Record bank profitability causing long-term damage
4 November 2013
Record bank profitability causing long-term damage to the economy
The Green Party are calling on the Government to strengthen Kiwibank in light of yet another season of record bank profits in a sector dominated by foreign-owned banks.
Westpac’s final profit result announced today marks the end of another record profit season for the big four Australian banks that monopolise New Zealand’s banking sector. Westpac New Zealand announced a record cash profit of $770 million up nine percent from last year’s result. Overall, ASB, ANZ, BNZ and Westpac made $3.7 billion in cash profits this year up 10.1 percent from last year’s record result.
“Our big four Australian banks are already some of the most profitable banks in the developed world. This year they got even more profitable,” said Green Party Co-leader Dr Russel Norman.
“While it’s good to have strong banks, the excessive profits of the big four foreign-owned banks are simply damaging the rest of the New Zealand economy and contributing to our number one problem – a high and persistent current account deficit.
“Year-on-year record bank profits should not be the norm. Record profitability comes at the cost of New Zealand businesses and households that are paying higher borrowing costs and bank fees than is reasonable. This is a major drag on the productive sector and makes housing less affordable.
“The challenge for the Government is to build up our New Zealand-owned banks to compete away excessive profits and stem the capital drain offshore.
“Currently, New Zealand-owned banks make up only six percent of our banking sector.”
The Green Party has proposed a number of solutions to address the lack of competition in the banking sector and the high degree of foreign ownership.
“We can increase competition in our banking sector by strengthening Kiwibank and other New Zealand-owned banks,” Dr Norman said.
“A strong Kiwibank is an integral part of a smart, green economy.
“By injecting capital into Kiwibank and allowing it, in time, to become the Government’s banker, we can increase its capacity to compete fairly with the much bigger Australian banks.
“The banking sector is the lifeblood of the New Zealand economy. It’s important we get it right so that all businesses can prosper, not just the big four foreign-owned banks.”