The Dim-Post

March 16, 2016

KiwiBank?

Filed under: Uncategorized — danylmc @ 9:15 am

Via RNZ:

Last week the Reserve Bank cut the OCR to a record low of 2.25 percent, but the major banks did not lower their mortgage interest rates by an equivalent amount.

John Key said Labour leader Andrew Little was ignorant for suggesting banks should be made to pass on the rate cuts.

Mr Little said the government should pressure the major banks to reduce their mortgage interest rates, and if he was Prime Minister he would consider going as far as legislating to make them do it.

Wasn’t the WHOLE reason Labour created KiwiBank so it would have a non-legislative mechanism to force the commercial banks to do things like pass on interest rate cuts?

30 Comments »

  1. Very good point.

    I also thought part of the reason was so that the commercial banks could shed all their unprofitable customers onto Kiwibank and therefore become more profitable, but I’m not sure that was publicly announced. 🙂

    Comment by PaulL — March 16, 2016 @ 9:17 am

  2. I would like to ask the commenters here who they bank with? If they don’t bank with a NZ-owned bank, why not? Disclaimer: I don’t work for a bank or in the finance industry. I believe if a person is a Green, NZ First, Mana or Maori Party supporter then they are bound by their conscience not to bank with an Australian or other foreign-owned bank. Similar if they oppose foreign owership of property.

    Comment by cctfred — March 16, 2016 @ 9:32 am

  3. And then Kiwibank led the charge in the mortgage wars between 2003-06, which saw household debt blow out from $75billion to $150bn.

    Talk about yer unintended consequences.

    Comment by robhosking — March 16, 2016 @ 9:38 am

  4. @cctfred: Good thing nobody here cares what you think they should or shouldn’t be allowed to do with their personal finances, then!

    Comment by Ortvin Sarapuu — March 16, 2016 @ 9:52 am

  5. I think @cctfred is correct that, if you weren’t to be a hypocrite, then if you strongly believe in NZ owned banks, that banking with a NZ owned bank would be consistent. There are two good choices – Kiwibank if you’re in favour of government owned banks, or TSB if you’re in favour of community owned institutions.

    Comment by PaulL — March 16, 2016 @ 10:12 am

  6. there are two good choices – Kiwibank if you’re in favour of government owned banks, or TSB if you’re in favour of community owned institutions.

    FYI – the full list of NZ-registered banks is here: http://www.rbnz.govt.nz/regulation-and-supervision/banks/register

    Comment by Phil — March 16, 2016 @ 10:28 am

  7. Also SBS Bank (formerly Southland Building Society), the Cooperative Bank (formerly PSIS) and Heartland Bank (CBS Canterbury + Southern Cross + MARAC). I have been a Kiwibank customer from early on after they were set up. Generally they are helpful and will negotiate on mortgage rates. I nearly switched to SBS recently but Kiwibank came back with a competitive offer. They tend to be pedantic on having the correct name on depositing cheques and complying with recent money laundering regulations but I accept this as part of their public service origins.

    Comment by cctfred — March 16, 2016 @ 10:30 am

  8. Key is right on this one, though. Banks don’t get all their finance from the NZ reserve bank, but will borrow from overseas as well and have all kinds of hedging going on. So the relationship between a specific change in the OCR and the rate which a given bank will charge its customers isn’t necessarily simple and direct, whether the bank is NZ owned or not.

    Also, I think that the fact that so much of our banking system was based in the strong Australian economy during 2008 and 2009, when much of the rest of the world was facing a banking crisis, was a major piece of good luck for us.

    Comment by Dr Foster — March 16, 2016 @ 11:01 am

  9. I think the PM is displaying a laughable ignorance of banking as well when he replied to Little by asking whether Little would be happy “if” the banks also passed on rate increases to customers.I can’t think of a single example when banks haven’t automatically, gleefully and swiftly passed on interest rate hikes to their customers.

    Comment by Don 1 — March 16, 2016 @ 11:09 am

  10. No, I think the WHOLE reason Labour created Kiwibank was to buy Jim Anderton’s vote.

    Comment by Nick R — March 16, 2016 @ 11:36 am

  11. > Wasn’t the WHOLE reason Labour created KiwiBank so it would have a non-legislative mechanism to force the commercial banks to do things like pass on interest rate cuts?

