatedly said it was concerned these particular margins were too high given April's 50-basis-point OCR cut.
The committee picked up on this criticism and published a report calling on the banks to bear more of the burden of the recession.
It emerged the committee had also received advice from its special adviser warning that excessive bank margins may be worsening the effects of the recession.
Neither BNZ bank, which has said it would welcome the chance to respond to the committee, nor Westpac, which said it saw no value in an inquiry, would comment yesterday.
* The first cartoon is from the Manawatu Standard of July 4, 2009, and the second cartoon is from the Manawatu Standard of July 8, 2009. The character on the right in the second cartoon, saying "No, no, no! I meant REAL solutions!", is Prime Minister John Key.