NZ Post selling part of Kiwibank

NZ Post Chairman Michael Cullen announced today that NZ Post wants to sell 45% of Kiwibank. That’s a similar proportion to the part asset sales of the power companies in the last term.

Stuff: NZ Post to sell 45 per cent of Kiwibank for $495m cash injection

Troubled state-owned New Zealand Post is selling 45 per cent of Kiwibank, 25 per cent to the New Zealand Super Fund and 20 per cent to ACC.

The deal values Kiwibank at $1.1 billion, NZ Post chairman Sir Michael Cullen said. Both entities are owned by the New Zealand government.

If the sale goes ahead, NZ Post will receive $495 million for its stake.

So that’s still public ownership but with shares being sold to investors the Super Fund and ACC.

John Key is in favour.

Prime Minister John Key said it was good solution

Key rejected suggestions it was a compromise to get around the Government’s opposition to further selling off of state assets.

Labour seems to be backing it too:

Labour leader Andrew Little said it was important Kiwibank stayed in public ownership.

“And this does that, there are some good conditions around it,” he said.

“This provides a way to get extra capital from these sovereign wealth funds, and hopefully for NZ Post to use the funds that they raise from the sale, to put more capital into Kiwibank.

Meanwhile, Labour Party state-owned enterprise spokesman David Parker said Cullen should be congratulated on the idea.

“Michael Cullen should be congratulated for securing a route to expand KiwiBank and keep it in public ownership, given the refusal of National to provide more capital for NZ Post or KiwiBank.

Greens have more concerns:

Green Party co-leader James Shaw said the move opened the door to partial privatisation.

“This deal makes it harder for the Government to use Kiwibank to drive competition in the banking sector, as the Green Party announced we’d do, because the Government can’t direct the Super and ACC funds in the way it could have directed Kiwibank,” he said.

“The fact is the Government forced Kiwibank’s hand and today’s announcement will make it easier than it was before to move Kiwibank into private ownership.”

But Cullen…

…said Shaw’s argument, that the Government was able to direct Kiwibank, was “completely incorrect”

“Kiwibank is a 100 per cent owned subsidiary of New Zealand Post but in terms of the Companies Act and Reserve Bank requirements it must act independently in terms of its activities.

“The Government cannot direct New Zealand Post, nor through New Zealand Post can it direct Kiwibank.”

And the person who made Kiwibank happen, Jim Anderton via Newshub:

Founder of Kiwibank, Jim Anderton believes the move to sell 45% of New Zealand Post shares in Kiwibank was the best option available.

So part from the Greens it looks like there will be little opposition.

Greens want to ‘repurpose’ Kiwibank

James Shaw announced a Green policy to “repurpose Kiwibank and save Kiwis hundreds of millions”:

The Green Party will strengthen Kiwibank so that it can compete with the big four foreign owned banks leading to better interest rates, the Green Party said today.

To achieve better bank interest rates, the Green Party will:

  • Inject a further $100 million of capital in Kiwibank to speed its expansion into commercial banking;
  • Allow Kiwibank to keep more of its profits to help it grow faster; and,
  • Give Kiwibank a clear public purpose to lead the market in passing on interest rate cuts.

“The Government has limited Kiwibank’s ability to scale up and compete, leaving the big foreign banks free to make unnecessarily large profits off Kiwis, rather than pass on recent interest rate cuts to us all,” said Green Party Co-Leader James Shaw.

“New Zealanders could be getting better interest rates no matter who they bank with if Kiwibank was allowed to properly compete with the big four Australian banks.

“Under our plan, a first home buyer in Auckland with a $500,000 mortgage could save $690 per year, meaning they pay off their mortgage earlier.

“Across the entire economy, these mortgage savings alone translate into savings of $312 million per year. That’s a massive saving for NZ Inc.”

New Zealand’s banking sector is amongst the most profitable in the developed world.  Four foreign-owned banks control 87 percent of New Zealand’s banking industry — a situation ratings agency Standard & Poor’s recently described as ‘oligopolistic’.

