Larger bank profits worsen current account deficit
21 September 2006
*Larger bank profits worsen current account deficit*
Increased profits and offshore shareholder returns by the Australian owned banks are having a negative effect on the current account deficit says Finsec, the finance workers' union.
A factor in the worsening current account deficit is more money going out from New Zealand to investors overseas, compared with the amount of money coming in from foreign investments owned by New Zealanders.
For the six months to 31 March 2006 the four major banks declared a combined total profit of $1.445 billion, $103 million more than in the same six month period a year earlier; an increase of 7.7%.
"We are seeing New Zealand's overall economic wellbeing worsened by the Australian-owned banks sending higher profits back across the Tasman," said Finsec's Campaigns Director, Andrew Campbell.
"It's time the big Australian banks looked to retain a larger proportion of their earnings in their New Zealand subsidiaries. They can do this through investing more in their staff and their New Zealand infrastructure," said Campbell.
"If the banks can make a profit of nearly $1.5 billion off New Zealand customers in only six months, they can afford to invest more into New Zealand, helping to improve both the current account deficit and their service provision in this country," said Campbell.
"We believe the banks have an economic obligation to invest more back into New Zealand communities, staff and local infrastructure."