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Peter Wilson - Kiwibank: A Problem The Government Could Have Avoided

Contributor:
Peter Wilson
Peter Wilson
John Key
John Key

On Friday, June 4, in the electorate of Helensville, Prime Minister John Key was asked whether he could rule out the sale of Kiwibank at any time in the future and he replied: "Under my leadership, yes."

Thanks John. That will save a lot of trouble between now and the next election.

If you had said it two weeks ago, it would have saved a lot of trouble since then.

This has been a bizarre episode as the Government dealt with an opposition backlash over asset sales which partially obscured reaction to the May 20 budget.

The day after it, Finance Minister Bill English took questions from his audience at a business meeting in Christchurch. The sale of Kiwibank was raised and he responded by talking about how popular its shares would be.

That was enough to start a blaze of speculation about the future of the 100 percent state-owned bank and, until Friday, the Government didn't put out the fire.

Mr Key and Mr English seemed to be fudging the issue. While on one hand saying there were no plans to sell Kiwibank, they also said the promise to voters before the 2008 election had been that there would be no assets sales, or partial sales, during the first term of a National Government.

They also said that policy was going to be reviewed, and if there was any change it would be announced before the 2011 election and National would campaign on it.

Nothing wrong with that. Governments can't be expected to have policies set in stone for successive terms in office and as long as they are honest about it and make it clear to voters before an election then democracy is served.

Kiwibank, however, is something of an exception.

Its reputation rests largely on its name. It is New Zealand owned, a rare thing in a world where Australian-owned banks control nearly everything else.

If it was sold, or even part of it was sold to foreign interests, the change would be highly controversial.

In Parliament, opposition MPs have tried to force Mr Key into a corner. They didn't really succeed until Progressive Party leader Jim Anderton, who created Kiwibank when he was a minister in the Labour-led government, produced two quotes from Mr Key before the 2008 election in which the National Party leader said Kiwibank would never be sold.

Labour MPs, following it up, quickly trawled through the campaign archives and found nine occasions on which Mr Key made that commitment.

They made a lot of noise in Parliament about that and they could have been shut down by Mr English, who was answering questions on Mr Key's behalf. That didn't happen and the row raged on until Mr Key shut it down himself.

So Kiwibank is exempt from any policy change. Mr Key agreed on Friday it would be "off limits".

Other state-owned assets won't be and Labour is going to closely watch developments from now on. It believes any sign the Government is going to put them on the block will be a huge issue, one it can gain votes from.

Despite previous Labour governments selling vast amounts of state-owned assets, the party is now ferociously opposed to getting rid of any more. It suits its purpose to be this way.

Mr Key has an impressive list of assets that were sold by Labour, and can probably recite it from memory by now.

He clearly wants to have options open in front of him after the next election, but he will have to be careful how he handles those options.

Revenue Minister Peter Dunne, who would be very interested in asset sales should they occur, has taken the unusual step of issuing a warning to the Government.

In his capacity as leader of the United Future Party, Mr Dunne said selling state-owned assets "for no more than ideological reasons" would rightly arouse strong and widespread public opposition.

Mr Dunne is making sense here, so it is worth considering the rest of what he said.

"Simply selling assets on the vague premise that they would be better off in the private sector is not a good enough argument, but equally Kiwis are no longer in Labour's camp of 'shock, horror, hysterics' at the very idea of some degree of asset sales.

"The vast majority of New Zealanders certainly think privatisation went too far in the past, but they may now be more open to a proper discussion on some degree of private ownership -- New Zealand ownership -- of some assets.

"There is an argument that the capital base of some state-owned businesses needs to be expanded to enable them to remain competitive and to grow, and that the State is not in a position to fund this expansion.

"I think New Zealanders are open to that argument -- but they will not tolerate open slather and National needs to understand that."

Mr Dunne went on to say the Government will need to be very specific about its plans, including the scope for options short of privatisation such as publicly listed debentures or limited share floats to raise the capital required.

As for Kiwibank, Mr Dunne said he detected no public enthusiasm for its sale "particularly if this would see their ownership transferred overseas".

The Government, when it talks about assets, plays on the "mum and dad shareholders" angle because that implies ordinary Kiwis would be in control.

Mr Anderton has been making the point that those shares could be, and he thinks would be, quickly snapped up by the big Australian-owned banks who would offer the Kiwi mums and dads much more for them than they paid for them.

Mr Dunne said there could be safeguards in any state asset sales to ensure majority New Zealand ownership was retained and restrictions on the number of shares institutions could hold, as well as limiting the sale of shares to New Zealand-owned institutions.

"This would stop a long way short of privatisation as we have known it in the past," he said, which is something the Government is sure to consider when it begins its policy review.

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