Kiwibank goes easy on Aussies

Kiwibank's boss was conciliatory towards the Aussies yesterday, but his bank's TV ads take direct aim at the transtasman enemy. Photo / Supplied

State-owned Kiwibank says its big Australian rivals are not "rorting" Kiwis on interest rates, but it has proposed improving competition by making it easier for customers to change banks.

Kiwibank chief executive Sam Knowles was the only banker to appear at the Opposition parties' banking inquiry when it began yesterday.

The inquiry was instigated by Labour finance spokesman David Cunliffe after Government MPs blocked a proposed finance and expenditure committee investigation into the claims that banks were not giving customers the full benefit of Reserve Bank interest rate cuts.

Mr Knowles told the MPs Kiwibank had consistently had lower variable interest rates than its big Australian-owned competitors, despite having to pay the same for money it borrowed.

"We've always taken an active stance that when our cost of funds comes down, we will pass that on."

Kiwibank did this because "we are the challenger bank and they are the incumbents", Mr Knowles said.

"If you've got a customer, you try and maximise the yield from that customer," he said. "If you haven't got that customer you've got to try and offer a better deal."

Asked by Labour MP Clayton Cosgrove whether higher rates were evidence that Kiwibank's larger rivals were "rorting Kiwis", Mr Knowles said that was not the case.

High interest rates on credit cards, for example, were "evidence of incumbency".

"I don't think there's any sense that there's some strategy in Australia that they want to cream Kiwis," said Mr Knowles, whose bank's advertising portrays its big Australian-owned rivals as rapacious invaders.

"This is a competitive market, and the way they operate leaves space for Kiwibank."

But he said there was scope to increase banking competition with measures such as making it easier for customers to change banks.

One way of doing this would be to let them keep their account number if they switched banks, as happened in the electricity and telecoms markets.

"If you look long term, the thing that would make it most easier is bank account number portability," Mr Knowles said. "That's something that some countries are looking at.

"If you were looking, 10 years out, to make banking less profitable and more easy for customers to change, you would work towards getting a bank account for life, which could move across banks.

"Obviously, there are some risk issues involved but no technical reasons it can't be done."

The inquiry was set up because of concerns about banks' mortgage interest rates, but submissions to it raise other issues, including monetary policy, tax settings and the exchange rate.

The inquiry continues today.