Leading economist Cameron Bagrie slams Government's banking probe as 'pure politics'

  • 27/06/2023

A leading economist has slammed the Government's probe into the banking sector as "pure politics".

It comes after the Government last week announced a Commerce Commission investigation into banking. The scope of the probe, however, was limited to retail and personal banking.

The investigation won't focus on business banking.

It comes after New Zealand's retail banks' profits rose to a record $7.2 billion last year - up $1b from 2021.

Leading economist Cameron Bagrie believed the Commerce Commission should definitely be investigating business banking as well.

"I think it's just pure politics in regard to what's going on here," he told AM co-host Laura Tupou.

"Banks have had a big target on their backs because they make big profits, and banks should be making big profits because they're really big entities."

Instead of a Commerce Commission probe, National had earlier proposed a "short" and "sharp" Select Committee investigation into the retail banking sector - but that was dismissed by the Government. 

Bagrie said while it was helpful to "have a bit of a look" at the banking sector, the scope of the probe meant the Commerce Commission would only make "pretty small" findings.

"You look at credit card charges… those numbers are pretty eye-watering - up around 20 percent - but, if you want to make a really big difference to what happens across retail banking, one of the big steps we should be pursuing is actually improving financial literacy.

"Where the banks make a lot of money out of credit charges is because people don't know how to manage their credit cards from month to month."

Bagrie didn't think the probe would find anything in the mortgage market either.

"The mortgage market is really competitive - it's really transparent," he said.

"Where we need to be looking here - if you want to make a more productive, dynamic economy that supports economic wellbeing - the facilitation and the flow of credit is a really important part of an economy's economic development."

Watch the full video for more.