KEY POINTS:
Calling Paula Rebstock, are you at home?
The competition regulator must get be getting mighty worried about the emergence of a de facto banking cartel.
Rebstock has been a doughty fighter when it comes to exposing anti-competitive behaviour by our airlines and wood products manufacturers.
But she's (so
far) been missing in action while the banks indulge in some rather outrageous behaviour that has been whipped along by one of her predecessors as Commerce Commission chair.
Alan Bollard, who's now governor of the Reserve Bank, is charged with fighting inflation.
Bollard is also fixated with rising house prices and has been trying to dampen down consumer demand in this area.
One month ago he suggested to Parliament's finance and expenditure committee that he was concerned over the slenderness of banks' margins, and was considering the imposition of more stringent capital adequacy ratios to dampen house mortgage lending.
But the private tete-a-tetes he then held with New Zealand's leading bankers look more like an orchestrated attempt to drive up banks' fixed-term interest mortgage rates at the expense of their consumers than a coherent response to problems on the inflation front.
The commission, which has sat on the sidelines while Bollard does his behind-scenes jaw-boning, needs to investigate to what degree he incited the banks to suddenly switch tack and raise fixed-term mortgage rates to around 8.9 per cent over the past few weeks.
The increases, which mount up to about 60 basis points, are argued (by some) to simply be a rational response to cover off expectations that more tightening will occur at the central bank's April 26 review.
But that's just self-serving spin.
As is the line being retailed to news media, that the increases are a direct response to rising rates on wholesale money markets.
The reality is that as banks' margins swell from 40-50 basis points towards 100 basis points, the benefits will flow in a one-way street: right to banks' bottom lines.
It's not going to worry them too much if consumers have to pay more for loans as fixed-term mortgages are reviewed or rolled over.
It won't even dampen all lending as many mortgage holders are in effect captive consumers.
They will be forced to pay the going rate when they renew their mortgages, with little prospect that any other member of the banking pack will undercut on price.
But aspiring first-home owners - the segment which faces difficulties getting into the market - might be discouraged.
That's the law of unintended consequences at work.
The upshot is that banks will safely be able to bump up margins and book super profits without any fear of having to compete in a true free-market regime.
Any revenue decreases they might arguably face on the new business side would be more than compensated by their ability to extract extra revenue from their already captive clientele.
And that's really worrying from a consumer standpoint.
New Zealand's real interest rates are already among the highest in the Western world. But the impact on banks' clients has in the past been moderated through competition among mortgage providers.
Which is how free markets should work.
Airline travellers would get pretty upset if Air NZ and Qantas (for instance) were encouraged to collude together to bump up transtasman ticket prices and put travel out of the reach of ordinary New Zealanders. Why should the mortgage market be any different to any other market?
A dig back through newspaper files reveals many New Zealanders faced substantial problems getting mortgage finance in the 1970s and early 1980s.
Banks faced restrictions on what they could lend. Second mortgages - at high rates - were also common for those who were not poor enough, or forward-thinking enough, to line up first-home mortgages from the state.
The deregulation of the financial markets changed that.
But why does Bollard want to hit on housing finance anyway?
Westpac points out that by last December economic growth had slowed to 1.5 per cent from 4.5 per cent two years ago, despite a robust world economy, strong commodity prices, a housing boom and an expansionary fiscal policy.
Westpac chief economist Brendan O'Donovan argues the Reserve Bank's monetary policy should be solely measured on its ability to deliver a stable price level, not its ability to target a specific asset price.
O'Donovan's research suggests that, given fundamentals, most of the increase in house prices was justified. He says that adjustment to fundamentals in debt and house prices has largely run its course, but the Reserve Bank trying to halt the correction was like King Canute trying to stop the tide coming in.
Then there is the problem of contagion.
The NZ dollar came very close to bursting the US 74c level last week. If the rising interest rates increase demand for New Zealand bonds, our tradeables sector will be squeezed. As will other businesses who will have to pay more for loans finance.
It's a vicious circle which will simply stave off a resurgence in strong economic growth.
Rebstock faces a difficult choice here.
If she tackles the banks head-on, it will inevitably cause ructions around the Beltway.
But in reality she has little option.