The People's Bank to some, a waste of money to others

Kiwibank chief executive Sam Knowles.

Act leader Rodney Hide, who thinks the Government should not be bankers, says Kiwibank has not cut banking prices and has negligible market share.

Three years after Kiwibank's launch, Jim Anderton, the political father of the "People's Bank", still receives as many as 30 letters a week from customers.

It is a mere trickle compared with the hundreds that flooded in after the bank opened in February 2002.

But with the exception of the occasional note berating him for a failed loan request, Anderton says most are from happy customers.

"I think some people think I run the bank, but I'm not even a shareholding minister,"Anderton says.

In fact, Finance Minister Michael Cullen and State-Owned Enterprises Minister Paul Swain hold the Government purse strings.

As leader of the Alliance, Anderton pledged a New Zealand-owned bank providing services for low- and middle-income earners in the 1999 election campaign.

With the country's major banks - ANZ, the National Bank, Westpac, ASB and BNZ - all foreign owned, a "People's Bank" would keep profits onshore.

It would also bring to an end rising bank fees, and return banking services to smaller towns that had suffered from a dramatic cull in branch numbers from 1500 in 1993 to 900 in 1999.

At the time, Anderton said ordinary people were being "taken to the cleaners". Labour reluctantly agreed to the creation of its coalition partner's dream in 2001. Kiwibank was set up as a subsidiary of New Zealand Post with $83 million of taxpayers' cash.

The move was against the advice of the Treasury and the Government's Crown Company Monitoring Unit, the opposition and the financial community.

Even after it was established, the OECD chipped in saying it was not an efficient use of public funds.

But, with an additional $40 million injection of taxpayer funds, it has begun to deliver on its promises.

Kiwibank offers home loans, term deposits, credit cards plus savings and cheque accounts. Fee comparison tables on Kiwibank's website claim its services are between 35 and 59 per cent cheaper than the big banks.

It now has 306 branches in post shops, chemists, petrol stations and hardware stores, including 30 in towns and suburbs that suffered from the cull, such as Darfield, Featherston, Kawakawa and Miramar.