    Not the WHOLE reason, and possibly not even PART of the reason.

    From the Beehive press release in 2001 (https://www.beehive.govt.nz/release/anderton-welcomes-kiwibank):

    “Jim Anderton sees the benefits of the new bank as cheaper fees, the retention of banking profits in New Zealand, new services such as banking for children, more branches at convenient locations and greater flexibility for opening hours for bank customers.”

    Comment by Antoine — March 16, 2016 @ 11:45 am

  12. And to the extent that I have a share in the (100% state owned) Kiwibank, I’d rather see it operating commercially, than taking direction from Andrew Little.

    A.

    Comment by Antoine — March 16, 2016 @ 11:49 am

  13. Antoine , banks almost never put their customers first and often dont act commercially either- otherwise they wouldn’t have to write off big loans that were made to businesses like TV3, or say Dick Smith

    Anyway Little isnt talking to the banks – they dont have a vote- but to those who do, which is why Key &co are screaming blue murder. Inspite Key saying much the same thing a few days ago:
    Speaking from Port Moresby, Mr Key said it would benefit home owners.
    “There’s every chance you’re going to see mortgage rates with a three in front of them. They are phenomenally low levels for home owners and businesses to borrow money.”

    Thats was after he strongarmed the Reserve Bank governor the other day
    “Prime Minister John Key has sent a shot across Reserve Bank governor Graeme Wheeler’s bows, effectively warning him not to keep interest rates unjustifiably high as inflation heads lower.”

    Comment by dukeofurl — March 16, 2016 @ 1:10 pm

  14. > Antoine , banks almost never put their customers first and often dont act commercially either- otherwise they wouldn’t have to write off big loans that were made to businesses like TV3, or say Dick Smith

    I never said banks put their customers first. I was looking for Kiwibank to put its _shareholders_ first. I see no evidence that banks have deliberately made decisions that are not in the long term interests of their shareholders (although agree management capture can happen, etc).

    > Anyway Little isnt talking to the banks – they dont have a vote- but to those who do,

    Most of which won’t like it. I certainly don’t. Legislating to force banks to change their interest rates is banana republic stuff. Why stop there…? how about legislating to lower the price of petrol? to require landlords to drop rents? to make supermarkets sell cheap groceries?

    To the extent that Little was serious, it was crazy talk.

    But I do notice that Little seems to have a habit of chucking ideas out there, that he is not 100% serious about or committed to. Is this a form of thinking out loud perhaps? or of floating ideas to see how they go down?

    > Inspite Key saying much the same thing a few days ago

    That is actually a completely different thing. Key was saying he hoped or expected that interest rates would fall. Completely different from proposing to legislate to control them.

    > Thats was after he strongarmed the Reserve Bank governor the other day

    Also a completely different thing.

    A.

    Comment by Antoine — March 16, 2016 @ 1:43 pm

  15. @me

    >But I do notice that Little seems to have a habit of chucking ideas out there, that he is not 100% serious about or committed to. Is this a form of thinking out loud perhaps? or of floating ideas to see how they go down?

    Case in point, his recent comment that “Labour is considering a UBI”, which is being excitedly discussed on the Standard (http://thestandard.org.nz/labour-considering-unconditional-basic-income/). Surely Little is not serious about considering a UBI, it sounds like total electoral poison to me.

    A.

    Comment by Antoine — March 16, 2016 @ 2:17 pm

  16. Kiwibank just subsidises NZ Post, and employs some Wellingtonians, thats about it really.

    Comment by Richard Williams — March 16, 2016 @ 2:44 pm

  17. #7 cctfred What on earth is a “cheque”?

    Comment by Phil Moore — March 16, 2016 @ 2:56 pm

  18. i read that KB will be reducing 1, 2 and 3 year rates on/around march 24. so maybe we wait.

    Comment by Che Tibby — March 16, 2016 @ 4:30 pm

  19. “I can’t think of a single example when banks haven’t automatically, gleefully and swiftly passed on interest rate hikes to their customers.”

