Well, today in Question Time Bill English had an attack of honesty. He confirmed that over the last week he had received representations from almost all of the major banks, and that preceded his change of emphasis from demanding full pass-through of interest rate cuts to struggling households and businesses, to emphasising the need for a stable (and profitable) banking sector as “the government’s top priority”.

As such he has left the banks in no doubt they have a free hand to withhold interest rate cuts – despite the substantial taxpayer subsidies involved in retail and wholesale guarantees, and provide tens of billions of dollars in banking assets underwritten via the Reserve Bank’s balance sheet.

In so doing his government has sold out struggling Kiwi families and businesses paying more than they should for mortgages and loans. In the last year only 449 out of 575 basis points of OCR reductions have passed through to home mortgages and only 243 of 574 basis points have been passed through to short term business loans.

What is now on the public record is this sequence of events:

Last week John Key said: “Our big aim is that if the Reserve Bank Governor does cut rates tomorrow that actually flows through to what consumers are paying, because in the last cut that Alan Bollard delivered it ended up with the banks and not with the consumers” (June 10, One News, 6pm)

Last week Bill English said:

10 June 2009 – NZ Herald – ‘”Taxpayers are supporting the banks, and we want the banks to be able to demonstrate that they are going to support businesses and households through a tough time in the economy, even if it affects their profits a bit”.

10 June 2009 – NZ Herald – “Remember, these are organisations with hundreds of thousands of customers, and those customers are keen to see they are treated fairly.”

Then “three, if not four major banks” paid them a visit or made well placed calls.

On Monday 15 June at his post-Cabinet press conference John Key said:

“I am not sure an inquiry will achieve a  lot. Labour have been making a lot of noise on this issue but actually when they were in government lending rates were much higher than they were today.”

And on Tuesday 16 June Bill English told the House:

“I must say to members that in the face of those adverse circumstances a parliamentary inquiry might be interesting, but it is not exactly clear to me how it would help those people who are feeling the pressure.” (Question Time, 16 June)

If the government was relaxed about banks withholding interest rate cuts, they should not have pretended to be lions last week and reveal themselves as lambs this week.

The net result of this sorry charade has been to demonstrate the decisive influence of the Aussie banks over the New Zealand National government. Where is the economic sovereignty in that?

I have issued a statement on National’s weak-kneed double-talk, which can be found here.

Action now turns back to the Finance and Expenditure Committee possible inquiry into banking. Watch this space.