Commerce Minister Duncan Webb at a select committee. (file photo) Photo: Phil Smith
The government is giving its strongest indications yet of a Commerce Commission study into bank profits after preventing a shorter select committee inquiry.
It follows a new report which found bank profits were 17.3 percent higher compared to a year ago.
Commerce and Consumer Affairs Minister Duncan Webb this morning said he was taking advice from the commission and was actively considering the matter.
"We want to do that in a careful and deliberate manner," he said.
"If we do a market study into banks we want to get the front end right, make sure we get the terms of reference appropriate, so we're taking advice from the Commerce Commission and officials on that.
"It's really important to know where to look, the scope fo the inquiry whether it's more into mortgage rates, or whether it's a more broad-based inquiry but we're certainly not going to let the banks off the hook."
The National Party had called for the Finance and Expenditure Select Committee to carry out a shorter inquiry, a proposal which had support from all parties in Parliament except Labour.
Labour used its majority in the committee to vote down that proposal today.
National's Finance Spokesperson Nicola Willis said it would have been fast enough to get timely answer for New Zealanders who wanted answers about competition in banking services, and the request was made in good faith.
"This was never an either/or proposition. An open, transparent select committee inquiry would have been a pragmatic step, equipped with powers to summon witnesses and to require the production of information from banks and others. Evidence would have been heard in public, not in the closed interview rooms of a government agency.
"A select committee would not have prevented a Commerce Commission inquiry occurring later - if warranted.
National's Finance Spokesperson and deputy leader Nicola Willis Photo: RNZ / Angus Dreaver
"Instead, government MPs have voted down my proposal for an inquiry, claiming a Commerce Commission market study is likely to occur. If that is the case, the Minister of Commerce should confirm it immediately."
Webb, however, said that was not the reason it was voted down.
"No, the reason that was voted down is because a quick and dirty study lets the banks off the hook, it's the National Party trying to make something once over lightly - and that's not good enough.
"We're not going to do a quick and dirty inquiry from politicians - we want to use experts ... if we do a market study it'll be using the commerce commission and all the resources and skills they've got."
Willis said her key concern was the Reserve Bank's observation that depositor interest rates had lagged behind those for mortgages.
"That's a worry and that could be contributing to these higher rates of profitability," she said.
"We also have the question about the effect of the funding for lending programme, and the money printing that the Reserve Bank's done over the last couple of years. How much have the banks benefited from that and how much has that contributed to their bottom line? Because what we do know is all new Zealanders are now paying the price for that through higher rates of inflation."
But Webb insinuated National was trying to scupper genuine attempts to investigate the banks, saying their loyalties were with "the big end of town".
"We know where their loyalties lie. We're concerned that banks are not giving a fair deal to consumers and if a market study is needed and appropriate, that's what we'll do.
"A market study would take a year possibly more, but the result would be a thorough understanding of how the sector's working and where it's going wrong - and if that's what we need, that's what we'll do.
"Getting it right is more important than getting it quick."
Willis said her loyalties were with ensuring New Zealanders were getting a fair deal, and the market was operating effectively with good competition.
"I just find that a reprehensible comment. I am loyal to New Zealanders and that is why I have put forward a proposal for an inquiry.
"As things stand Duncan Webb has done nothing, so I won't be corrected by him when he hasn't actually initiated any action on this."
He refused to say when Labour might announce any move to review bank profits, saying merely to "watch this space".
Others, including Green Party MPs Chloe Swarbrick and Julie Ann Genter, have urged Labour to do more - saying while an inquiry would be useful it was not needed to make changes now.
Options could include a windfall tax as the Greens have been urging, progressing work on open banking, or strengthening Kiwibank - the fifth-largest bank in New Zealand owned wholly by the government through a state-owned enterprise. The latter could include exploring some level of privatisation.
Webb said it was not about what level of profits the government would accept.
"It's not a political decision about what we're willing to tolerate, it's about where the biggest gains for New Zealanders can be made and what that study will look like, so that's why I'm taking advice on it."
"Kiwibank is a market player, it competes in an even field, and I don't think we've got any proposals to do that."