The NZ Herald reports that the Green Party is criticizing Prime Minister John Key for lacking “the courage to tackle the big Australian banks which have saddled New Zealanders with billions of dollars of debt in pursuit of profits.” They call for “state-owned Kiwibank to be bulked up to take them on.”
This really looks like a argument driven more by ideological predisposition than by any logical analysis, i.e. “private profits bad, state ownership good.” First, they completely ignore the fact that New Zealanders’ debt is a consequence of New Zealanders’ own choices. No one has a gun to the heads of borrowers. If New Zealanders are taking on too much debt (and I’m inclined to think they are), it’s because of their own stupidity.
To the extent that this may involve poor lending standards for residential mortgages, the banks do bear some responsibility – but it is primarily responsibility to their own shareholders for the additional risks this entails (though arguably the Government also has a stake, given the retail deposit guarantee scheme). However as Gareth Morgan pointed out back in September, part of this responsibility actually belongs to the Government – not for failing to restrain the banks but rather for actively encouraging them through Reserve Bank prudential policy favoring lending for property over other investments.
Further illustrating the silliness of the Greens’ attempt to shift blame for bad borrowing decisions away from New Zealanders themselves, Bernard Hickey had a good article in the Herald a few days ago pointing out that Kiwibank actually relies on risky short term overseas funding to a greater degree than the Australian banks, and has “decided not to compete as hard with the Aussie banks for term deposit funding”. They were also New Zealand’s second biggest mortgage lender in the March quarter, making it pretty hard to paint the Australian banks as the villains of the New Zealand banking industry.
Brian Gaynor also has an article in the Herald today pointing out the huge difference in attitudes towards saving in New Zealand compared with Australia. The same banks (more or less) operate in both countries. But the data Gaynor presents shows clearly that New Zealanders are much less inclined to save and invest locally than Australians, further illustrating the fact that New Zealanders’ financial situation is a result of their own choices. For the Greens to paint the Australian banks as some malevolent force that must be stopped is just absurd.