Cunliffe David: Questions for Oral Answer — Questions to Ministers 
Cunliffe David: Questions for Oral Answer — Questions to Ministers 
[Volume:656;Page:5883] 
4.  
Hon DAVID CUNLIFFE (Labour—New Lynn) 
 to the  
Minister of Finance 
: Why is he allowing banks to opt out of the retail banking guarantee scheme? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 Participation was voluntary under the current scheme and it remains so under the extension I announced yesterday. 
Hon David Cunliffe 
: What are the consequences for the average level of risk borne by the taxpayer if major banks opt out but small and less creditworthy finance companies stay in? 
Hon BILL ENGLISH 
: The consequences for the taxpayer are that the more institutions they guarantee the more risk there is. At the moment the contingent liability is around $120 billion and a big part of that is in bank deposits. Banks have operated in New Zealand for around 150 years without Government guarantees and it is possible that they will be able to do so in the future. As I said before participation was voluntary in the current scheme and it will remain so in the future scheme. 
Hon David Cunliffe 
: I raise a point of order Mr Speaker. I submit that the Minister has not addressed the question. The question was very specific and asked what the consequences would be for the average level of risk. He attempted first to talk about the total level of risk which was irrelevant and then talked about the voluntary nature of the scheme which was also irrelevant. He has not addressed the question. 
Mr SPEAKER 
: The member still has further supplementary questions available to him. It is a fine line to draw on the matter. I invite the member to pursue it through further supplementary questions. I will give him that chance right now. 
Hon David Cunliffe 
: Have the same major banks further reduced short-term interest rates in line with recent cuts to the official cash rate; if not what does the Minister propose to do about that? 
Hon BILL ENGLISH 
: That issue has been discussed extensively in the House and I maintain the same position as previously. If bank customers do not like the margin that the banks are charging on floating rates then they can opt for the 6-month rate for mortgages which happens to be lower. The Government’s priority is and has always been that banks should keep lending because when they stop lending people lose jobs. 
Amy Adams 
: Is the wholesale guarantee scheme altered by yesterday’s announcement? 
Hon BILL ENGLISH 
: No the wholesale guarantee is not affected by yesterday’s announcement. The two schemes are largely independent. Under the wholesale scheme bank issuers are charged a fee of between 70 and 200 basis points which is considerably more than is charged for the retail scheme. There are recent indications in the market that banks will be able to borrow money without the Government guarantee as a number of their parent Australian banks are doing now. 
Hon David Cunliffe 
: Having given the banks a free pass on the retail guarantee scheme and also on the interest rate pass-through issue when will the Minister start to stand up for the interests of hard-pressed Kiwi businesses and households or will he continue to just roll over in the face of pressure from the big end of town? 
Hon BILL ENGLISH 
: That is a pretty silly question. The banks do not get a free pass. If they want to have the guarantee they will pay for it. The comments they have made on how much they have to pay for it indicates that they do not like it. If they do not have the guarantee then they do not pay for it. That seems an entirely logical position. It would be pretty odd if we imposed the guarantee on them.