This week our top four Australian-owned banks announced combined six-monthly profits of $2.5 billion dollars, up 11% from the same period last year. The question herein lies; is our banking system benefiting the people of New Zealand, or are we unwillingly being held to ransom?

In 2017, the same four banks made combined full-year profits of $5.19 billion dollars, an exorbitant amount given the current struggles of the lower and middle class in New Zealand. All of this is possible thanks to our monetary system, fractional reserve banking, which allows domestic banks such as Westpac, ANZ, BNZ and ASB to create and profit from around 80% of the creation of new money (debt).

This new money (debt) is essentially created out of nothing, typed into a computer and loaned out at interest. Henry Ford once famously said “it is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning”. The whole system is that deceptive.

Our financial system operates on debt, and it’s almost impossible to avoid if you wish to one day own a roof over your head. When a family arranges a mortgage to buy their first home, they sign up for decades of debt servitude, all at interest of course, and all of which never existed before.

Consider this example: The national median house price in New Zealand is now $550,000, so with a 20% deposit of $110,000, that leaves a $440,000 mortgage. Apply that over a typical 30-year term at the current interest rate of 5.79% and the figures speak for themselves.

Source: ANZ Mortgage Calculator

This is the reality of how most new money (debt) is created in New Zealand. Over the lifetime of a typical mortgage, a bank will make in interest revenue around the same value of the original debt. Now that’s not a bad business model! Add to this the large fees banks charge simply for operating a standard account, and it’s no wonder banks are making record profits.

In Australia where most of our banks originate, a massive banking scandal has been revealed by a Royal Commission inquiry into financial sector misconduct, finding widespread careless and illegal practices which have resulted in the tightening of lending to borrowers.

We’d be naive to believe these same banks wouldn’t be utilising the exact same corrupt practices here in New Zealand in the search for higher profits. This is exactly why we need a similar Royal Commission into the banking sector to determine whether these massive profits are fair and whether they are operating legally.

In New Zealand we are facing one of the largest housing crises in the world; largely thanks to a National government which refused to address growing local and overseas demand, and to the Australian owned banks which leapt at the opportunity to lend cheap money.

There was virtually no constraint besides the number of customers lining up for loans, which there certainly was no shortage of. This then created a massive housing bubble, especially in Auckland and the surrounding towns, with The Economist crowning our country’s housing the most unaffordable in the world.

While our Reserve Bank thankfully hasn’t been privatised like the Federal Reserve in America, our domestic banks have been by default, with these billions of dollars of annual profits being sucked straight out of the country to private investors in the Big Four. Greed is the core reason why the banking industry is making billion dollar profits, which is why we need a new system designed to service our needs as a country.

Imagine instead if the Crown controlled the supply of debt through domestic banks rather than the Big Four, and the $5 billion every year in profits utilised for growing demands in healthcare, education, public transport and building homes for our homeless, all of which are near impossible given current fiscal limitations?

So, why aren’t we all advocating for a complete overhaul in the financial sector? The Democrats for Social Credit once campaigned on a fairer banking system, but is there a political party in 2018 with the will to change our monetary system at it’s core, and create a more fair system which serves the people of New Zealand rather than wealthy investors? 

The first steps in fixing any problem is admitting we have one. A Royal Commission into the financial sector in New Zealand is long-overdue and would almost certainly bring the Australian Big Four banks under the scope of public scrutiny on which we can demand much needed systemic change that benefits our people.

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About The Author

Kyle is a Christchurch based freelance writer with a passion for investigative journalism and thirst for the truth. He's also an avid environmentalist and tiny house dweller.

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3 Responses

  1. Rod J

    Not just the banks but the fuel companies the power companies it the whole system but what the heck did you see shortland street and dwts. Come on NZ time to take a stand and fight for what is right.

    Reply
  2. Andrew

    Nothing but a Ponzi scheme, and are all suckers for putting up with these criminal Bankers.
    What Bank Fees, the Bankers are charging us for using our Money
    Read the Creature from Jekyll Island, find out more of the “TRUTH” just how
    Corrupt the Government Politicians, Puppets for the Bankers
    Stand and say NO Banking Fees
    Remember your contact with the Bank is an adhesion contact, It only favour’s the Bank
    Stand up against the Bankers Demand YOUR RIGHTS

    Reply
    • Stephen

      What ca we do ???? I moved to a local bank Cooperative bank….If everybody will do the same we can get rid of the suckers. Or nobody will go in any debts from these banks. Moving to a local bank is a good step.

      Reply

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