    They didn’t pass on all the 2014 hikes. Too much competition..

    Comment by robhosking — March 16, 2016 @ 4:42 pm

  20. Strangely enough, I have just had an email from Kiwibank announcing that they are lowering their interest rates on savings accounts. Andrew Little can heave a sigh of relief – banks do in fact react quickly to changes in the OCR…

    Comment by John Elliott — March 16, 2016 @ 5:29 pm

  21. Little’s moved on from banks to the state of ethnic restaurant kitchens.

    He’s got a broad range of skills and knowledge.

    Comment by NeilM — March 16, 2016 @ 6:00 pm

  22. Richard Williams

    You’ve got it wrong.

    NZ Post subsidises Kiwibank. That’s just one of the reasons NZ Post makes huge losses.

    Cullen should sell this dog to Toll Holdings.

    Comment by Adolf Fiinkensein — March 16, 2016 @ 8:03 pm

  23. “I would like to ask the commenters here who they bank with? If they don’t bank with a NZ-owned bank, why not?”

    Currently ASB.

    I started with the post office out of school, which became Postbank, which was eaten by ANZ. Then I stuck with ANZ for ages because it did everything I needed to (okay interest rates on savings, etc) and I had other things to worry about. Then when shifting to Australia I ended up with an Australia ANZ account. (Llengthy story but basically I fell for their marketing swindle about the banks having any relationship whatsoever, which is completely false). Over time I generally came to believe that ANZ on both sides of the ditch aims to be the crappy service one-size-fits-all fast food outlet of banks, at least on the retail side, so I decided to finally ditch it when coming back to NZ 3 years later.

    We looked at KiwiBank, but when we walked into the Marion Street branch (in Wellington), lined up for ages and then the staff there didn’t seem to have much of a clue about the banking side of the business, or explaining anything. Maybe it’s great once you’re in, but at that time they gave an impression of it being an ad-hoc operation who didn’t know what they were doing. In the end my wife already had an old ASB account lying around from before we’d left NZ earlier, we knew they had good internet banking which is where I prefer to spend most of my banking time anyway, so we went in there and set up a joint account. Now they have our mortgage because, once again… laziness.

    Comment by izogi — March 16, 2016 @ 9:24 pm

  24. @cctfred – You’re making some pretty big assumptions about why I do and do not vote for a party. Personally I vote Green because I like the logo, and as long as it stays the same, I’m well within my conscience for voting that way.

    Comment by Simon — March 16, 2016 @ 10:01 pm

  25. Although Kiwi back where pretty quick lowering the interest rate on my deposit accounts…

    Comment by Fargo — March 17, 2016 @ 9:05 am

  26. >i read that KB will be reducing 1, 2 and 3 year rates on/around march 24. so maybe we wait.

    Woah, serious? Ta for that, I am just about to take out a new mortgage. Will wait until next week.

    Comment by Ben Wilson — March 17, 2016 @ 4:41 pm

  27. Any central bank governor’s job is a lot harder when key sectors of an economy just happen to be dominated by the rentier class. In NZ’s case, it’s the Auckland property bubble.

    Comment by Kumara Republic — March 18, 2016 @ 2:11 am

  28. Labour is consider UBI? Excellent. Perhaps they can fund it with a capital gains tax & flat income tax?

    Comment by Clunking Fist — March 18, 2016 @ 1:59 pm

  29. Introducing Kiwibank promptly put an end to the eye-watering monthly service fees that had become standard amongst the rapacious Aussie-owned quartet.

    The Greens are explicit that government should use Kiwibank to control the behaviour of the other banks: http://www.radionz.co.nz/national/programmes/morningreport/audio/201793713/reaction-from-greens-to-incomes-dropping

    Comment by Sacha — March 19, 2016 @ 7:30 pm

  30. as i sad, kiwibank drops it’s 2 year rate to 4.25% for 2 year loads (with 20% equity)on march 24. http://www.interest.co.nz/news/80758/review-things-you-need-know-you-go-home-thursday-residential-property-investors-resurgent

    such fuss with so little information, people.

    Comment by Che Tibby — March 24, 2016 @ 5:48 pm


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