Kiwibank, a new bank for people wanting to go back to a simpler way of banking in New Zealand, began a nationwide rollout on March 23. The country's only public bank, it is also the only New Zealand-owned bank since 1989 when the last of the four government-owned banks, the PostBank, was privatised.
 
Few countries sold and deregulated public utilities and services faster than New Zealand under successive Conservative governments in the 1980s and 1990s. Now under a Labour-Alliance coalition government, the public sector is making a come back in banking, electricity, telecommunications and transport.
 
Kiwibank is the brainchild of Alliance leader and Deputy Prime Minister Jim Anderton. As the Minister for Economic, Industry and Regional Development since end-1999, he has presided over the strong re-entry of the public sector into the economy. Addressing the Commonwealth Business Forum on Oct 2, 2001 he said in a no-holds-barred speech titled ‘Lessons of Privatisation’: "It is difficult to outline New Zealand's recent experience of private-public partnership without considering the chaos that economic policy can wreak."
 
For New Zealand, the privatisation of banks altered the economic picture. By the early 1990s, not only was there not a single bank or major financial institution that was New Zealand-owned, but many parts of the country lost banking services altogether, triggering an exodus of business. There was also growing public resentment to the high bank charges levied by the foreign banks, which annually reported record profits that were repatriated overseas. The financial profit worsened the country's already critical, current account deficit situation.
 
Anderton's Kiwibank seeks to break the private sector stranglehold on the banking sector. The bank has been established by the publicly-owned New Zealand Post, which is highly profitable and well-run. The Post has remitted over $500 million in dividends to the government, and it is from those dividends that it pays for police, education, and social services. The Post's 170 franchises across the country have agreed, following long-drawn negotiations on terms and conditions, to open Kiwibank branches. The bank is aiming for about 300 branches by the end of May or early June – in the 140 NZ Post corporate outlets and 170-odd post franchises.
 
Hundreds of customers are signing up to avail of the low entry fees and face-to-face services on offer. New Zealand's banks like the Australian-owned ANZ charged a high $5,000 entry fee that excluded large numbers of people from the banking system. In the face of competition ANZ introduced a new low-fee account, Connect 10, for ordinary people in mid-January, weeks before Kiwibank had even opened. Although the bank has denied its new account was making a pre-emptive strike on the looming competition, other banks are expected to similarly respond to the competition.
 
Kiwibank had also promised it would be undercutting mortgage rates and other charges imposed on clients by the big banks. The established banks have been making big profits on home lending, asserts Massey University banking studies senior lecturer, David Tripe. However, three days before Kiwibank's branch opening programme, New Zealand Reserve Bank Governor Don Brash raised the official cash rate, the benchmark for mortgage and business lending rates, from 4.75 percent to 5.0 percent. Still Kiwibank's revised home-loan rates – from 6.10 percent to 6.70 percent – is half a percentage point lower than the interest rates on offer at most other major banks – a saving of $30 a month on a $100,000 loan over 20 years.
 
The opening of the "People's Bank" for New Zealand has not been without hiccups. Marketing expert Dr Mark Colgate has criticised Kiwibank for missing a chance to catch potential customers by not opening all its branches simultaneously across the country and by not having software that lets customers open accounts on-line. The main rollout followed the successful pilot opening of seven branches in February. Some 30 new branches are expected to open every week from end-March to June.

May 10, 2002.

[Source: New Zealand Herald www.nzherald.co.nz]