9 Aug 2013

Call for flexibility in Kiwibank funding

10:10 pm on 9 August 2013

Finance Minister Bill English says the Government will continue discussions on Kiwibank's requirement for capital, but has not considered allowing Crown agencies like the Superannuation Fund to invest in the bank.

The chair of the New Zealand Post Group says would like entities such as the Super Fund to be able to take a shareholding as a way to resolve the bank's capital needs. Sir Michael Cullen says the New Zealand Post Group can only continue funding the bank for the next few years.

Mr English says the possibility has been raised in the context of of a broader discussion about the bank having sufficient capital to grow.

"It's an interesting idea Dr Cullen's put forward but we simply haven't considered it." Mr English says there are other more mainstream options for making sure Kiwibank has enough capital, such as issuing more debt.

New Zealand Post has been restructuring its business over the last few years to deal with the rapid decline in mail volumes, its core business.

Kiwibank, which was started in 2002 as a diversification strategy, now makes up about 70% of the group's earnings.

In the past there has been talk of privatising the bank, but Sir Michael says that would not be good for the business because it underestimates what brought people to the bank.

"I think it is a wise move to retain 100% ownership within the wider Crown network because when the idea was floated, two years or so back, of partial privatisation there was an immediate reaction from many of the bank's customers."

Sir Michael says people join Kiwibank because it is 100% owned by the New Zealand Government.

He says there is a synergy between Kiwibank and the Superannuation Fund. "The Super Fund does not have a huge interest in short-term profit, it has a large interest in long-term wealth acquisition and profit maximisation over the long-term."

Sir Michael says that meets Kiwibank's capital needs rather well.