“Our plan will help Kiwibank lead a change in New Zealand banking, by giving it a clear public purpose that requires it to drive competition to generate better interest rates for New Zealanders,” said Mr Shaw.

“We’ll help Kiwibank to grow faster by injecting $100 million of capital into the bank and let it retain more of its profits.

“Strengthening Kiwibank so it can create competition in the banking sector is the smartest way to ensure all banks pass on the best interest rates to Kiwis.”

Link to more information:

NZ Herald: ‘Beefed up’ Kiwibank would save homeowners big bucks – Greens

“Beefing up” Kiwibank would lead to lower interest rates and could save homeowners hundreds of dollars, Mr Shaw said.

“Under our plan, a first-home buyer in Auckland with a $500,000 mortgage could save $690 a year, meaning they pay off their mortgage earlier.”

Across the entire economy, these mortgage savings alone translate into savings of $312 million a year.

That’s a massive saving for NZ Inc.

But is it realistic? I’m sure the Green numbers will be checked over.

But Labour are sticking to strong arm tactics for now:

Labour leader Andrew Little said he would not rule out legislating to force banks to pass on cuts by the Reserve Bank…

It’s worth keeping in mind that with current support levels any changes to Kiwibank would also require NZ First support.

Last month Winston Peters slammed trading banks but gave no specifics on what he would want to do about them:

Winston Peters has got no sympathy for our trading banks.

The New Zealand First leader said the excuse used by the banks that they’re facing higher international borrowing rates doesn’t wash.

“The disparity between the actual borrowing rate and what they’re charging the borrowers in this country is a disgrace. We’re paying not the lowest interest rates in 50 years but in fact, in comparative terms, the highest”.

That doesn’t make sense. But NZ First voters, many of whom are retired and rely on interest earnings on savings, may not be happy with pushing interest rates down.

Kiwibank, not Aussiebank

How much risk is there of Kiwibank being sold off? How does Aussiebank sound?

Kiwibank started in 2002 due to a coalition agreement between Labour and the Alliance Party. It was a major policy success by Jim Anderton, and the bank has been a major success for Kiwis. Jim Anderton retires from parliament this year. His Alliance Party is winding up. Who will champion the Kiwi’s bank once Jim is gone?

Does National want to sell off Kiwibank?

Kiwibank tape catches English

An embarrassing recording of National Party deputy leader Bill English in private conversation has surfaced. He suggests National will sell Kiwibank “eventually, but not now”.

Mr English said last night he could not recall having a conversation with anyone about Kiwibank. But he said National had pledged not to sell Kiwibank in its first term of office and that policy was unchanged.

Their first term is just about over.

Government considering state asset sales – English

Finance Minister Bill English has signalled the Government is again considering partial state asset sales – including Kiwibank.

A good example was Kiwibank, English said. It had got to a size where it needed either a government guarantee or ”an awful lot of capital”.

”So one option would be to go to the market and raise capital. So keep crown ownership, majority crown ownership and raise the rest of the capital from the market. So who’d buy into that.”

Obviously there is support in National for selling Kiwibank . And we are just about at the end of their first term – so what will they do next term? There is increasing pressure on National from the right to be much bolder with policies like asset sales.

If the next government is an Act-National coalition there will be even more pressure on government to sell assets like Kiwibank.

What’s the best way to protect Kiwibank once Jim Anderton is not there to stand up for it?

UnitedFuture has always supported Kiwibank, and will continue to support Kiwibank. A significant UnitedFuture presence in parliament, and a continued presence of UnitedFuture in government, will provide a continued safeguard for Kiwibank.

Keep it Kiwibank

How much risk is there of Kiwibank being sold off? How does Aussiebank sound?
It’s known what Act and National would like to do.

UnitedFuture have supported Kiwibank, and will be releasing details soon about their stance.