KEY POINTS:
Prime Minister John Key took the unusual step of making what he called "a health check" on Australian-owned banks and met their heads last week to tell them he expects them to treat New Zealand customers fairly.
And he said yesterday that "as a general rule" they did
- although they could do better on cutting credit card interest rates.
Mr Key made it clear that he intended to continue the Prime Ministerial house calls - which he dubbed "castle calls" - and that he saw such contacts as part of his duty.
"It is a healthy positive situation but it is also my duty of responsibility as Prime Minister to spell out my expectations and I did that.
"The banks are the lubricant that will keep the economy going and if you consider the massive component of our economy which is driven off the private and private sector consumption, the banks are integral to that process."
At his own initiative, he met the head of the ANZ-National Bank on Thursday afternoon, and the heads of Westpac, the BNZ and ASB Bank on Friday last week following the slashing of the official cash rate from 5 per cent to 3.5 per cent on Thursday morning.
He was very confident that the New Zealand banking system was in a lot better shape than in the United States or Europe.
"So I firstly wanted just to check, if you like, a bit of a health check, that they were seeing things the same way, that they were confident that they were raising money, that things were working appropriately and have an exchange of views."
He also wanted to let them know that it was the Government's expectations "that the banks would act honorable and pass on to consumers lower interest costs and lower costs overall where it was fair and reasonable that they should do so."
Mr Key said the banks had confirmed that of the 475 basis points cut since July last year, they had passed on about 400 points to consumers.
"Broadly, when you look at where they are raising money, that is probably about right."
Asked about the fees the banks charged to break mortgages, Mr Key said that in fairness to the banks, they ran largely a "matched book" - meaning a mortgage contract with a customer was matched by a liability held by the bank. Asked whether he had discussed the banks' lending rates to businesses, Mr Key said that was part of the "health check".
He had been told that demand had reduced "dramatically" both for residential and business borrowing.
"They have expressed a strong willingness to lend and confidence that they can raise money. There has to be a degree of caution in the kinds of economic circumstances that we all face, but as a general rule, the message was that they are happy are to lend."
Finance Minister Bill English had not yet talked to the state-owned Kiwibank which charges the highest break fees.
Mr Key said the banks would be invited to the jobs summit he will host on February 27.
Labour leader Phil Goff has said he has no difficulty with Mr Key's contact with the banks and said he had arranged a series of meetings with bank executives, starting today.
ECONOMY WATCH
Today
National caucus signs off on reforms to Resource Management Act, to reduce the time and cost of development.
Tomorrow
* Prime Minister John Key releases a relief package for small to medium businesses.
* Finance Minister Bill English compares notes with his counterpart in Australia, Wayne Swan, on approaches to the global recession.
Thursday
Latest unemployment statistics released.
Next week
Cabinet considers a small rise to the minimum wage of $12 an hour.
