Inquiry claims banks didn't pass on OCR cuts

The Opposition inquiry into the banking sector found the big four Australian banks didn't pass on between 50 and 70 basis points to customers after the central bank embarked on its steepest series of cuts to the country's benchmark interest rate to shore up the economy's financial stability. It questioned the use of manipulating the OCR to manage monetary policy, and pushed for greater powers for the Reserve Bank.  

"It appeared that to some degree the banks have also retained an additional margin on borrowing costs in order to offset other factors reducing their profit levels," though increased costs of borrowing money from offshore absorbed some of this difference, the parliamentarians' report said. "The present monetary policy framework was seen to have serious unintended consequences for the New Zealand economy." 

The inquiry was held after government MPs and their supporters blocked Parliament's Finance and Expenditure Committee from pursuing concerns it raised about the banking sector's response to the recession in June.  

The report called on the government to inject capital into state-owned Kiwibank as a way to "promote more effective competition on bank lending margins and contribute to a greater share of local funding lending."