Photo: RNZ / Mark Papalii
New Zealand First’s plan to buy back the Bank of New Zealand is an “outlandish proposal”, says an economist.
NZ First leader Winston Peters on Sunday announced a policy to automatically enrol all newborn citizens into KiwiSaver with a $1000 government contribution, alongside a proposal to buy back the Bank of New Zealand and merge it with Kiwibank to create a new state-owned bank.
Speaking at a campaign event at the Trusts Arena in West Auckland, Peters said the new entity – to be known as “National Bank of New Zealand” – would be commercially run and designed to compete more aggressively with the major Australian-owned banks operating in New Zealand.
Infometrics principal economist Brad Olsen said it “headline-grabbing” rather than “serious policy”.
He argued there were little details as to how the policies would be carried out, which made it difficult to understand what effects they might have.
He said it was was encouraging to see more political discussion around KiwiSaver, but he worried that continually changing the scheme would keep people from being able to plan ahead because of ever-changing rules.
NZ First wants to buy back the Bank of New Zealand and merge it with Kiwibank to create a new state-owned bank.
Photo: RNZ / Nate McKinnon
He questioned where the party might find the funds for these policies.
“There’s talk around the likes of sovereign bonds and similar. That’s still debt that the government would effectively have to backstop and take on board. It would require a number of Kiwis to front up with a whole bunch of cash to buy a new bank when you still haven’t seen all that much interest in recent times around putting more money into Kiwibank.”
Olsen said there was not much money for the government to spend on such purchases, given necessary expenditure on such things as health, education and defence.
Massey Business School Professor Claire Matthews not only worried about finding the money for buying back BNZ, but also about what message it was sending to international companies.
“If he’s saying ‘we will buy it back’, he’s basically saying that National Australia Bank have got no choice. They will require them to sell it to them. That’s nationalisation. That’s a major thing for a government to do.”
She questioned why a single bank had been targeted if the goal was simply to make Kiwibank more competitive through a merger.
“So if it’s really just about fostering competition and fostering the New Zealand banking sector, then I don’t think you would be targeting a particular bank. You would simply be saying ‘we would like to discuss it and see if we can reach an agreement’, which is quite a different message.”
As for KiwiSaver, Matthews said making contributions compulsory was “one of the least important elements”. She said she would prefer an overhaul of the system rather than isolated changes.
But Rupert Carlyon, the managing director of KiwiSaver provider Kōura Wealth, disagreed that the system needed to be transformed.
He argued that the main issue was a lack of incentives for people to contribute. Even with mandatory contributions, “the economically rational person would not be contributing to KiwiSaver,” he said.
He pointed to Australia where money going into superannuation is taxed at a reduced rate and at the UK where contributions are tax-free as possible models.
Similarly, Carlyon did not understand how nationalising BNZ would solve issues in the banking sector – such as lowering interest and fees or increasing lending to small businesses.
“I mean, it just doesn’t make any sense to me. We own the electricity companies and we still can’t get them to deliver for consumers and for everyday New Zealanders. If we own one of the banks, how’s that going to be any different?”
He advocated for regulation instead.
Financial writer Martin Hawes said making KiwiSaver compulsory was much needed, and the earlier someone joined, the better.
“I think it was Oscar Wilde who said youth is wasted on the young, and that’s nowhere more true than in investment.
“Investment works with compound interest, and what you really need with compound interest is lots of time.”
He attributed high uptake of KiwSaver to the $1000 kickstart payment, which ceased more than a decade ago.
He said introducing the saving scheme early and bringing back a kickstart would incentivise the next generation to contribute.
Associate Professor of Finance at Victoria University, Martien Lubberink, said having two major banks merge and be government-owned was not optimal for attracting investment.
“That sort of politicking creates tremendous uncertainty among investors because they’ll be subject to regulatory risk. If there’s a new government, there will be a new policy for the bank.
“What you want is a long-term vision for the combined bank to survive, but if politics start interfering every few years, there’s too much uncertainty to make it work.
“There’s not really a problem with BNZ or Kiwibank, they’re making profits, they’re growing a bit, probably the best thing is to leave it alone.”
Concerns about funding the policies were echoed by the Labour Party.
“It was Labour who created Kiwibank and KiwiSaver. We welcome any serious conversations about improving both for New Zealanders but Winston Peters’ plan lacks details, such as how they plan to pay for it,” Labour’s finance spokesperson Barbara Edmonds said.
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