Report Finds NZ Banking Lacking
November 11, 2009 New Zealand Finance
According to a Labour, Progressive and Green Party investigation, New Zealand banks failed to pass on the full effect of Official Cash Rate (OCR) decreases to borrowers.
The multi-party cooperative inquiry yielded a report on November 11th that unambiguously claims that New Zealand’s major banks have not passed on the full effect of OCR cuts to New Zealanders. It is reported that the full effect of the drop from mid-2008’s level of 8.25% to today’s 2.5% was not transferred and the four largest banks kept a one percent margin for themselves. At today’s borrowing levels, the report states, an extra NZ$787 million has been added to the cost of business, NZ$460 to farming loans and NZ$1.6 billion to home-loan repayments.
Russel Norman, Green-Party Co-leader, stated upon the release of the report that the Government needs to invest more capital into Kiwibank. This could allow the locally owned bank to operate at competitive levels to its Australian owned counterparts.
Jim Anderton, Progressive Party Leader, summarized the report and its recommendations, saying “We need to look at how we can remove incentives to invest in property, otherwise we’re headed for another boom and bust cycle in property prices, and another recession. Banks must be encouraged to lend to businesses; and we need to review our tax system which at the moment encourages unproductive property investment and discourages investment in the productive tradable good export sector”.
The official Banking Inquiry report can be found on the banking inquiry website.