The multiparty inquiry into the banking sector has reported back [PDF], finding that the New Zealand banking sector is not competitive, and that this lack of competition has allowed the four major Aussie banks to not pass on cuts to the OCR. The cost of this is staggering - an estimated $2 billion in increased interest costs, effectively as oligopoly rent to a foreign-owned cartel. The Australians really are looting us.
In the face of this finding, the recommendations of the inquiry are rather tepid: the government should "consider" increasing the capital available to Kiwibank to allow it to bring competition to the market, the Reserve bank should gather more information on overseas borrowing by banks, and the government should hold inquiries into bank-sector competition and monetary policy. Yeah, that'll scare them into behaving.
I have a better solution: forcibly beak up the Aussie banks into smaller units to restore competition to the market, and regulate the crap out of them to ensure they behave. This was once the perfectly orthodox solution to monopoly and oligopoly abuse (see Standard Oil and Bell for examples). But if such a solution is too radical for Labour, then we can hardly expect National - run by an ex-banker with close ties to the very Aussie banks who are abusing us - to go for it.
