Cunliffe David: Questions for Oral Answer — Questions to Ministers 
Cunliffe David: Questions for Oral Answer — Questions to Ministers 
[Volume:654;Page:2918] 
4.  
Hon DAVID CUNLIFFE (Labour—New Lynn) 
 to the  
Minister of Finance 
: What is his Government doing to encourage responsible behaviour by the banking system? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 As the member will know the New Zealand banking system is regulated and subject to the prudential supervision of the Reserve Bank—a longstanding framework. 
Hon David Cunliffe 
: Is he concerned about Reserve Bank of New Zealand reports that business borrowing costs—the red line—have hardly budged despite dramatic falls to the official cash rate; if so what is he doing about it? 
Hon BILL ENGLISH 
: Yes I am concerned about that and I understand the Reserve Bank will be paying some attention to the matter. I suggest that if the member wants an explanation of that he could get it directly from the banks by going and asking them. 
Hon David Cunliffe 
: Does the Minister believe it is fair that three major Australian-owned banks made a combined profit of more than $2 billion last year while keeping business lending rates way above those that should have applied if they had matched wholesale the rates set by the Reserve Bank and what does he say to the decent hard-working Kiwi businessmen and women who are paying too much for their business loans? 
Hon BILL ENGLISH 
: That member was not complaining when the rates for those hard-working decent people who are running small businesses were much higher under his Government. But I suggest that the member get a briefing from the banks as the Reserve Bank almost certainly will about the reasons that they believe the rates are where they are at. I am concerned about it. I know it is very tough on businesses and I would ask the member what he thinks the Reserve Bank should do about it. 
Peseta Sam Lotu-Iiga 
: What was the highest variable mortgage interest rate faced by homeowners in the past 10 years and how does it compare with the current rate? 
Hon BILL ENGLISH 
: According to official Reserve Bank data average variable mortgage housing rates peaked at 10.9 percent in June 2008 and I do not recall hearing complaints from Labour at that stage. They had fallen to 6.41 percent by last month and that is good for householders. 
Sue Bradford 
: Does the Minister think that the Government should expect anything back at all from the banks in terms of social responsibility given the huge risk the country is taking in providing the wholesale funding and retail deposit guarantee schemes? 
Hon BILL ENGLISH 
: Yes I do. The taxpayer is helping to underwrite the banking system. We expect the banks to give their clients a fair go and to stick with them through tough times. I might say that it is also in our interests to have a strong banking system. Only New Zealand Australia and Canada have escaped the collapse of their banking systems and that is a huge advantage to New Zealand. We need to keep a balance here between the taxpayer underwriting the banking system and also ensuring the banks are strong because the costs of the banks failing are very high. 
Hon David Parker 
: Why does the Minister think he has that balance right when New Zealand taxpayers are guaranteeing over $120 billion of bank debt while those banks that are making billions of dollars in profit from New Zealanders are the same banks that are preferring the interests of their Australian shareholders over New Zealand’s interests by shipping hundreds of jobs overseas? 
Hon BILL ENGLISH 
: I think the balance is about right. The taxpayer is underwriting the banks to ensure the benefit to the whole country of having a sound banking system and a comparison with what has occurred in other countries shows why that is worth it. I do not think the banks should be expected to be as profitable as they were because they are in respect of depositors taking much less risk than they were. I hope that we will see banks accepting that trade-off. 
Sue Bradford 
: Why does the Minister believe that the New Zealand Government cannot expect some commitments on things like requirements to provide finance for homes and businesses caps on executive pay and bonuses job retention and other things that jurisdictions overseas are expecting precisely in return for substantial Government backing for their financial and banking sectors? Why are we standing out on this? 
Hon BILL ENGLISH 
: The difference is that in the countries where all of those requirements are being made taxpayers have actually put in billions of dollars. Fortunately we have not had to do that yet. As I said yesterday I understand the concerns of the financial sector union about jobs being lost but I think it is a bit heavy-handed to say that if banks lay some people off we will remove the guarantees. That would be a very disproportionate response and bad for the economy.