Protestations from banks have hollow ring

29-06-2009 | Alan Emerson

The current weeping, wailing and gnashing of teeth by our politicians about the banks' usurious interest rates is leaving me cold. My suggestion to them is more action and a lot less noise.

We know the banks, more than any other part of the economy, are doing what they can to extend the recession and make things as difficult for the rural sector and what annoys me is that we can fix it but won't.

The issues in my opinion are simple. Our main banks are almost branch offices of their Australian parents. Those banks borrow money, loan it cheaply to Australians and then further clip the ticket and lend it here at interest rates above those across the Tasman.

Last month the NZ Herald reported that, for example, the ANZ charged Australians 5.81% on floating mortgages whereas the figure here was 6.45%. You'd have to ask why, especially as the Australian official cash rate is above ours.

Further, Feds claim that farm overdraft rates have dropped 2.68% since last December whereas the official cash rate has dropped 4%. They then went on to claim that banks were costing farms $450 million. Quoting Feds spokesman Phil York's 1% on interest rates, considering the farm debt of $45 billion, equates to $450 million. I'd argue that figure was conservative.

The banks are certainly candidates for the creative spin doctor prize but ANZ National CEO, Jenny Fagg, told Morning Report that the four Aussie banks were "four of the 10 top-rated banks in the world". As an editorial in the NZ Herald mentioned, for top rated read most profitable.

She was extremely sensitive on the accusation of "gouging" by the banks, but I believe it is the most appropriate word to use.

At the end of the day the politicians can huff and puff all they like and the Reserve Bank governor can continue to cry foul, but all either action is likely to achieve is a two finger salute by the four Aussie banks in question. Also don't forget that we, the taxpayers are guaranteeing their deposits.

If the government is serious about bringing banks into line all it has to do is make more money available to Kiwibank and encourage it to lend to the rural sector, end of story. The other option is to loan money to TSB, a 100% NZ owned bank, with a good rural presence locally and interest rates under 6%.

Select committee investigations will achieve nothing except giving politicians a further platform to bore us witless. That the government isn't encouraging Kiwibank is an indictment. They own it, it's there and able to do the job. Why the pollies are pandering to the Aussie banks defies gravity, is extending the recession and costing the productive sector dearly.

One thing we as individuals can do is to support either Kiwibank or TSB and tell the others to get stuffed. TSB has been around over 150 years, is rock solid and dependable.

Going onto the ANZ website you can read that "ANZ is passionate about agribusiness". Yeah, right! In that case drop your rates and help NZ out of the recession. Mind you, going to the Westpac site you can read how "Westpac is proud to sponsor Federated Farmers". Now there's a problem. The bank goes on to claim Feds have around 26,000 members, that's 1000 more than Meat and Wool NZ estimates there are levy players, but I digress.

Currently Feds and Westpac are going round the country running "free nationwide seminars on practical farm debt management".

Despite all the publicity there are only five seminars over a three day period, at Timaru, Kaiapoi, Palmerston North, Hawera and Morrinsville, so it's hardly a solid attempt to get into the provinces.

My problem is with a bank sponsoring a pressure group, that group is not going to be too critical of the bank in question or banks generally. A bit of rhetoric maybe but no king hits and I have issues with that. As an example Business NZ does not have sponsors and their website is commercial free, as it should be. They can comment without compromise.

If Feds were serious about dropping interest rates they would be encouraging the government to do what I suggested, loan to Kiwibank or the TSB, both NZ owned and proud of it. In addition they could encourage their members to bank with the two NZ banks. Now that would really annoy Westpac and its Aussie mates, wouldn't it?

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