Banks respond to Luxon’s claim they ‘can do a much quicker job’ of passing on OCR cuts, as they post billion dollar profits

Tuesday, 11 November 2025

Prime Minister Christopher Luxon has two points to make about banks posting big profits in their annual reporting.

Major banks have responded to comments from Prime Minister Christopher Luxon that they “can do a much quicker job and a better job”, of passing on cuts in the Official Cash Rate to borrowers.

Luxon made the comment after ANZ reported on Monday a cash net profit after tax for the year to the end of September up 4% from a year earlier, to $2.37 billion.

The bank’s statutory net profit after tax was up 21%, to $2.53b, with ANZ saying that increase was largely driven by gains of $163 million from economic hedges, compared to losses of $195m the year before.

Asked about the result while talking to reporters, Luxon said: “My only wish to the banks, message to the banks, is pretty clear, which is ‘I expect you to pass on OCR cuts incredibly quickly to the customers’.”

“I think all banks can do a much quicker job, and a better job,” he said.

The Reserve Bank started easing the OCR in August 2024, taking the rate from a cyclic peak of 5.5% down to 2.5% in its most recent review last month.

Responding on Tuesday to Luxon’s comments, ANZ said that since the OCR started to drop in August 2024, ANZ had reduced home loan floating rates by 2.75%.

ANZ says hedging is responsible for much of the 21% rise - to $2.53 billion - in annual statutory net profit after tax.

Fixed rates have fallen even further. Since ANZ started cutting its rates in March 2024, the 1-year home loan special rate had fallen by 2.90%, ANZ said.

About 12% of ANZ home loans were on floating rates, so fixed rate changes impacted a larger portion of the bank’s book.

It was important to consider the entire OCR cycle when comparing interest rates, ANZ said. “Through the interest rate cycle, following changes to the OCR we’ve reduced floating lending rates more quickly than we increased them.”

The OCR was also not the only driver of changes to wholesale market interest rates, which were also influenced by broader economic conditions both domestically and abroad.

Prime Minister Christopher Luxon says he expects banks to pass on OCR cuts ‘incredibly quickly’. (file pic)

Similarly to ANZ, Westpac said it had been “consistently faster to pass on OCR cuts to borrowers in the current easing cycle than we were to pass on increases during the OCR hiking cycle of 2021-2023”.

Westpac said it recently became the first bank to offer sub-5% special home loan rates on all terms from 6 months to 5 years.

The time taken to implement variable home loan rate cuts had been reduced to 6 business days for existing customers and 3 days for new customers, Westpac said.

“For small and medium business customers, we’ve cut some variable rates by 3.05% since July 2024 - more than the amount the OCR has fallen by – to help encourage them to grow.”

Infometrics principal economist Brad Olsen says there is a question about whether banks are ‘doing absolutely everything they can to push things through’.

In his remarks to reporters, Luxon also said people should shop around for mortgages. “Because when I’m looking at some of the rates that you can see from some of the second tier banks across New Zealand, there are some very very good interest rates going,” he said.

“Sometimes our consumers are a bit reluctant to change their banking arrangements, but actually if you can get a better deal, you should go for it.”

Infometrics principal economist Brad Olsen said the ANZ profit was “an enormous amount of money”.

ANZ had highlighted hedging, the fact they hadn’t had to write-down as much debt because loans were being repaid, along with net interest margin expansion, Olsen told Herald NOW on Tuesday.

“Sometimes that’s going to be because interest rate cuts might not have been passed fully on to households.

“To be fair, it’s also a lot of the time because people keep their cash in their savings account and don’t do anything more with it,” Olsen said.

ANZ had also said a lot of it was because the Reserve Bank required them to hold more capital, and that capital did get funded out of profits.

But “clearly as a bank, ANZ is in a good position, could they not make sure that when interest rate cuts come through they pass through absolutely everything, because clearly the economy could do with a little more help at the edges,” Olsen said.

The increase in bank profits when the economy clearly wasn’t growing as fast, Olsen said, did raise the question about whether banks were “doing absolutely everything they can to push things through”. It seemed like more could be done.

Last Thursday, BNZ reported a statutory net profit for the year to September of $1.5b, down $7m - 0.5% - from the year before.

Last Monday, Westpac said its net profit for the year to September was up 13% from a year before to $1.2b, “partly due to a $71m swing in impairment provisions as customers coped better than expected in tough economic conditions”. Pre-provision profits were up 8% to $1.6b.

ASB and Kiwibank published results in August for the year to the end of June.