Gordon Campbell on banks, and Brownlee’s Christchurch sellof
Gordon Campbell on bank profits, and Gerry Brownlee’s asset sales plans for Christchurch
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The news that the banks in New Zealand have returned to their pre-global recession levels of profit comes as no real surprise. New Zealand banks and their Australian masters have weathered the global financial crisis better than their counterparts elsewhere, and were less responsible than those overseas colleagues for the crisis in the first place. Even so, the scale of current profit-taking is still mind boggling, given that the local communities from which they have been extracted are still suffering so badly.
As RNZ reported this morning:
PWC's latest Banking Perspectives report shows profits at ANZ, ASB, BNZ, Kiwibank and Westpac collectively rose 25% to $2.8 billion. PWC analyst Sam Shuttleworth says the growth is driven by better interest margins as wholesale funding costs have fallen and customers switch from fixed to floating rates. He says there's been a big shift in the use of floating mortgages and approximately 58% of residential mortgages are now floating, compared to 14% in 2007.
Mr Shuttleworth says interest rates are still comparatively low compared to what people had to pay three, four, five or even 20 years ago He says the eurozone debt crisis could have a major impact on future earnings as funding costs increase, unless banks manage to pass it on to borrowers.
Right. And banks always do manage to pass on the cost of the bad times to borrowers. These flush times for bankers have to be contrasted with the very bad times being experienced in Christchurch – where the city is struggling to meet its $1 billion share of the earthquake rebuild. Put those two sums together: the banks took out $2.8 billion in six months, Christchurch is in deep strife trying to find a little more than a third of that amount, and is being pressured by Earthquake Recovery Minister Gerry Brownlee to sell its assets in order to do it:
Brownlee said the clown remark [ made by him about Christchurch mayor Bob Parker] had been "inappropriate" and he "shouldn't have done that".
But he said the "real issue" was how the council would meet its more than $1 billion share of the cost of rebuilding its quake-wrecked city.
"Let me tell you, when the Government is spending $5.5b anywhere, we expect the recipients of that to have some plan for how they will participate in what will be a very, very expensive recovery. And that plan has to be a lot better than 'we're just going to put up the rates and we're going to borrow a lot more money'." Labour's Christchurch East MP, Lianne Dalziel, questioned Brownlee in Parliament over suggestions the Government had pressed the council to sell some of its assets. Dalziel suggested there was "a showdown behind the scenes" with the Government putting pressure on the council to raise rates and sell off its assets.
Please. It would be idiotic to force Christchurch to sell its assets to pay for its rebuild, under present conditions. Given the current state of the city, those assets would earn only fire sale returns. Hocking off the city’s assets dirt cheap is yet another version of the destruction of its legacy – and while it may make sense to Brownlee to sell off that legacy to any of his government’s real estate speculator mates who may be waiting in the wings, it would be a betrayal of the people of Christchurch who as Dalziel says, have been through enough: “What they don't need are backroom deals being done on the future of their city and their city's assets."
By raising rates and borrowing, the Christchurch Council is doing the right thing, and all it can do. Government has to do the rest, and if it can’t afford the rebuild from current revenue – or from the offshore insurers, who I thought were footing the bill – it has to garner more bridging revenue in this year’s Budget by raising taxes. For ideological reasons, this government acts as if it has a spending problem – but in reality it has a revenue problem, one that it refuses to address.
It could also ask the banks to come to the party. So far, the banks have done nothing for the community in the wake of the Christchurch earthquakes, beyond deferring when it will take its profits. As accommodation supplements run out, more and more residents of the shattered city are paying mortgages on properties they can’t inhabit, and on business premises they can’t utilise. Where is the leadership from Gerry Brownlee in getting the banks together to broker a deal whereby they offer genuine, enduring relief to the community on such issues? Right now, the banks can plainly afford it.
To return to those banking profit figures. Taking out profits of $2.8 billion inside six months during a climate of recession is simply obscene. Especially when the vast majority of that money will be heading offshore into the coffers of their Australian owners – and this, again, only underlines the stupidity of privatising essential assets 25 years ago. If the BNZ at least, had remained in state hands, New Zealand would be in a far stronger position to help out Christchurch in particular, and to create productive competition in general between the Australian players – who, as a result, dominate our banking system virtually unimpeded. Kiwibank does its best, but is still too small to have much leverage on what is, in effect, an Aussie cartel.
Brownlee and his mates won’t touch the banks. Banking reform? Too hard. Welfare reform? Now, there’s an easy target. And his ‘solution’ for Christchurch is to try and force the city to sell its assets at guaranteed rock bottom prices. What a clown.