Why are our banks making record profits? In the blue corner

OPINION: It would take a Kiwi worker earning median hourly wages a quarter of a century to earn what the bosses of the big Aussie-owned banks get paid in just one year. Banks make eye-watering profits and are accused of chasing short-term bonuses for themselves. We’re being told ‘‘open banking’’ is the way to get a better deal. What is it and does it have cross party support or is this yet another policy which will be repealed and get us nowhere? An MP from each side of the House gives their views.

Like the rest of the world, New Zealand is experiencing significant cost of living issues. As a Government, we’ve been clear in calling on all those who may have the ability to ease that pressure to do so, and banks are included in that.

In addition to supporting families with the cost of living, including with our fuel tax, we’re moving forward with our plan to make sure Kiwis get a better, fairer deal at the bank.

A return to heavy-handed regulation would stifle innovation, and create the risk of the market exploiting gaps in the rules. That’s why we’re putting in place sensible policies that will deliver a better deal for Kiwis by increasing competition and putting more power in the hands of bank customers.

We’re forging ahead with ‘‘‘open banking’’, which ensures banks must share customer information if they request it, making it easier for people to compare mortgage rates, apply for loans and switch banks. Open banking is a requirement on the Australian-owned banks’ parent companies across the ditch and is a fixture of the United Kingdom’s banking system. It’s a common-place tool used to increase competition and make it easier for customers to get better deals.

We’re also taking back full ownership of Kiwibank. This simplifies the ownership structure, and will allow Kiwibank greater operational flexibility, and potentially access to capital, to grow and challenge the four big banks. Although Australia has the same big banks as us, it now has 97 banks in total, compared to our 27 – and many of these aren’t full retail banks, so the vast majority of customers are concentrated with the big few. The benefit of this extra competition in Australia can be seen in the bank margins (the profit they make between their borrowing and lending).

At a time where cost of living is high around the world, we believe that Kiwis should have the power to shop around for better deals, and make sure they’re getting the best bang for their buck out of their banking arrangements. It’s hard to see how other political parties could reasonably oppose this.

When you look at banking sector profits, it is critical to understand the underlying reasons behind their profits. Part of understanding why the banks have made such a profit would be having an independent investigation into the Reserve Bank, and being open and transparent with New Zealanders on why they made the decisions they did.

The Reserve Bank printed and borrowed excessive amounts of money during and following the pandemic, which has resulted in the high inflation we are seeing now and increased official cash rate. That has meant Kiwi households are in a financially tough position, and the future looks even tougher.

New Zealanders deserve to know why they are facing tough times, and why their banks are making record profits while they are struggling. An inquiry into the actions of the Reserve Bank will at least help to provide some of those answers.

Open banking happens in other parts of the world and frankly, New Zealand’s been way too slow in embracing it. It makes it easier for customers to compare mortgage rates, apply for loans and switch banks, a bit like you can do already with your power company.

However, any suggestion that this proposal is somehow a way of dealing with the cost-of-living crisis is far off the mark.

New Zealanders are going backwards under Labour. Families are facing pressure at the pump, mayhem with their mortgages, and a crisis at the checkout. Wages are not keeping up with inflation, the cost-of-living crisis is getting worse, and the Government has done nothing to get it under control.

Instead of coming up with a plan, the Government has put the blame on supermarkets, petrol companies, banks, Covid or the war in Ukraine – anyone but themselves.

Wasteful Government spending has contributed to making inflation higher than it would otherwise have been. They must also urgently fix our broken immigration settings that mean there’s a shortage of workers, which is pushing up prices across the economy.

The economic forecasts are worrying, and New Zealanders need a competent Government and an economic plan to get them out of this mess. More of the same – more spending, more bureaucrats, more tax, will lead to worse outcomes.

National has a plan to fight inflation. We will restore discipline to Government spending, reduce unnecessary costs to businesses, get rid of the bottlenecks in the economy and adjust tax brackets to allow Kiwis to keep more.