1. Banking Sector—Official Cash RateGRANT ROBERTSON (Labour—Wellington Central) to the Minister of FinanceORAL QUESTIONSQUESTIONS TO MINISTERSBanking Sector—Official Cash Rate1. GRANT ROBERTSON (Labour—Wellington Central) to the Minister of Finance: Does he stand by all his statements?Hon BILL ENGLISH (Minister of Finance): Yes. And in particular when I was asked a few months ago about what I thought of the Labour Party proposal that the Government legislate interest rates I said: That's a pretty dumb idea." I stand by that statement.Grant Robertson: Does he stand by his statement that he is not concerned that trading banks are not passing on the full official cash rate (OCR) cut?Hon BILL ENGLISH: Yes in the context in which it was made. The banks operate in a competitive environment. I see some of them have decided today for instance to favour their depositors by putting deposit rates up. For all those New Zealanders who save and put money in the bank they probably prefer that. Other banks over time may decide to pass all those reductions on to borrowers.Grant Robertson: In light of that answer then has he sought to correct the Prime Minister who said he thought that banks should "pass … on in full" the rate cut to their customers?Hon BILL ENGLISH: That of course as you would expect from the Opposition was not quite what the Prime Minister said. In fact he made a comment to the effect that he expected that is what the banks would do in the context of a competitive market. And fundamentally it is our view that the competition among banks will determine how much is passed on. It is not the Government's job to tell them how to run their business.Grant Robertson: If it is not the Government's job to tell banks how to run their business why did John Key say: "If banks behave like good corporate citizens they should pass on Reserve Bank cuts in full to their customers."?Hon BILL ENGLISH: Because good corporate citizens do what their customers demand that they do and that is what will happen. In the end they will decide how to respond to demand in the market and New Zealanders who are worried about it can ring up their bank demand a lower interest rate and I am told that they will get it.Grant Robertson: What responsibility does he take for New Zealanders not receiving the full benefit of the OCR cut today given the ANZ bank statement that lowering lending rates would "throw fuel on the fire in an over-heated housing market."?Hon BILL ENGLISH: This week the primary responsibility for the housing market in New Zealand lies with the Auckland Council. It has in front of it a plan and we like the council hope that it will sign off a plan that is convincing about bringing more supply to the market because that is the critical variable in the housing market and the Auckland Council has control over that variable.Grant Robertson: When 75 percent of New Zealanders are telling his Government that it is not doing enough to address the housing crisis and that this is the reason banks are giving for not cutting rates why will he not front up to New Zealanders and admit that his Government's failure to even admit there is a housing crisis is a major reason why mortgage rates will not be cut?Hon BILL ENGLISH: In the first place the member is making an assumption about mortgage rates and I think we have yet to see how the competitive pressures in the market will work out. As it happens banks have reduced mortgage rates over the last 6 months or so by more than the reductions in the OCR and that could easily happen over the next few months. But the key decisions now for the housing market lie with the entity that regulates the Auckland housing market and that is the Auckland Council.Grant Robertson: Does he recognise that he is now completely out of touch in ruling out a review of immigration policy settings when the Reserve Bank has now joined every Opposition party and most economic commentators in saying that unsustainable levels of immigration are putting downward pressure on wages and upward pressure on housing prices?Hon BILL ENGLISH: Immigration policy settings are always under review but I will tell you one part of it we will not be reviewing. The biggest single change is New Zealanders staying home. Unlike New Zealand First our policy is not to kick New Zealanders out in order to reduce the migration numbers. [Interruption]Mr SPEAKER: Order! [Interruption] Order!Grant Robertson: Why is he refusing to undertake a review of monetary policy and the Reserve Bank's policy targets agreement (PTA) when on the basis of today's Monetary Policy Statement inflation will not reach the mid-point target until 2018 meaning it will have failed to meet the PTA for 7 years by that point?Hon BILL ENGLISH: Along with other commentators I would invite the member to specify what he thinks the alternative should be because in fact across the world there is so much concern about deflation that central banks are taking extraordinary means to try to reach the inflation targets. And it turns out inflation targeting is probably more important now than it has ever been. In any case the PTA is reviewed every 5 years as it expires and that will happen in the next 12 months or so."