Foss Craig: Questions for Oral Answer — Questions to Ministers 
Foss Craig: Questions for Oral Answer — Questions to Ministers 
[Volume:655;Page:4271] 
1. CRAIG FOSS (National—Tukituki) 
 to the  
Minister of Finance 
: What reports has he received on lending practices in the banking sector? 
Hon BILL ENGLISH (Minister of Finance) 
 I receive regular reports from the Reserve Bank and elsewhere. The Government’s most important objective has been to ensure stability and orderly lending by the banking system. Experience overseas in the past year demonstrates the high cost of bank failures. I am pleased to report that our primary objective of ensuring financial stability has so far been achieved. We have strong banks that are able to continue lending. 
Craig Foss 
: How has the price and availability of credit evolved over the past year? 
Hon BILL ENGLISH 
: The general structure of interest rates is declining. The average variable mortgage rate peaked at 10.9 percent in June 2008 and had fallen to 6.4 percent in May 2009. Overall credit is expanding. In the year to April the total lending to New Zealand residents increased by $15 billion or by just under 6 percent and it has expanded in 10 of the last 12 months. All of this illustrates that the banking system is working in an orderly fashion. 
Hon David Cunliffe 
: Has the Minister seen reports that show that although the Reserve Bank has cut the official cash rate by 575 points banks have over the same period passed through less than half of this—a total of 243 points—to New Zealand businesses; and if this practice continues and the banks do not pass on the large cuts to interest rates does he believe that New Zealand businesses will be getting the fair go that he expects from banks that have the backing of taxpayer-funded guarantees valued at $130 billion? 
Hon BILL ENGLISH 
: Yes of course there is going to be debate about whether the banks have passed on all the interest rate cuts although I might stress to that member that the bank margin peaked at 260 basis points over the overnight cash rate in 2004 under his Government. That has now dropped. 
Hon Darren Hughes 
: You’re in charge now. 
Hon BILL ENGLISH 
: We are in charge now and the bank margin has dropped to 210 points—about the lowest in 10 years. 
Craig Foss 
: What other factors are influencing interest rates at present? 
Hon BILL ENGLISH 
: One factor that can influence interest rates quite directly is bank customers choosing to go to other banks that are offering lower rates or customers choosing to go on to rates with a different term structure. For instance the current 6-month rate is considerably lower than the floating rate and bank customers are free to choose that rate if they want to. I am sure that the banks will take notice of any change in market share if their floating rates are too high. 
Metiria 
 Turei 
: Does the Minister believe that even though New Zealanders might be grateful that the Australian-owned banks are not going under they would also be rather grateful if their Parliament would set up an inquiry into mortgage rates and credit card interest rates and into the bonus payments made to bank chief executive officers all of which remain very high? 
Hon BILL ENGLISH 
: Of course for many households and businesses interest rates seem to be too high particularly if their incomes and revenue are dropping or if people have lost their jobs. I must say to members that in the face of those adverse circumstances a parliamentary inquiry might be interesting but it is not exactly clear to me how it would help those people who are feeling the pressure. 
Hon David Cunliffe 
: Has the Minister seen reports of comments by Reserve Bank governor Dr Alan Bollard that “I do think it’s time when banks have to look as they ride through this recession just how much pain will be borne by their shareholders and how much will be borne by the New Zealand economy.”; and does the Minister agree with the Finance and Expenditure Committee that an appropriate response by banks to the recession should include passing on reductions to the official cash rate maintaining liquidity and ensuring it is available on as equal terms to businesses in New Zealand as it is to those in Australia and recognising current economic conditions? 
Hon BILL ENGLISH 
: Yes I agree with all those comments. The one comment I disagree with is the inference by the Opposition spokesperson that emergency powers in the Reserve Bank Act ought to be used to try to make the banks lower their interest rates. That would be a bizarre response to the current situation. 
Hon David Cunliffe 
: I raise a point of order Mr Speaker. The Standing Orders provide protection from members against misrepresentation. Perhaps the Minister could be invited to clarify which comments he is referring to. 
Mr SPEAKER 
: The member will take his seat. The member can use further supplementary questions if he wants to challenge aspects of the Minister’s answer but he cannot use the point of order process to debate the Minister’s answer. There is no provision in the Standing Orders for that. 
Hon David Cunliffe 
: I am not seeking to trifle with your ruling Mr Speaker but the question that I asked might have been misheard by the Minister. The question did contain a number of quotes none of which were from myself but the Minister’s answer sought to draw other comments that he purports to have heard into debate. He is obviously fabricating this because I have never made— 
Mr SPEAKER 
: The member will take his seat. He must not make such accusations under a point of order. If the member reflects back on the question he asked he will find that it was quite a long question. It had a first part where he said “and” then he read a list of further matters. Obviously with such long questions he is not always going to be happy with the answers he gets but the member does have further supplementary questions in which to challenge the answer. 
John Boscawen 
: Is the Minister satisfied that companies in the export sector are able to access bank funding as and when required? 
Hon BILL ENGLISH 
: I have heard from a number of companies small and large that have difficulty in accessing credit. One reason we need to have strong banks is so that through a recession the banks are able to show some tolerance of the pressures that a number of companies are under. If the banks stop lending people will lose their jobs.