Increased capital requirements for banks announced today will add more pressure on an already slowing economy in the short term, National’s Finance spokesperson Paul Goldsmith says.
“The two primary effects of today’s decision will be higher borrowing costs than would otherwise have been the case and businesses and farmers will find it harder to access the funds they need to grow.
“This comes at a time when the economy is already slowing, from close to 4 per cent a year under National to just 2.1 per cent now.
“Growth per person is currently 0.5 per cent at a time when we are enjoying record high terms of trade and should be doing well.
“A slower economy means fewer opportunities for Kiwis to get quality jobs, higher incomes and for the country to afford public services.
“The Reserve Bank argues the economic costs are justified by the benefit of reducing the risk of a banking collapse from one in 50 years to one in 200 years. That may be the case, but there will still be short run costs to the economy.
“The costs are certain and, in some cases, are already being felt; the benefits may or may not be gained in 100 years’ time.
“The Minister of Finance should have been more forceful in insisting on an earlier, public cost-benefit analysis so independent analysts and economists could critique the analysis.
“The Minister of Finance’s passive approach to this issue is consistent with a Government that has been complacent about our economy.”