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David Cunliffe - Source: ONE News -
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Labour Finance spokesperson David Cunliffe believes banks are rorting New Zealanders in a time when households and businesses are struggling.
Cunliffe told TV ONE's Q+A programme that banks have failed to pass on the last round of cuts to the official cash rate, and that the banks' arguments of the higher cost of borrowing does not wear.
The official cash rate sits at an historic low of 2.5% after being cut by 0.5% at the end of April and with no change to the OCR at the Reserve Bank's latest monetary announcement last week.
Banks have been criticised for failing to pass on the OCR cuts in full and Reserve Bank governor Alan Bollard, in both his April and June statements, urged banks to let cuts flow through to lending.
Banks have argued that the high cost of offshore borrowing to meet lending requirements has increased their costs. BNZ CEO Andrew Thorburn says banks have passed on the majority of OCR cuts to mortgage customers - about 4.5% of the 5.75% cut since July last year.
"The OCR's a useful indicator, but we raise deposits from local New Zealanders, and we raise it offshore. In fact, we raise 40% of our funds offshore and the pressure on deposits is going up so we're paying 4.25, 4.5% for deposits for New Zealand."
However, Cunliffe says the percentage of offshore financing has dropped in the last three months, now at $125 billion and on the decline after peaking at around $140 billion.
"Now that doesn't seem appropriate in a recession where ordinary New Zealanders and business are suffering. So it's about good corporate citizenship, it's about a fair suck of the sav for everybody, not just the banks, while other people are suffering," he says.
Thorburn says the bank's interest has fallen 26 basis points to 2.23% in the past six months. Of its costs BNZ pays $350 million in salaries, $300 million in tax, and another $200 million to other suppliers.
"So there's a billion dollars before we get our profit that's washing around the economy, stimulating it," he says.
But Cunliffe says while the BNZ's profit on bank lending in the last six months apparently dropped $11 million, at the same time the provision for voluntary bad debts went up $66 million.
"If you back out the difference in fact their profitability on bank lending in New Zealand went up 24.5%," he says.
For more on this debate, read the transcript of Paul Holmes' interview with David Cunliffe and Andrew Thorburn CLICK here .
You can also click on the WATCH tab to see the video of the interview.
