The New Zealand economy is facing a “death of a thousand cuts” under the powerful grip of monopolies across key sectors, Monopoly Watch leader Tex Edwards said.
Edwards said the profits recently posted by three of the big four Australian-owned banks underscore the dominance of a small group of companies and reveal policymakers’ failure to effectively regulate their power.
“When we look at why the economy is underperforming, it’s almost death by a thousand cuts, or in this case death by 10 or 20 cuts, because there are 10 or 20 monopolies that are extracting monopoly rents.”
“Supermarkets, electricity companies, airports, insurance companies, and banks are under scrutiny, and what we’re seeing is a continued amount of tinkering and pampering instead of structural reform.”
Edwards said the banking sector requires further regulatory action to deliver real benefits to consumers. However, he noted that various select committee enquiries, a Commerce Commission banking study, and oversight by regulators so far have resulted in little meaningful progress.
He said the major banks had been skilful in promoting the narrative that they were injecting capital into the country, paying substantial taxes, fostering economic activity, and encouraging competition in a sector where they already held over 80% market share.
“They’ve used this to confuse politicians and policymakers as to how competition would evolve.”
Edwards said the banks had surrounded themselves with PR and policy lobbyists, who had effectively “captured” policymakers, politicians, and regulators.
He said the big four banks had also delayed the rollout of open banking, which enables third-party financial firms to offer competing services, by taking additional time to upgrade their technical systems to meet the new standards.
“New Zealand banks have delayed open banking because it would lower margins and lower profitability.”
Edwards proposed that Payments NZ, which oversees the payments system settling transactions between banks, should be removed from the control of the eight banks that currently own it.