Nicola Willis has unfinished business as banks set to become an election issue

Thursday, 4 June 2026

Nicola Willis and David Seymour bridged their differences in the Budget by agreeing to only a modest prudential levy, for now.

ANALYSIS: Banks got off lightly on Budget day.

The Government will introduce what Finance Minister Nicola Willis described as a “modest” prudential levy, from July next year.

That will see banks, insurers and other regulated financial services providers foot an annual bill of about $70 million for the cost of being regulated by the Reserve Bank.

But it could have been worse for the banks were it not for the ACT party, which continues to be the major obstacle to a larger tax.

Why did banks get off lightly?

Willis made clear on Budget day that she would have gone further, had she been able to secure the support of National’s coalition partners (read the ACT party).

And she indicated it was not over.

“I have looked at and continue to actively consider other measures,” she said last Thursday.

On Sunday, she reiterated she was still looking carefully at the taxation of banks as a whole, saying they made “extremely good margins” and should be taxed fairly.

What was Willis considering?

She has declined to spell that out.

But in July last year she asked Inland Revenue to look into the option of copying Australian’s Major Bank Levy.

This is a levy on the value of deposits held by Australia’s five largest banks.

It raised about A$1.7 billion (NZ$1.9 billion) last year and is ostensibly compensation for the risk of the Australian government one day having to bail them out in a financial crisis.

Westpac chief economist Kelly Eckhold estimated such a levy would raise about $400m a year if transplanted to New Zealand and applied at the same rate.

It is conceivable Willis might want to go further still, however, given the New Zealand arms of the big four Australian banks made a combined net profit of more than $6.5b in their most recent financial years.

What would the Government do with the money?

Willis is known to have explored putting in place something similar to Australia’s Business Growth Fund, an idea backed by the OECD that was also explored by the former Labour government.

The Australian scheme is designed to plug a perceived gap in Australia’s capital market left by the banks and others, by providing minority government-backed equity investments in medium-sized businesses.

Willis revealed last month that she had spoken with Australian federal treasurer Jim Chalmers about the Australian fund. A meeting in April discussed New Zealand potentially “joining” that scheme.

But she hasn’t confirmed that was the plan and it is also possible the revenue from a larger levy might go into the general government coffers.

“I have no further comment to add on the Australian Business Growth Fund at this time,” she told The Post after the Budget.

“I note that the Government already supports New Zealand venture firms to access growth capital through the Elevate, Aspire and Scout funds which are governed by New Zealand Growth Capital Partners.”

What does ACT make of Willis’ refusal to give up?

ACT party leader David Seymour says it is naive to think that banks wouldn’t pass on the cost of a bigger levy to customers, making it in effect a tax on them.

“If you believe that the banks are uncompetitive and charge what they want and pass on whatever costs they have to consumers, then that will be true of a new tax.

“If you believe that the banking market is competitive and they will compete away any gains, then the whole basis for going after them kind of evaporates.”

In the face of ACT’s opposition, Willis’ tough talk on the banks appears to be a case of the coalition parties staking out their own ground ahead of the election.

“All three parties in government are now starting to lay out what differences they would offer at the election,” Seymour says.

“I can understand there’s a big political market for saying we will wreak vengeance on these people that are charging you too much, but I don’t think that the economics of that quite works out.”

Could ACT ever roll over?

A bigger bank levy — at least on the scale of the Australian version — wouldn’t seem quite as poisonous a pill to ACT as, say, superannuation reform would appear for NZ First.

But Seymour makes no attempt to play down the ideological divide, as he sees it.

“I wouldn’t start laying out what anyone’s bottom lines are at this point in the cycle but, clearly, if you believe that the path to salvation is to take money from somebody that’s got it — rather than create the conditions to unlock New Zealand's real potential — then you will support arbitrary new taxes on anyone who seems to be doing well.

“And if you believe that our society needs to grow to reach the prosperity we all deep down desire, then you’ll oppose that view,” he says.