After Westpac’s profit announcement, coming hot on the heels of ANZ New Zealand’s large profit, anger at the subsidiaries of the Big Four banks in New Zealand is building, calls for a ‘windfall tax’ are getting louder and the prime minister has pointed the finger at the banks’ management.
Westpac NZ’s profit was up 13.2 per cent to NZ$1.1 billion, while ANZ recently reported a record full year net profit of NZ$2.3 billion.
At her regular Monday afternoon news conference, New Zealand prime minister Jacinda Ardern said Kiwi banks were not demonstrating social license by repeatedly making “unjustifiable” profits, and they should “engage in some self-reflection”.
"They [the banks] all seek the same social license. They exist in the community. They know that this is a time where New Zealanders are facing increases in the cost of living like many other of our international counterparts," Ardern said.
"The question I would pose to them is they may be operating as other banks are, but are they demonstrating social license? Are they demonstrating commitment to the communities they are serving by taking profits such as those in these current times. That would be my question," she said.
Asked if they were demonstrating social license, she said: "No."
"They're continuing to operate within the parameters in the rules that are set, but that doesn't mean that necessarily it's giving them a social license that you would expect from banks who claim to be operating as members of the community and within the community.”
The NZ Green Party has called for a ‘windfall tax’ on bank profits, similar to the taxes on banks’ profits being considered in the UK and Europe as interest rates rise and the banks reap larger profits, as well as to the Australian Major Bank Levy.
But Ardern said windfall taxes were generally directed at “a very different set of scenarios” where businesses reap an outsize benefit from a particular set of circumstances or events. She said the issue in New Zealand was an ongoing one and appeared to be more with the management of the banks’ New Zealand arms.
“We've seen repeated significant profits being drawn by banks in New Zealand. So this is not what I would argue is a one-off. We've seen this consistently, them posting significant profits. I think there's questions need to be asked to management of these banks as to whether or not they're serving their communities well."
It was an apparent attempt to “jawbone” the bank profits down with a bit of public shaming. Ardern said the government had no policies in mind to tackle the issue.
"I'm simply being frank with you around my observations around what is occurring with bank profits. Do I have a current solution from government on that? The answer is no. But I do share a view as obviously someone that takes a perspective on the behalf of the welfare of all these Zealanders that what we see I don't think is justifiable.
“It is not unusual, of course, for companies or indeed other operators in our communities