National Party leader Christopher Luxon says he's "uncomfortable" with the large profits banks are making and wants an independent inquiry into whether Government spending is to blame.
New Zealand's 27 banking companies posted before-tax profits of $9.7 billion in the 12 months to June.
This week it was announced Westpac posted a $1 billion full-year profit, rising 12 percent annually, while ANZ recently posted $2.3 billion, up 20 percent.
Prime Minister Jacinda Ardern said she doesn't think it's "justifiable" the amount of profits banks are making.
"This is not what I would argue is a one-off. We've seen this consistently, them posting significant profits. I think questions need to be asked to managers of these banks as to whether or not they are serving their communities well," Ardern said at her weekly post-Cabinet press conference on Monday.
She challenged banks to look at their own policies and reflect on whether they were doing the right thing.
"The question I would pose to them is they may be operating as other banks are, but are they demonstrating social licence?
"Are they demonstrating commitment to the communities they're serving by taking profits such as those in these current times?"
Luxon joined Ardern in criticising the banks for the large profits they're making, saying he's "uncomfortable" with it.
"What we're saying is at a time when there is a massive cost of living crisis, where Kiwis are doing it incredibly tough with rising inflation, rising interest rates and at the same time, you've got large bank profits. That's a really tough thing to see," Luxon told AM co-host Ryan Bridge.
When questioned by Bridge about what defines large profits and why he is the arbiter of it, Luxon said he wants to get to the cause of the problem.
"We've been calling for an independent inquiry into the actions of the Reserve Bank and the Government around its spending, around the printing of money, around the borrowing amount through COVID-19 and to understand whether that contributed to bank profits as well as contributed to worsening the cost of living crisis," he said.
When quizzed on if he was proud of the large profits he made when CEO of Air New Zealand, Luxon said he was.
"I'm very proud of the record at Air New Zealand around commercial success, cultural success and customer success," he said.
"It's about making sure that we understand whether the Government's actions actually contributed to worsening the cost of living and inflated Government bank profits."
While Luxon might be "'uncomfortable" with the large profits banks are making, Massey University professor Claire Matthews told AM on Tuesday the country needs banks to be successful and was critical of the Prime Minister's response.
"Well, to be perfectly frank, I think the Prime Minister is playing to her audience," Matthews told AM co-host Ryan Bridge.
"She's come out of the Labour Party conference. She's starting to gear up for the next election and banks are an easy target and they're busy announcing profits that sound in dollar terms really large."
Matthews said banks are very large organisations so they're going to make "large amounts of profits in dollar terms", but she doesn't believe they're creaming it on the margins they're charging Kiwis.
Watch the full interview with Christopher Luxon above.