The best reason for the government to abandon the idea of selling Kiwibank is the flood of interest in buying it.
Within a few days of Bill English thinking out loud about part-privatising this iconic asset the vultures were circling.
Ex New Zealand First MP and now Chief Executive of the Federation of Maori Authorities Ron Mark says his members are keen to buy state assets such as Kiwibank if and when the government puts them up for sale. Ngai Tahu Chief Executive Mark Solomon says such assets could become “state-iwi assets”.
Chief Executive Officer of the New Zealand Superannuation Fund Adrian Orr says the fund would be keen for a stake in Kiwibank. It is working to increase its New Zealand investments and high quality state assets would provide a welcome opportunity.
On the face of it a sale to Maori Corporations or the New Zealand Superannuation Fund would at least keep the bank in New Zealand hands. But this would only be in the short-term with no guarantees longer term. Green Party Co-leader Russel Norman makes the point that “once Kiwibank is privatised it will inevitably end up in foreign hands whether it is first sold to small shareholders and then on-sold, or if it is first sold to the Super Fund who are then required by law to liquidate their assets.”
The experience with previous privatisations bears this out.
These investors see a chance to make money where the risk is carried by the government which also provides a guaranteed revenue stream. Even though the government would retain a majority shareholding in Kiwibank the private shareholders would mount constant pressure for improved dividends. The bank’s emphasis would shift from service delivery to customers and competing to keep the Australian banks’ interest rates down to delivering higher profits to the minority private shareholders.
Remember the privatisation of our trustee banks? Previously they were owned by their account holders but once they were bought up by the big Australian banks their customer service ratings dropped while their profits soared and left the country. In contrast one of the few remaining trustee banks, Taranaki Savings Bank, ranks consistently at the top in customer satisfaction surveys.
The big four Australian banks have acted more as a cartel than as competitors and New Zealanders have been fleeced. In response Kiwibank has grown strongly since 2002 and now has assets of $12 billion and 700,000 customers.
Despite this National has always hated Kiwibank and Labour hasn’t been much different. Helen Clark reluctantly agreed to its formation under pressure from the Alliance and refused to shift the government accounts to the New Zealand bank. John Key has shown similar disinterest and the government still banks with Australian-owned Westpac.
John Key has said he would prefer to list a part-share of the bank on the stock exchange to give “mums and dads” the chance to buy into a high quality investment. This is part of a plan to rescue the New Zealand Stock Exchange which has struggled to attract investors. New Zealand companies are performing poorly (how much lower can Telecom go?) and investors have been stung with the spectacular collapse of finance companies. Unsurprisingly people have been investing in property rather than the likes of the sharemarket.
Stock Exchange Chief Executive Mark Weldon says investors need good quality investments. He doesn’t put it like this but the public sector is again being asked to bailout private sector failure.
Meanwhile the bank needs extra funds to expand and John Key says these could come from private investors. However the funds needed are minimal and could be raised simply through reinvesting existing government dividends from the bank.
The effect of Key’s plan will be to reduce the shareholding of ordinary mums and dads and transfer them to those who will have extra to spend after their windfall tax cuts.
New Zealanders are very wary. The privatisations of the 1980s and 1990s have been a disaster. Among the worst were Telecom, Air New Zealand, the electricity sector and New Zealand Rail. The Labour government of the time told us privatisation would bring greater efficiency, better services, lower prices and greater accountability. National told us that breaking up our electricity supply into multiple competing companies in production, distribution and retail would bring similar benefits. The outcome has been the opposite – a series of sick jokes at our expense.
Selling Kiwibank would give us more of the same. It’s a valuable asset which should remain in the hands of all New Zealanders rather than be part transferred to a select few who have the resources to get an extra share of benefits which should accrue to us all.