By VERNON SMALL deputy political editor
A state-owned Kiwi Bank has been supported by key Coalition negotiators and is expected to get the go-ahead from the cabinet in the next few weeks.
An "in principle" deal has been hammered out between Finance Minister Michael Cullen and Deputy Prime Minister Jim Anderton for a bank, run by New Zealand Post through its branch network, with Government financial assistance if needed.
The bank, a key plank of Alliance policy, will open for business next year. It will offer the junior Coalition partner tangible evidence of its influence in government as it struggles to make its mark in the face of low poll ratings.
A crucial roadblock to the bank was cleared when Dr Cullen dropped his blanket objection to any extra Government investment.
That has opened the way for NZ Post to raise debt and pay the Government a lower dividend to finance set-up costs of $80 million.
The exact nature of the Government's financial help has not been settled.
Dr Cullen told National Radio there was an issue over the level of capital injection needed and where that would come from "because as I have indicated in the past I am reluctant in effect for that to come directly out of the Government's coffers."
In earlier statements he had ruled out any equity injection or continuing financial support.
His comments suggest Government financial help will be channelled through the capital spending provision.
At the time of the June Budget $127 million was still available for capital spending in the 2000-2001 financial year, although Dr Cullen indicated this would be increased.
It is understood half of the $80 million set up costs could come from the sale of NZ Post's Wellington headquarters.
A previous attempt to sell the headquarters failed.
Government sources said the Crown Company Monitoring and Advisory Unit's preferred option of capital raising through a share float was unlikely to go ahead.
Initial costs would include computer software, conversion of branches, added security and hiring extra banking expertise.
Dr Cullen said that about 85 per cent of the work on the bank proposal had been done.
"New Zealand Post has developed a pretty strong business case, it has to be said. Around that I think there is a need for an independent assessment of that case. That is under way."
Mr Anderton said a public asset "of very significant value" would be built up. He said the bank would in time be worth more than the rest of NZ Post, although it was expected to make a loss in the early stages.
He hoped a future Government would not sell it but he could not "guarantee posterity." He had said previously that the bank would offer the full range of services and charge lower fees than the other banks.
He said the Southland Building Society and Taranaki's TSB Bank had rejected approaches for a joint venture which would have allowed them to retain their autonomy but be part of a much larger network.
But TSB managing director Kevin Rimmington said the bank was not interested in joining a Government entity "where we lost control and maybe end up being sold off."
Southland Building Society chief executive Ross Smith said it was fiercely independent and he did not like the idea of it being owned by the Government and possibly sold.
The NZ Post business case had not been put to him.
Cullen clears way for Kiwi Bank setup
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