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.