Banking union calls for levy on bank profits

FIRST Union, the union for bank workers across New Zealand, is supporting calls for an immediate inquiry into bank profits and proposing a levy on excess profits to fund the establishment of a Ministry of Green Works.

The March 2023 KPMG Financial Institutions Performance Survey reported that New Zealand banks made after tax profits of $7.18 billion, with almost 90 percent of this generated by the Big Four Australian owned banks.

John Kensington, head of banking and finance at KPMG, defended these profits over the weekend, arguing that the return on equity of the NZ banking industry is lower than other industries, at 13.4 percent in 2022.

FIRST Union Researcher and Policy Analyst Edward Miller said that a decade’s worth of data shows that New Zealand banks’ returns on equity are among the highest of our standard comparator countries.

"While the Big Four banks’ 2022 return on equity figures clearly trumped those of their Australian parents, our analysis of World Bank data shows New Zealand banks have some of the highest return on equity figures in the developed world," said Mr Miller.

"Bank profits are extracted from our communities. It is unclear why we have to endure higher rates of profit extraction than Australian, British, Dutch, Japanese or Spanish citizens."

FIRST Union Finance sector organiser Callum Francis said that the annual increases in bank profits are routinely higher than the increase in wages for workers in the banks.

"Last year, while bank profits increased by 17 percent, many of the bank employees that we represent received real-terms pay cuts," said Mr Francis. 

"If the banking industry is looking for ways to strengthen their social licence and invest in New Zealand, a major pay correction would be the first place to begin."

Miller said a Government inquiry into bank profits is necessary, but the union would like to see a more direct approach.

"Everyone already knows there’s a problem here so we want to focus on immediate solutions," said Miller.

"We would like to see an additional five percent levy imposed on the profits of any bank that earns more than half a billion in annual profits to fund the establishment and operation of a Ministry of Green Works."

"In 2022, a levy like this would have delivered more than $300 million in revenue."

"With dozens of building companies going into liquidation every month, there is a real opportunity here to rebuild critical infrastructure and develop our workforce quickly."

"The Ministry would build crucial public infrastructure, addressing long-term housing and infrastructure deficits, including mitigating the impact of extreme weather. This will help stabilise the New Zealand economy and deliver more balanced growth."