I'd like to ignore Dr Russel Norman but he could be the next Minister of Finance. Last week he complained that our banks were too profitable and were strip-mining New Zealand of capital.

Such puerile economic nationalism demonstrates Norman is either economically illiterate or is pandering to people to win votes. Neither is comforting.

Banking is competitive. If you do not want to use an Australian-owned bank, don't. Money is the most disloyal, transient commodity there is. If a bank wants your business it has to earn it, with service, ATM machines and price.

People choose to trade with the ASB because it is better for them than trading with the TSB, despite the latter's jingoistic appeals.


Banks make money from lending and managing our accounts. We use a bank because there is an economic advantage in doing so and competition is fierce. Banks battle for our custom with low-deposit loans, swanky business centres and mobile mortgage managers. Before they can take any money offshore they must make a profit by trading with us, by giving us what we want at a price we are prepared to pay.

Most of the money we are borrowing is sourced offshore by banks with strong balance sheets, backed by their Australian parents. The largest, the ANZ, has a market capital of A$66 billion ($84 billion), almost a third of our GDP. It took no dividends during the GFC and has A$9 billion invested in New Zealand. That is what it takes to be a global competitive bank.

Most of the $3.4 billion profit made by the big four will remain in New Zealand. A third will go in tax and Australian banks have a dividend policy of paying about 60 per cent of post-tax profits. The Australian banks are well run, prudent and financially sound. This gives them a strong competitive advantage. They provide us with a better service at a better price than if they were locally owned.

The same is true for dairy farms in China; those run by New Zealand firms have a higher milk yield than those run by the locals. This does not make China poorer, it means it gets quality milk at a cheap price and we earn a profit. We live in a rapidly advancing economic world. New Zealand business needs a world-class banking system with access to capital and technology if we are to remain competitive.

Today we are blessed with a robust banking sector. The fraction of a per cent they earn as a dividend is tiny compared to the economic value our banks deliver to us.

If Norman wants to know how well a locally-owned banking sector performs he need look no further than South Canterbury Finance.