The purchase of Kiwibank could cost the taxpayer a lot more than the $2.1 billion already spent to buy it. Photo / Dean Purcell
The purchase of Kiwibank could cost the taxpayer a lot more than the $2.1 billion already spent to buy it. Photo / Dean Purcell
OPINION:
The Government cannot find $300 million for a third medical school.
Instead, last week the Government spent seven times that amount - $2.1 billion - to buy a bank.
Minister of Finance Grant Robertson admits the taxpayer may have to inject more cash. The purchase of Kiwibankcould cost the taxpayer a lot more.
Labour once boasted it only cost the taxpayer one dollar to buy back the rail network. The railway is costing the taxpayer a billion dollars a year. The Government has also had to pledge $1.2b as the taxpayers' share of re-nationalised Air New Zealand's capital raising.
The Government has not been a good owner of either the railway or the airline. The delay in ordering new Cook Strait ferries means the vital service is unreliable. Air New Zealand, which is 52 per cent state-owned, has made so many redundant that the airline has cancelled 100,000 seats. From personal experience, it takes hours on the phone to ring the airline.
Analysts believe ACC and the New Zealand Super fund are selling their shares in Kiwibank because they do not want to contribute extra capital to meet the Reserve Bank's higher prudential ratios. The taxpayer is now on the hook for the extra capital.
More concerning is Super Fund chief executive Matt Whineray's statement that the fund has had concern over Kiwibank's "governance capabilities".
Ministers are hopeless at governance. When the taxpayer owned the Bank of New Zealand the bank funded the Wine Box rort. The BNZ had to be bailed out by the taxpayer to avoid its collapse.
When David Lange made me the first minister of state-owned enterprises I was in charge of 22 government businesses. I discovered not one was paying any company tax because none were profitable. The services and products were awful and overpriced. Politicians are just hopeless business owners.
Among the businesses was the Post Office Savings Bank. It was insolvent. The bank paid its depositors less interest. It would not give its customers loans. The new owners immediately increased the interest they paid savers. Customers were issued with credit cards freeing customers from having to rely on loan sharks.
Kiwibank has always been a political stunt that has produced few, if any, of the benefits promised. This month the bank was the first to increase its mortgage interest rates. The bank almost ruined New Zealand Post. All of New Zealand Post's earnings went into supporting Kiwibank.
NZ Post could not invest to expand its courier services to deliver Internet shopping deliveries. NZ Post had to beg the government to let it sell shares in the bank to ACC and the Super Fund to avoid bankruptcy. With the cash from the partial sale and NZ Post concentrating on its core delivery business the SOE has returned to profitability.
National has been very muted in its response. Michael Woodhouse, National's spokesman, has said that Robertson will not be able to resist interfering. Woodhouse would know. John Key appointed Michael Cullen chairman of New Zealand Post just to get Labour's best debater out of parliament.
Finance Minister Grant Robertson. Photo / Mark Mitchell
National must be wondering if Labour's purchase is a trap. Cullen bought KiwiRail without a Treasury report or valuation because he thought National would not be able to resist promising to sell railways. Labour wanted to make privatisation an election issue. Key was far too canny. He said National would never have purchased KiwiRail but would not privatise it. It is a decision that helped National win the election but has left the taxpayer with a massive multi-billion dollar bill.
What Christopher Luxon thinks of spending $1125 a household to buy Kiwibank is a mystery. Last week the only post from the National leader on the party's website was a eulogy for Sir Toby Curtis.
David Seymour put out a substantive statement. He asks as there was no tender how does anyone know that the shares are worth $2.1b? He also asks why not let New Zealanders invest in a share float of the bank? If Government ownership is important why not just keep a 50 per cent controlling interest?
Some Kiwi Fund managers have said they would support a share float. Other analysts say Kiwibank is a risky investment. The New Zealand Super Fund knows far more about investing than Robertson. The fund believes Kiwibank needs a shareholder that would strengthen governance, presumably an overseas bank.
Labour is so keen to promote competition in the supermarket sector that it is encouraging foreign-owned Costco's entry. At the same time Labour is spending billions of taxpayers' dollars to prevent real competition in the banking sector that a foreign bank shareholding in Kiwibank would bring. The only winners are the Australian-owned trading banks.
If you cannot get a doctor you can take comfort in knowing that the government owns a bank.
• Richard Prebble is a former leader of the Act Party and a former member of the Labour Party.
