Drums beat louder for investigation into bank profits
A banking inquiry has cross-party support, but who should lead it remains an open question.
Mōrena and welcome to The Bulletin for Monday, March 13, by Catherine McGregor. Presented in partnership with Z Energy.
In today’s edition: NZ sharemarket braces for impact following US bank collapse; cocaine use soars across the country; PM Hipkins defends government approach to retail crime. But first, all sides want a banking inquiry. Will the Commerce Commission be called back into service to lead it?
Image: Tina Tiller
All signs point to a banking inquiry
It set its sights on petrol prices in 2019 and the supermarket duopoly in 2022. Now the Commerce Commission seems to be gearing up to take on banking, as calls for an investigation into the sector’s profits grow. An inquiry has cross-party support – the question is who should lead it. National wants “a short, sharp, quick study” via select committee, while the government is backing a bigger (but slower) ComCom investigation. It’s not just politicians: the Reserve Bank has voiced its support for an inquiry, and the banking industry itself (paywalled) “would welcome the opportunity to discuss bank profits and the contribution banks make to support the New Zealand economy, households and businesses”.
Many issues, few easy solutions
Simplicity Kiwisaver founder Sam Stubbs has been one of the loudest voices calling for an inquiry, arguing that it should look into not only the source of those huge profits, but also the role played by Kiwibank, “a one-armed boxer in the ring with four Aussie heavyweights”. If the inquiry does happen, the Herald’s Liam Dann isn’t confident it’ll make much difference (paywalled). “I can’t see any appetite within Labour or National for giving the sector a real shake-up, so calls for an inquiry are just political theatre,” wrote Dann. His diagnosis: “We used foreign money to inflate our own house prices and super-size our mortgages. It’s made many of us very comfortable but the trade-off is we’re sending billions offshore in bank profits every year. Who’s to blame? We are, of course.”
Is a windfall tax the answer?
The Greens say a windfall tax is needed to clip the big banks’ wings. Speaking to TVNZ’s Q&A on Sunday, financial services expert Claire Matthews warned a windfall tax could come back to bite the government. “Part of the reason that [banks] make profits is to get them through the bad times," the business professor said. "The risk is, if you take in tax what's seen as the windfall profits, you will actually then almost have a liability to compensate the banks when they have difficult times.”
She added: “But also, how do you define windfall profits? And it is a big question to answer."
Get ready for open banking
Part of the issue is that once a bank has you as a customer, they likely have you for life. There’s a widespread belief that it’s difficult to change banks but, as Gareth Vaughan points out in Interest.co.nz, taking your banking business elsewhere is actually pretty easy in NZ – the problem is, most customers don’t know it. The next step to making the sector more competitive will be open banking, which Duncan Greive sang the praises of last year. It allows customers to switch banks without having to switch their account numbers, just like you hold onto your phone number when you change mobile providers. Open banking – which offers a lot more functionality than just account number portability – is already the norm in much of Europe and in the UK, where it’s now used by more than 7 million customers and forms the backbone of popular ‘neobanks” like Monzo and Starling. It’s set to arrive in New Zealand sometime next year.
During the pandemic, billions of people were forced to reassess how they worked and whether the understood norm was in fact best practice. As work resumes as usual for much of New Zealand, employers have struggled to keep employees in the office and hybrid work set-ups are now considered non-negotiable. Has work changed forever? And after the hustle and "grind" mentality of millennials for the past two decades, was it all for nothing now that Gen Z is "quietly quitting"? Work week will examine our relationships to work and ponder a future where work (whatever that really means) is a positive aspect of everyone's lives.
Check out Work Week, made possible by Trade Me Jobs, on The Spinoff now.
