Cunliffe hits out over bank inquiry

David Cunliffe. Photo / Mark Mitchell

National, Maori Party and Act members of Parliament's finance and expenditure committee voted against an inquiry into the margins banks are charging on variable rate mortgages and short-term business lending, Labour's David Cunliffe says.

Chairman and National MP Craig Foss said following a briefing from the Reserve Bank, the committee yesterday voted against either an inquiry into the relationship between the official cash rate and short-term interest rates or a wider investigation into "recent banking practices including a particular focus on retail interest-rate margins".

Labour Party finance spokesman Cunliffe told the Business Herald his party had favoured the broader inquiry covering margins on medium-term rates and credit-card borrowing as well as short-term rates.

However, on being informed by the Reserve Bank that it was reasonably happy with the medium-term picture, Labour's position was that it would have been satisfied with a narrower inquiry. That was an approach Government members had given "every indication" of supporting.

"Not only does that mean there will be no further action on it from the committee, but it also in my view calls into question the integrity of the process.

"We went through an exploration, the prima facie case was established by the Reserve Bank, and Government members voted against it anyway.

"Thousands of New Zealand homeowners, businesses, farmers and exporters have every reason to ask why Parliament's watchdog on the economy is, by a majority vote, choosing to stay muzzled," Cunliffe said.

Federated Farmers' economics and commerce spokesman, Philip York, said his organisation had also gained the impression there was cross-party support for an inquiry and was now disappointed with the committee's decision.

Foss said yesterday's decision was made following "various briefings", including additional presentations from the Reserve Bank.

"I think the committee has a lot more information at hand to reach the conclusion by majority that it did today, but I'm sure all members will be looking forward to the next Financial Stability Report and the next Monetary Policy Statement from the RBNZ."

Foss also echoed Prime Minister John Key's comments last month that an inquiry was of limited value.

"At the end of the day an inquiry could only ever inquire. Could it affect and impact on actual interest rates or effect change? Obviously it can't."

Campaigns director Andrew Campbell of bank workers' union Finsec said the decision "shows the Government is either impotent or on the side of Australian-owned banks".