Opinion: Government ideology putting money in the bank

Opinions are divided on whether the government buying Kiwibank will be a victory for taxpayers. Photo / Provided

OPINION:

Was I the only person in the country taken by surprise yesterday when Finance Minister Grant Robertson announced that the government would spend $2.1 billion to buy Kiwibank?

$2.1 billion. And even then, people in banking and finance say it won’t mean much because for Kiwibank to live up to its true potential, it needs a lot of investment if it is to become a real competitor of the major Australian bank. banks.

It’s something the government says it could do, but I’ll believe that when I see it, because I don’t see a government-owned bank being a vote-collector – and if something isn’t a vote collector, so usually it goes nowhere.

A banking specialist from Victoria University of Wellington, Martien Lubberink, wonders why the government would want to own a bank.

He says today that we are funding a very risky, probably unviable institution, which “isn’t great if you ask me”.

And I couldn’t agree with him more. In fact, “not great” is an understatement. What I would say about that is that it’s just another example of the current government letting ideology rule its thinking.

Because apparently the Super Fund wanted to take a bigger stake in Kiwibank on the condition that it had the flexibility to allow private investors in on the action.

But the government was not going to have a bar of that. Grant Robertson couldn’t bring himself to let that happen, so he reached for the back of the chair, found a few billion dollars, and announced that the government would buy it outright.

That’s if the Reserve Bank gives it the green light. But I don’t think the government would announce that if this part was nothing more than a formality. So it will happen and the government will have control of Kiwibank.

And what those in the know see happening is that the only additional investment the government could make in its bank is in the future if the debt has to be repaid, which, in effect, would make Kiwibank what experts call a “zombie bank”. It is a bank that only continues to function because a government acts like an ambulance at the foot of the cliff.

I heard an expert on Newstalk ZB this morning say that Kiwibank has provided an illusion of competition in the banking sector, but has never been able to compete with the big banks because it does not offer everything that Aussie outfits offer.

And, in the years since the late Jim Anderton lobbied for a 100% New Zealand-owned bank – and got what he wanted – she’s been just a small player on the market and will probably remain so.

Which is largely attributed to the bank not having the capital to grow and grow. And, from what I read, there aren’t many people around the traps who think that’s going to change with the government in charge.

Yes, he’s spending $2.1 billion to buy Kiwibank from the New Zealand Post, ACC and the Superannuation Fund – because these companies don’t see owning a bank as fitting their “strategic and business plans”. ‘long-term investment’. But the government will not continue to pour money into it and that will not change much.

The question this raises, however, is: Is a public bank really a priority right now? My answer would be “no”.

I am not a Kiwibank customer. I never was. And that’s probably because I don’t care if a bank is locally owned or not. That’s why I never got to appreciate the fire that Jim Anderton had in his stomach about a New Zealand-owned bank.

I actually think the country has moved on since that time and I think we’ve gotten past this whole issue about Australians taking over everything from pavlova and Phar Lap and our banking system.

And I suspect that most of us – whether or not we have accounts with Kiwibank – will think today that the government hasn’t read the piece, because I think there’s a lot more to worry about these these days whether or not we have a New Zealand-owned bank.

In fact, I’d go so far as to say that I think spending $2.1 billion to buy Kiwibank is the last thing we need from the government right now – especially if the experts are right, and that will not bring anything significant to the people of New Zealand.

As far as I’m concerned, spending $2.1 billion to promote some kind of government ideology is never a good reason for any investment. Especially when it comes to an investment made on behalf of the taxpayer.