Jim Anderton's proposed bank - known affectionately, he says, as "Jimmy's Bank" - could reinvent the Post Office Savings Bank that was a fixture of a previous era. Reinventing the wheel is not always a bad idea, particularly if new technology has proved unsatisfactory for some.
New Zealand Post, the highly successful state company forged from the Post Office, found some years ago that there was a gap in the market for counter services. For all the convenience of telephone banking, Eftpos and automatic teller machines, some people still preferred to pay their accounts in person. Since then post shops have been profitably providing counter services for various billing and cash-handling operations, including those of several insurance companies and banks.
When the Alliance leader first suggested a need for a basic, low-cost banking service to small customers, NZ Post was naturally interested. Evidently it remains so, as do credit unions and a "surprising" array of public-sector organisations and local body corporations, according to Mr Anderton. But he seems to prefer NZ Post. It would, he concedes, need to operate in partnership with a more sophisticated financial organisation that would probably have to be a foreign-owned bank. Which wheel is being reinvented here?
Politicians need to be very careful when they wade into a settled and naturally evolving market. Banking, like any business, finds the most efficient equilibrium between costs and services.
Trading banks have been steadily increasing their charges for small transactions in recent years, even as their services become more automated and cheaper to provide. Yet those small transactions remain unprofitable overall and, as competition for the profitable parts of the banking business has squeezed margins, the banks are less willing to subsidise them.
Enter Mr Anderton. He seems to believe that a bank geared to low charges for predominantly small depositors can be profitable - at least he has not suggested it will be subsidised. If he is right, he has spotted an opportunity that has escaped the notice of all the major banking houses trading here. If he is wrong, then "Jimmy's Bank" will end up running at a cost to the taxpayer. NZ Post has made it clear that, unlike trading banks, it is not about to let services to small savers be a burden on its other operations.
So the question that must be posed to Mr Anderton is: would the country be better off with a "people's" bank? Some people would be better off. Those given to frequent deposits and withdrawals of small amounts would probably not face the full administration cost of their accounts. And the business customers of the other banks could expect slightly lower charges as those banks gladly saw their small depositors go to Mr Anderton's creation. But the country's best interest overall is a more elusive consideration.
Is it better for the economy that small accounts are subsidised by the banking system or by the state? The banks are more likely to increase charges to the point that people keep their transactions to a minimum and some sort of equilibrium is reached at which savings mount at least cost to everyone. The state is more likely to keep costs low, encouraging more transactions and transmitting the cost in taxation to everyone, including those big customers paying lower direct charges to the banking system.
Then, Mr Anderton's bank would be an albatross strung around the country's neck.
<i>Editorial:</i> Anderton's bank could cost us all
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