Well I think that is what MPs are saying in this report yesterday. Let’s have a look at this argument that these big Australian banks are creaming profits at the expense of Kiwis because they haven’t passed on all the recent OCR cuts.
Our graph here shows clearly that bank margins on floating rates have increased as the OCR has come down. Does that mean they are profiteering?
We don’t know and nor do the politicians. These big banks are complex businesses and sometimes it is dangerous to look at one set of numbers in isolation.
It is not up to politicians to tell banks where they should be setting their interest rates. If that is what they think they should be doing then make some regulations and tell the bankers how to run their businesses.
I thought, no matter whether it is a National-led or Labour-led government, that we had a free market in this country? Likewise I don’t recall the politicians stepping in when the mortgage price war was going on saying that rates were too low and they were worried banks were losing money.
MPs are as impotent as the Reserve Bank is at forcing change to retail interest rates.
Tomorrow with the OCR announcement we will see what the Reserve Bank governor Alan Bollard has to say about the situation. My feeling is that he isn’t that worried about home loans rates and what is going on in that market. The housing market is bubbling along OK, prices seem to have plateaued out and there is sufficient activity to keep the sector healthy.
It isn’t likely to burst into any great boom at the moment as the fundamentals just aren’t right.
The much bigger issue for the Reserve Bank and the economy is what’s happening with the currency and how that is severely hurting our export sector.
Taking this as the key issue then the central bank has little choice but to cut the OCR at least 25 points. Such a cut won’t be primarily designed to bring home loan rates down.
[...] Reserve Bank governor Alan Bollard would like to see them come done some more, but as this earlier post says, the central banks and politicians are impotent on this [...]
“Likewise I don’t recall the politicians stepping in when the mortgage price war was going on saying that rates were too low and they were worried banks were losing money.”
Since you mention it… here’s the RBNZ in May 2007:
“The low level of lending margins has contributed to ever increasing levels of household debt… it is not clear that banks are taking appropriate account of the systemic risks associated with the rapid growth in their aggregate lending.”
http://www.rbnz.govt.nz/news/2007/3000676.html
And margins were actually higher then!
limiting overseas “private” deposits will force the banks to source their funding ex RBNZ.. the recent practise of our banks with their high deposit interest rates caused by the stupid actions of RBNZ the last 5 or 6 years, have now in reality made the RBNZ redundant..its actions are irrelevent to the local banks, and now banks rely on their funding of these “private” deposits, so unless limiting these, the mortgage rates will never come down in tandem with the RBNZ..
in one word, Bollard and co are dumb!
And the IRD letting these “private” overseas deposits get away with 1 to 2% tax rates, while we have to pay 39% really stinks..