So far so good, for those who fear a slide back towards Muldoonism. The PM has done no more than tell us he is keeping in touch with the banking sector in times of trouble. His Govt needs good information about (as he explains) the lubricant to keep the economy going, and face-to-face chats will put him in the picture about bankers’ bad-debt positions, potential risks and other concerns. He has advised them of his hope they be fair to customers and pass on OCR rate cuts (especially for business investment), but he told journalists he hasn’t complained they aren’t doing this. If this is Govt intervention, it’s too insignificant to ruffle the Business Roundtable’s Roger Kerr.

Regulation Will Be Tightened. He disapproves of “outsiders” (the Reserve Bank or Cabinet ministers) telling any business how to set prices, including bank interest rates. But he sees no sign of Key overstepping what he regards as the proper boundary, a far cry from the bank-bashing and price-fixing days of Rob Muldoon - it never works and it culminated in the National Govt’s heavy defeat in 1984. British, US and other countries’ banks should be bracing for tougher regulations because they were baled out with public money. Their tighter regulation seems bound to influence what happens in this country and the financial deregulation of the mid-1980s may be unwound, at least partly. It’s reasonable our banking system at least be re-examined, to see if it is as good as it could be, in the light of the global meltdown in the finance sector and see what lessons need taking.

The System Needs Reviewing. We like to think we’re in better financial shape than other countries and our banks are relatively unaffected by the turmoil. But Govt guarantees of retail and wholesale deposits are a significant intervention and whether they should remain, when circumstances become “normal,” needs debating. Deciding when and how they are removed should be accompanied by a review of other aspects of our financial system. There’s a strong case, especially, for reviewing the way the guarantees were introduced: taxpayers were exposed to billions of dollars of contingent liabilities without reference to Parliament. For now, reflecting immediate official concerns about economic lubricant, overseas lenders are being assured NZ is still a great investment. Just two years ago, Labour’s Michael Cullen was cautioning foreign savers about sending their money here because of the forex risk. They will be bemused.

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