English's Kiwibank windfall
By Richard Harman (author)
Finance Minister Bill English is not going into any detail about how any special dividend to be paid by NZPost after the sale of the Kiwibank shares might be spent.
When the Government partially privatised the power generation companies in 2014, the proceeds went into the so-called Future Investment Fund which was set aside for infrastructure projects.
That fund is now exhausted though there are some big ticket infrastructure capital items still on the Government’s books like the Auckland Central Rail Loop.
Labour’s SOE spokesperson, David Parker believes that the Government could recycle some of the special dividend it receives back into Kiwibank should (as is thought likely) its new shareholders, ACC and the Cullen Fund, decide to increase the bank’s capital so it can expand.
The Government share in Kiwibank is held by NZPost and Mr English said that if the new shareholders decided to put more money into the bank in a way that required NZPost to do the same to maintain its proportionate shareholding (55%) “Then the Government might be putting more capital in. We wouldn’t rule that out.”
But Mr Parker also says that the Government will be able to use some of the special dividend for tax cuts.
Mr English left the door open to this by telling journalists yesterday afternoon that the special dividend was “essentially a transfer within the Government balance sheet.”
However his emphasis was on the future of Kiwibank.
He said that he expected the new shareholders would want to see the bank grow.
“They have strong commercial incentives to see the bank succeed and grow its value because they are investment managers and year to year they have to meet pretty tough thresholds in terms of getting returns on their investment,” he said.
That raises the question as to whether Kiwibank will now become more aggressive competition for the four Australian owned trading banks.
Bank industry sources say Kiwibank has a limited digital ability and relatively small marketing budget.
One thing it does have is customer loyalty and Opposition parties yesterday honed in on the possibility that the share sell down could eventually lead to privatisation.
Mr English, however, said the Government had right of first refusal on the ACC and Superannuation Fund holdings which meant no sale could take place without Government agreement and the current Government would not sell it outside Government.
Mr Parker said Labour may challenge this with a Private Member’s Bill which could require Parliamentary approval before any sale took place.
But Greens co-Leader James Shaw asked Mr English in Parliament how he could guarantee that Kiwibank would remain in public ownership, when he could not control who future finance Ministers would be or whether they would choose to buy back the shares
In reply Mr English opened the door to privatisation just a chink: “That will be a matter for the Government of the day. In the end, the guarantee of public ownership of Kiwibank is a matter for the public and the Government of the day, on any day.”
However that has always more or less been the case --- the only thing that has stopped the Key Government privatising has been a campaign pledge in 2008 not to do so.
That pledge was made against a background of Bill English having been secretly taped saying the Government would “eventually” sell Kiwibank.
NZ First Leader Winston Peters also proposed in 2008 that 24.9% of Kiwibank be floated off but “only to Kiwi investors”.