Burns Brendon: Westpac New Zealand Bill — In Committee 
Burns Brendon: Westpac New Zealand Bill — In Committee 
[Volume:672;Page:18807] 
BRENDON BURNS (Labour—Christchurch Central) 
: 
 I think it is important to acknowledge at the outset the importance the Labour Party attaches to the trading banks most noticeably as evidenced by this bill the Westpac New Zealand Bill. Obviously banks are necessary to the functioning of a modern economy but I still remember my old dad’s dictum about banks which I think reflects the public view sometimes of banks. He used to say that banks are entities that give out two umbrellas when it is sunny and ask for them both back when it starts raining. That wisdom I suppose has imbued a certain caution in me about banks and it is not always I feel a caution that is reflected by banks themselves. 
I sometimes wonder whether Westpac as an example remembers our very recent history. Just last night on television I saw an advertisement for I believe Westpac. It showed a couple in a small modest flat and the woman was gazing across the road as someone was moving into a big old villa. The advertisement basically said: “Why wait?” and advertised that one can buy a house with a 5 percent deposit. Then the advert showed the couple having moved into what I guess would be in Auckland terms a villa worth at least three-quarters of a million dollars or thereabouts. I think that is illusory I think it is unreal I think it is enticing and I think it is provocative. I think it is also breathtakingly short term in view because it fails to take account of what we have been through in our very very recent history. One has just to ask sometimes what the fundamentals are that the trading banks including Westpac are operating under. We have to ask what happens in a situation where somebody buys a house with a 5 percent deposit and house prices collapse as some commentators still believe will happen at some point over the next year or two. 
I have to pick up on the speech of my colleague Stuart Nash and acknowledge the issue with dairy farmers. The average debt of dairy farmers at the moment be they a Westpac New Zealand customer or a customer of any other trading bank is $2.8 million—$2.8 million of borrowing. No wonder they are able to pay only $30 a week in tax because they are struggling to maintain any semblance of principal repayment when they have debts at that level. Of course it takes two parties to dance in respect of debt. One is the farmer wanting to expand wanting to grow wanting to acquire the neighbour’s property and wanting to increase the size of the herds and then there is the bank to fund the farmer into that proposition. But if the reality is that the farmer is paying only $30 a week in tax there is something wrong with that fundamental. When a farmer with a turnover of $1 million - plus pays only $30 a week in tax there is something very seriously wrong. There is a real shortcoming there in respect of that. 
We need only to contrast it with the financial borrowings of dairy farmers across the Tasman who are also likely in many instances to be Westpac customers. There seems to be a more prudential approach being taken there because according to Rod Oram’s column last Sunday the average debt of a Victorian dairy farmer for example is under $1 million. We are talking nearly three times the borrowing by New Zealand dairy farmers under banks such as Westpac yet the equivalent debt across the Tasman is about a third of the New Zealand figure. That says to me that there will be consequences. When farmers are paying only $30 a week in tax they are able to pay perhaps only $1 out of a $7.50 return from a kilogram of milk on principal if they are lucky. That is if the prices hold up and that of course is not guaranteed. I acknowledge that this bill does not deal with those issues. We leave the prudential management to the Reserve Bank but it is still worth noting those points. 
This bill is about having regard to the Reserve Bank’s policy of local incorporation. That is a very sound policy. We want to see banks with as much of a New Zealand component as possible and this bill is transferring some of the assets held by the broader Westpac Banking Corporation through to the New Zealand arm. This will underpin the financial viability of Westpac New Zealand.