Reserve Bank Governor Adrian Orr should start focusing on the needs of New Zealanders instead of how he can deliver more profits into the hands of the wealthy shareholders of the country’s commercial banks.
Today’s increase in the Official Cash Rate will increase bank profits substantially as they raise rates on loans that cost them nothing to create in the first place.
Banks don’t lend out money people deposit with them.
They create the digital money they lend out of thin air, like fairy dust.
While it’s true they do pay depositors interest on some accounts, much of the money on deposit is in accounts that don’t pay interest.
And that interest is subsidised by the Reserve Bank which pays the banks interest at the OCR rate on the billions they have sitting in their reserve accounts at the Bank. That balance currently stands at $46 billion.
At the new OCR rate of 2.5 percent that means taxpayers will be subsidising the banks to the tune of $1.15 billion per year from the interest payments on their reserve accounts alone.
That’s money that should have been spent on nurses and doctors, getting people out of motels and into houses, putting food on the tables of starving kids, and making sure the police have the resources to deal with gang violence.
The OCR increase will hurt beneficiaries, superannuitants, and the low paid with a double whammy effect as businesses try to recover their additional interest charges by pushing up their prices.
Rising mortgage payments and rising rents will exert real pressure on those already struggling to make ends meet and the increased costs due to supply chain issues will add even more.
What the bank has done is like adding more fuel to a fire that is already out of control.
On top of which the Reserve Bank still lending banks $12.7b of subsidised cash through its Funding for Lending programme that is helping to keep asset prices inflated, keep term deposit rates low and further increase bank profits, which are already running at $20m per day.
The Reserve Bank should have curbed the avalanche of money creation that has been indulged in by the commercial banks – yet it is still subsidising that lending.
Adrian Orr needs to explain why his taxpayer – owned Reserve Bank is subsidising the country’s commercial banks and driving up profits for their mainly overseas shareholders by taking money out of the pockets of Kiwis.