By Gareth Vaughan
The coalition government's select committee banking inquiry could look at how to encourage banks to lend more to "productive" sectors of the economy rather than having such a big focus on "unproductive" housing lending, Commerce and Consumer Affairs Minister Andrew Bayly says.
The National-NZ First coalition agreement says the government will establish a select committee inquiry into banking competition "with broad and deep criteria to focus on competitiveness, customer services, and profitability."
Speaking in interest.co.nz's Of Interest podcast, Bayly said the government will wait to see what the Commerce Commission has to say in its market study into personal banking services before launching the select committee probe. The Commission's draft report is due on March 21.
"Why have we seen outflows from the productive sector like small businesses, farming and property development which is really important if you want to build houses in New Zealand. We've seen funding going out of that sector, going into what I would term the unproductive sector which is the mortgage market. That's interesting because it obviously has a big impact on businesses and the productive sector," said Bayly.
"Then there are things around margin [and] capital adequacy ratios that the Reserve Bank manages. That will help banks determine where they put their money, and whether they want to invest in more mortgages, or whether they want to invest in supporting businesses."
"I'm approaching it with an open mind. I want to see where they [the Commerce Commission] have got to with retail [banking], but I think inevitably there's some other areas we want to cover," said Bayly.
Under bank regulatory capital rules overseen by the Reserve Bank, banks are required to hold less capital against housing lending than against other types of lending such as business/corporate and agriculture lending. The major lending exposure of all NZ's major banks is housing. ANZ NZ, the country's biggest bank, has 72% of its total lending in housing.
Bayly is also Minister of Statistics, plus Small Business and Manufacturing Minister.
On Statistics NZ, Bayly said it will deliver the 7.5% annual spending reduction the government has asked for. Decisions and preparation are ahead for the 2028 census, he said, noting the 2023 census cost $326 million, "a lot of money."
"I'm wanting to make sure that what we do drives economic growth for New Zealand, how we can power up those businesses. That's the big strategic intent," he said.
"Do you run another huge census every five years? That's the first question. And if you read the Stats NZ] briefing [to the incoming minister] there's a proposal that you don't run those big things again. Because governments all around the world are having the same issue where if you front up to someone now and say 'can you fill out this long form' most of them tell you to naf off," Bayly said.
The next census could look to make more use of administrative data like home addresses or tax returns, he said, information and data that lies within various government entities.
"Obviously they've got to do it within privacy settings. But that is certainly the trend overseas and we will have to look at it.. that you may move towards more localised, small surveys, targeted surveys, and look to buttress that information using existing data sources that are potentially untapped at the moment."
In the podcast Bayly also talks about Stats NZ reporting Consumers Price Index (CPI) data monthly, funding to update the CPI that's overdue, the Credit Contracts and Consumer Finance Act, the conduct of financial institutions (CoFI) regime, buy now, pay later, anti-money laundering rules, and his plans to rewrite the Companies Act.
*You can find all episodes of the Of Interest podcast here.
10 Comments
And so if the government were to pursue anti-monopoly regulations, or if it was to do the classical policy of taxing the land, then there would be two results. Number one, the land tax would not be paid to the banks and not be capitalized into higher housing prices. And number two, the price of housing would be kept down, the price of monopoly goods would be kept down, the price of doing business would be kept down because this excess economic rent, which means empty pricing, which means free lunch, would not be paid to the banks as its major source of income.
And we’ve talked before, last time, about how 80% of bank loans are mortgage loans. So the whole idea of progressive taxation is not simply taxing incomes higher, it’s taxing a particular kind of income higher, bad income, unearned income, economic rent income, not wages, not corporate profits.
The original American income tax in 1913, along with the Federal Reserve, didn’t tax wages, and it didn’t tax normal small businesses. It taxed the wealthy bankers and the wealthy real estate owners and the monopolists. And the last century has been moving away from this because banks became the mother of trusts, as they used to be called. Banks became the main fighters against any kind of economic progress toward the kind of free markets that the classical economists talked about.
A targeted land tax to reduce the tax burden in other areas has a lot going for it. Support productive effort by punishing lazy speculation on land and all that. NZ has had a chance to vote this in twice a TOP pushed this as their main economic policy, and clearly said "not interested". If land attracted and annual tax the speculative leverage monkey that currently invest in this an nothing else would run for the hills. Correspondingly house prices would then drop back to a yield driven number which is quite a way back from where it is today.
If land attracted and annual tax the speculative leverage monkey that currently invest in this an nothing else would run for the hills.
Just give it time. Property has worked for 30 years in terms of capital gains but as we slowly see birth rates dropping and as the largest generation start to decline in numbers, rest their souls, we will see the navigation of a new world that isnt as predictable as we dont have 1./ a mass pot war period of peace to grow and prosper and 2./ one generation having majority voting power in the western world.
Everything has a breaking point and as the young grow older and struggle to see a house as viable in NZ they will leave, or vote for their own interests which will oppose housing speculation.
"The next census could look to make more use of administrative data like home addresses or tax returns, he said, information and data that lies within various government entities."
One of the reasons why we have the Census is to stop governments aggregating data across government entities. To do so would place way too much power in the hands of a select few (and their minions) and opens up the system to corruption.
I'm quite happy to pay my share of the tax take to ensure the census survives and government stays firmly in the role as it is currently defined.
Wholeheartedly agree with you, ChrisOfNoFame,
The census needs to continue along the same principles as present. Too many risks (including lack of transparency) with using administrative date from government entities.
By all accounts, the 2023 Census has gone much better than the 2018 Census. The latter was a poorly managed crisis which, following an independent review, led to the demise of the Government Statistician / CEO of that era. (Have forgotten her name.)
TTP
One of the reasons why we have the Census is to stop governments aggregating data across government entities.
An interesting perspective, as my experience working within one specific department of govt back in 2015 was to secure major Information Sharing Agreements across other government entities to give huge efficiencies in core services. From what they achieved through this it was a success and continues to be so, however I appreciate your point and the risk this entails.
Stats already do this, its called the IDI. It literally takes all the customer data and various other data from almost all government departments, matches people up across them all. It then de-identifies the people and allows demographic searches to approved researches (who are often policy people trying to see what effect particular policies have/will have).
Access to it is strictly controlled though, they have a few data breaches from it that are usually small and inconsequential.
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