NZX braces for US bank run impact
Investors should expect a rocky start to the week as a result of the implosion of Silicon Valley Bank over the weekend. The go-to bank for US tech startups collapsed following a bank run and capital crisis and has been taken over by government regulators. Craig's Investment Partners Mark Lister told RNZ the US sharemarket had fallen in the wake of the collapse and New Zealand would follow suit. "You'll see our sharemarket start the week on the backfoot because [it was] closed up when the [news broke]," Lister said. "Wall Street nervousness always has an impact on our market." Among the companies directly affected is New Zealand’s Rocket Lab, which had US$38 million in the bank
Hipkins defends government approach to retail crime
The prime minister says the government has made good progress in addressing the surge in ram raids, but admits there is more to do on aggravated robberies at retail, Newshub reports. Hipkins was responding to figures released on Sunday by National’s police spokesman Mark Mitchell showing retail crime had increased by 39% year-on-year in 2022. National has proposed a slate of policies to address youth offending, including military-style camps. Hipkins said police “have been really proactively targeting this area of crime, because no one wants to see businesses experience the level of victimisation that they have in recent times because of the increase in retail crime”.
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Major jump in cocaine use
New Zealand is experiencing a dramatic increase in cocaine usage, the NZ Herald reports. Nationwide, police wastewater testing found a 70% increase in cocaine residue in the third quarter of last year, compared to the average of the four previous quarters. The jump was even bigger in the Bay of Plenty, where the increase was 102% over the same period. Drug Foundation chief Sarah Helm said recent samples appeared to have fewer fillers like caffeine and creatine. “That alone means this cocaine will be stronger than people will be used to.“ The fillers that did appear were increasingly more dangerous anaesthetics like benzocaine and lidocaine, she said.
Click and collect
“I’m expecting devastation”: Scientists are bracing themselves for the toll on glaciers from a summer of record temperatures on the West Coast.
A controversial feedlot for up to 2200 cattle proposed for a site near Lake Ellesmere has received 128 submissions to Environment Canterbury.
Banks believe this week’s GDP figures will show the economy shrank in the final three months of last year.
Parents forced to give birth overseas while the borders were closed are shocked to learn their children are only New Zealanders by descent, which may impact their own children.
Got some feedback about The Bulletin, or anything in the news? Get in touch with me at thebulletin@thespinoff.co.nz.
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Alex Casey explains why we’re dedicating this week to the world of work. Researcher Aisling Gallagher argues that National’s tax rebate policy won’t solve the childcare affordability crisis. Henry Cooke reflects on his current London OE and celebrates the news he can stay another year. Perzen Patel writes about how food became a lifeline for her family when they were new to Aotearoa. Luke Owen Smith explains why the “hand-crafted” label is such a tricky issue for chocolate makers. Charlotte Muru Lanning wonders why it’s so hard to find a proper loaf of rēwena bread. Chris Smol previews today’s Oscars, and shares his predictions for all the major categories.
Sporting snippets
The BBC’s flagship football show Match of the Day aired for just 20 minutes on Saturday following a walkout in support of host Gary Lineker, who was suspended for criticising government asylum policy.
New Zealand sprinter Zoe Hobbs has won the Sydney Track Classic with a 100m time of 10.97 seconds, breaking a record that had stood since 2000.
Richard Irvine’s Sport Review names and shames the most cursed haircuts in NZ sport.
The Breakers have forced a game 5 in the NBL championship by beating the Sydney Kings 80-70 to level the series at 2-2. The decider will be played on Wednesday night.
What the dying can teach you
“I wanted to be where life matters most, which is when it is ending.” Few of us want to spend any more time thinking about death than is strictly necessary, but not Anna Tims. She wrote in the Observer this weekend about her experience volunteering at a hospice, where she writes the life stories of patients.
She’s learned a lot about death, but also about life, she says: “Everything I took for granted – the school run, the weekly shop, an unexpected soaking in a rainstorm – seemed a gift to those no longer able to experience it.” It’s a lovely and moving read.
This is just to say that I’m enjoying the cleaner, sleeker design of my favourite morning read.