Friday, October 05, 2012

Profiting from our misery

The last four years have been tough. The global financial crisis and National's anaemic response to it has seen soaring unemployment, stagnant wages, and companies going bust right, left, and centre. Meanwhile, our rapacious Aussie banks are making out like bandits:

New Zealand's four major trading banks, which are all Australian-owned, made more money in the four years following the global financial crisis than the four years preceding it, new figures show.

The Greens have today released a comparison of four banks - ANZ, BNZ, Westpac and ASB - prepared by the Parliamentary Library which shows they reaped $14.42 billion profit from 2008-2011, up from $14.08b between 2004-2008. That is an increase in before-tax profits of about $340 million.

Greens co-leader Russel Norman said a similar analysis for all New Zealand industries found profits had fallen by 15 per cent since the global financial crisis.

And it gets worse: three of the four Aussie banks reported record profits in the last year. They're profiting from our misery.

How does this happen? Because our banking sector is not competitive. The Aussie banks have a tight little oligopoly, where they set the prices and we just have to pay whatever they are asking. While there are other players, they're not big enough to provide any real competition in the market, and hence not big enough to force fees and interest rates lower (or higher, for deposits). The result is effectively a giant siphon in the New Zealand economy, funnelling off our economic output to Australia.

As for how to stop this, supporting Kiwibank is one option. Tighter regulation is another. But ultimately, if the Aussie banks are too big and behave oligopolisticly, then they need to be broken up, to reintroduce competition into the market.