Q+A: Minister Shane Jones interviewed by Jack Tame
SHANE The Aussie-owned banks earn huge returns in terms of return on investment, return on equity, up to 18%. American banks hardly crack 10%. European banks are below that. So whether or not they feel happy with that outcome, whenever it comes through from the Reserve Bank, we cannot escape the fact that $2 billion was repatriated by the ANZ. And if there’s a case for them to bolster their balance sheet, they probably won’t like it. However, that’s the Reserve Bank direction of travel. And he’s a tough individual is our Adrian Orr.
JACK So did you get any specific commitments from Shayne Elliott?
SHANE We both agreed that there has to be more innovation and opportunity for the banks to collaborate and generate solutions in regional New Zealand, so we don’t see a wholesale withdrawal of services. He advised me that they’ve tried that in Australia, but because of competition laws, it’s not possible. I expressed a huge concern that the comments from the ANZ Bank in terms of rural New Zealand fill people with angst. And look, I’ve no idea whether or not they’re going to withdraw, but they have a profound social licence. The ANZ Bank bought the National Bank. The National Bank actually had a lot of detritus in it, and I’m sure that they’ve worked that through. But these threats in the newspaper, I don’t know if it’s bluff or bluster – it’s very, very unsettling.
JACK Come on – you’re a poker player; you must have an idea whether it’s bluff or bluster.
SHANE Oh, no, I’ve got no doubt in my mind that they’re going to fight our Reserve Bank to the nth degree.
JACK But are they really going to pull out of rural New Zealand?
SHANE Well, I suspect that if they want to maintain their social licence, you can’t send vast swathes of the agri-business sector in rural New Zealand to the wall. I mean, who’s going to buy such assets?
JACK So you think they’re bluffing?
SHANE Well, I think that the Aussie banks have become very, very addicted to super-profits out of New Zealand. And we want some more insurance. We want a greater level of assurance. And Shayne said to me, ‘Hey, mate, someone’s going to have to pay for this.’
JACK And who’s going to pay for it?
SHANE Well, that’s the point. Do they either trim their expectations so they’re more in line with international bankers? International bankers are down at 10% or 12%. I don’t see why they should continue to profit at a level of 18%.
JACK Yeah, but what can you as a government do?
SHANE Well, the system is such that Adrian Orr is our governor. And I don’t think it’s going to be very easy for anyone to change his mind. He’s got all the independent powers. There’s an arguable case as to whether or not this is actual monetary policy, but the law is the law. And in terms of the bankers, however, one thing I did say is that the board and the advisors around the ANZ Bank is looking like a colony of National Party refugees, and next year is an election. And I’m deeply concerned that the politics associated with the next election don’t start playing out in the ANZ board.
JACK What does Shayne Elliott say to that?
SHANE Well, he took it on board. They’ve got various advisors there sort of wandering around like National Party nightingales, endeavouring to improve the ability of ANZ to recover its reputation. At the end of the day, this is big money, big egos, big incentive packages, and I’m not going to keep quiet on behalf of rural New Zealand if the Aussie banks aren’t going to back down.
JACK All right. You’ve had a chance to speak with them, though. I want to be 100% clear – do you think ANZ is bluffing when it comes to those threads about pulling out their business from New Zealand if those capital requirements go through?
SHANE Oh, no, if those capital requirements go through, my interpretation of Mr Elliott is that they will significantly change their model of operation in New Zealand. And I think what John Key said – that the target will be the farming community – I think John Key and Shayne Elliott are good for their threat.
JACK I just want to be really clear, though – it is your expectation that if the capital requirement changes go through, rural lenders will increase their expenses and costs in New Zealand?
SHANE Let me absolutely be clear about this – after the meeting with Shayne Elliott, the ANZ CEO, I’ve not got a sliver of doubt in my mind that they are not going to absorb these costs; they are going to look to pass them on. I am not happy about that, but at the end of the day, that is between the governor of our Reserve Bank and them, and I think that will do inordinate damage to the brand and the social licence of ANZ Bank. And I think it will bring a great deal of taint to the New Zealand grandees who sit on that board.
JACK Does the Reserve Bank need to back off a little bit here? Should they meet the Australian banks halfway?
SHANE Well, no, what Grant Robertson said - and I agree - people need to stop the bluster and bluff and have a mature grown-up conversation. So I couldn’t have put it better myself.
JACK But what does that mean? That’s bluff and bluster itself. Do you think – yes or no – that the Reserve Bank should peg back these capital requirements?
SHANE No, look, I don’t want to start issuing instructions, and it’s wrong to do that to the governor, but the governor fully understands that if you make any changes about where the banks are likely to go in regional New Zealand, it’s not only the quantum, but it’s over what period of time does this cost structure change. And I’m quite sure that the governor of the Reserve Bank already knows that.
JACK What do you think is the solution for the situation at Ihumatao?
SHANE Well, I mean, it’s now Tainui business. I think people need to bear in mind that a lot of the forces behind the SOUL movement, they have no interest in stabilising Maori leadership or stabilising the situation there. But I’d say to the protesters I do not believe that they have stated their case. They’ve plucked words out of the air that the whole place is wahi tapu. Absolute nonsense - you don’t grow wheat in the old days and kai more recently on wahi tapu. So that doesn’t have any wash with me, but I would suggest that whatever forces are supporting the occupation, they want it to be protracted, but now that the Maori King is involved, I’m very confident that we’ll see a higher level of certainty. I mean, the notion that you prohibit any development on this farm and say that has a higher value than housing, I think that’s a debatable point, and I happen to think it’s nonsense. So this notion that you can run around prohibiting things just because you don’t like development, I don’t get that. Especially when the people of Ihumatao are already backing housing development on the other side of the road. Yes, I’ve always smelled a rat here.
JACK Should the government buy the land?
SHANE No. No, no, no. The government’s not in a position to reopen any Treaty of Waitangi settlements.
JACK But if this is done independently, if the government said, ‘We will buy this land; we won’t regift it to any iwi; we set this up as a reserve of national significance.’
SHANE Well, at the moment, the Maori King and his advisors and the freedom campers from the SOUL movement and the local hapu, they’re all having a big hui at Hopuhopu, so I’ll leave it with them. I would have thought that they are more than capable of sorting it out rather than dipping into the Crown balance sheet. We should be building houses to offer accommodation for the whanau, rather than saying that a scattered number of stones on an old cow farm have greater significance for Maori than building houses and keeping the tamariki warm and in a safe environment.
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