Opinion: Government ideology putting money in the bank

Opinion divided over whether the Government buying Kiwibank will be a win for taxpayers. Photo / Supplied

OPINION:

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

$2.1 billion. And even then people in the banking and finance sector are saying that it won't mean much because, for Kiwibank to live up to its true potential, it needs a whole lot of investment if it's going to become a genuine competitor to the big Australian banks.

Which is something the Government says it might do but I'll believe that when I see it, because I don't see a government-owned bank being a vote catcher - and if something isn't a vote catcher then, generally, it goes nowhere.

A banking specialist at Victoria University Wellington, Martien Lubberink, is mystified as to why the Government would want to own a bank.

He's saying today that we're funding a very risky, probably non-viable institution, which "is not great if you ask me".

And I couldn't agree with him more. In fact, "not great" is putting it mildly. What I'd say about it, 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 providing it had the flexibility to allow private investors to get in on the action.

But the Government wasn't going to have a bar of that. Grant Robertson couldn't bring himself to let that happen and so he's reached down the back of the chair, found a couple of billion dollars and announced that the Government will buy it outright.

That's if the Reserve Bank gives it the nod. But I don't think the Government would be announcing this if that part of it was anything more than a formality. So it will happen and the Government will have its hands all over Kiwibank.

And what those in the know see happening, is the only further investment the Government might make into its bank is stepping in some time in the future if debt needs to be paid off which, in effect, would make Kiwibank what the experts call a "zombie bank". Which is a bank that only continues to operate because a government acts as a bit of an ambulance at the bottom of the cliff.

I heard one expert on Newstalk ZB this morning saying that Kiwibank has provided an illusion of competition in the banking sector, but it's never actually been able to compete with the big banks because it doesn't offer everything the Aussie outfits offer.

And, in the years since the late Jim Anderton pushed hard for a 100 per cent New Zealand-owned bank - and got what he wanted - it's only been a small player in the market and is probably going to stay that way.

Which is largely being put down to the bank not having the capital to expand and grow. And, from what I'm reading, there aren't many people around the traps who think that's going to change with the Government in charge.

Yes, it's spending $2.1 billion buying Kiwibank from New Zealand Post, ACC and the Superannuation Fund - because those outfits don't see owning a bank fitting with their "long-term strategic and investment plans. But the Government isn't going to keep pouring money into it and so not much is going to change.

The question it raises, though, is this: is a state-owned bank really a priority right now? My answer to that would be "no".

I am not a Kiwibank customer. Never have been. And that's probably because I don't give two hoots whether a bank is locally-owned or not. That's why I could never appreciate the fire Jim Anderton had in his belly over a New Zealand-owned bank.

I actually think the country has moved on from those days and I think we're over that whole thing about the Aussies taking over everything from pavlova, Phar Lap and our banking system.

And I suspect that most of us - whether we have accounts with Kiwibank or not - will be thinking today that the Government has failed to read the room, because I think there is a lot more to worry about these days than whether or not we have a New Zealand-owned bank.

In fact, I'd go as far as saying that I think spending $2.1 billion buying Kiwibank is the last thing we need from the Government right now - especially if the experts are right, and it's not going to deliver anything meaningful for the people of New Zealand.

As far as I'm concerned, spending $2.1 billion to defend some sort of government ideology is never good grounds for investment of any sort. Particularly, when it is an investment made on behalf of the taxpayer.