Hollowing out the regions

Written By: - Date published: 10:58 am, August 28th, 2016 - 44 comments
Categories: business, quality of life, useless - Tags: , , , ,

Nat spin is that the ecnomy is “booming”. It isn’t, we have the illusion of growth due to population gain (and the Christchurch rebuild), but per capita growth is dismal. The weakness of the real economy is reflected in the continuing hollowing out of the regions:

Westpac closures reflect bigger trend affecting small town New Zealand

Regional towns are facing “death by a thousand cuts” as banks shut up shop.

Their residents will need to live off the grid as communities become increasingly cut off from services, economist Shamubeel Eaqub said.

Earlier this month First Union said Westpac was proposing to close up to 19 mostly rural bank branches, resulting in more than 70 jobs losses.

Eaqub said the proposed closures were part of a bigger story of the decline of small-town New Zealand. Small towns did not have large enough populations with enough business and transactions to warrant a bank’s presence, he said. “Do the banks have a particular moral obligation to be there, I don’t think so,” Eaqub said.

Rural populations were ageing as were their businesses and advancements in technology had been driving a long-term trend towards urbanisation, he said. “It’s death by a thousand cuts. …

People depend on regional services, e.g. Elderly face 180km journey if bank closes. Many are angry at the Westpac closures:

Protesters let Westpac know their feelings about branch closures

Around small town New Zealand on Friday afternoon people gathered to oppose Westpac bank’s proposal to shut down 19 branches, due to a drastic drop in over-the-counter transactions as bankers flock to online banking.

For them, and another 50 or so Waikanae, Kapiti Coast residents – some who came on mobility scooters, others with walkers, but many under their own steam – banking is still about the personal touch.

Some held “shame Westpac” placards, others chatted. As far as protests go it was a sedate affair. No police presence was required. To Waikanae’s elderly, Westpac’s proposal to close their town’ Westpac branch is missing points that don’t show on a balance sheet. …

Speaking of balance sheets, Australian owned Wespac had a $920 Million profit last year – our banking sector is a disaster for NZ.

Neglecting Northland cost the Nats the last by election. Neglecting regional NZ as a whole might cost them the next general.

44 comments on “Hollowing out the regions”

  1. Ad 1

    Even though I just hate banks with some irrational-scale loathing, most NZ regional decline and depopulation is generated by much larger dynamics than one shop closing.
    And I’m not even going to bemoan their decline.

    Far better to look at the regions that have reinvented themselves, and ask, “How did they do that? Could we do that?” Every issue of LIfe and Leisure magazine seems to have a dozen stories of people who walked out on city life, or London life, or Hong Kong life, and decided to make a business happen in some far-flung and obscure little 1-garage 1-hall hamlet.

    • b waghorn 1.1

      Jobs Ad is what is needed jobs for people that just want to live a quiet little life in a quiet community with their family close at hand, and government is the only outfit that could make the sort of jobs that some need , the one thing that go getter high achievers fail to grasp is many a neither capable of or want to pursue big things.

    • weka 1.2

      Far better to look at the regions that have reinvented themselves, and ask, “How did they do that? Could we do that?” Every issue of LIfe and Leisure magazine seems to have a dozen stories of people who walked out on city life, or London life, or Hong Kong life, and decided to make a business happen in some far-flung and obscure little 1-garage 1-hall hamlet.

      Those aren’t the people to be concerned about Ad. They can go anywhere and set themselves up and be ok. It’s the people already living there, who will struggle with yet another loss of service, and someone new coming in and setting up a cafe down the road won’t actually help them access banking if they don’t have a decent internet connection. The solutions here aren’t going to come from plucky individuals, what’s needed is socialism. People working for the collective good.

      One thing that stuck in my mind was didn’t we go through this already? Remember all those bank closures post-80s? Which makes me wonder what it is about these places/situations where banking worked through the previous cutbacks and not it doesn’t.

      • Craig H 1.2.1

        One relatively recent change is the lowering and elimination of fees – they went up for a while, and banks made profits off them, but now the banks make less off fees so feel the need to find other ways to economize. Online banking and Kiwibank have a lot to do with that.

        With Kiwibank, the government has options, but this one probably won’t exercise them.

      • Ad 1.2.2

        I would agree I wouldn’t be anxious about highly mobile people, except that, they are the only people in reality who are going to pull declining regions out of decline.

        We have never had enough capital to do it ourselves. We have by and large remained quarry-enclave economies rather than high value-add townships.

        So when in a little village ten or twelve highly motivated people setting up something new, and get publicity for it, and attract further service industries, well, the loss of one brick-and-mortar low-wage capital-extractive bank branch begins to get less and less important.

        The example I’m really thinking about is Otago, which is pushing new spirit and capital into its furthest hinterlands. Even Kaitangata has more jobs than it has people. Even those tiny hamlets deep down the South Otago coast are full of new initiative. This drive is greatly assisted by Aucklanders, and the internationals flying in direct to Queenstown Airport.

  2. Richard McGrath 2

    Why don’t these little towns start their own community-owned banks?

    • Henry Filth 2.1

      Insufficient capital.

      Next question. . .

    • Lanthanide 2.2

      Unless the community-owned banks are going to do all the services offered by a big bank, it’s not really a solution, is it?

      Community-owned banks are hardly going to be in a position to lend for mortgages, for example.

      • dukeofurl 2.2.1

        They can just act like a mortgage broker to a larger institution who do the lending

      • dukeofurl 2.2.2

        “In what Sam Moore, head of Bendigo Bank’s Community Bank Model Development, calls a “self-organizing” response, a number of rural municipalities appealed to Bendigo Bank to reestablish a banking presence in their midst. Bendigo Bank sensed an opportunity, but at the same time realized that a new banking model would be required with mechanisms to address the financial viability issues in communities where other banks had so recently found it unprofitable to operate. First, to assure Bendigo Bank of greater support from communities it was agreed that this would need to be a partnership, where both partners shared in the efforts and rewards. And to address the economic decline many of these communities were experiencing, it was agreed that a percentage of each Community Bank Branch’s profits would be allocated on a permanent basis to community-directed grant making. ”

        This is where kiwibank can step in to offer a local partnership. I can bet national wont be letting them touch this with a bargepole.

        “The Community Bank Branches operate under what is essentially a franchise model. Revenue is split between Bendigo Bank and the local community enterprise on a 50/50 basis on basic banking products. For more complex products Bendigo Bank’s share of revenues is higher. In return Bendigo Bank is responsible for IT, products, capital, and regulatory and compliance issues for the bank, and undertakes staff training. “

      • alwyn 2.2.3

        Doesn’t TSB offer mortgages?
        I thought that was there main stock in trade.

        • alwyn 2.2.3.1

          From the TSB website. Yes they do offer mortgages.
          http://www.tsbbank.co.nz/Loans/Default.aspx

        • Macro 2.2.3.2

          Yes they do.
          Have been with TSB for years now after I decided I no longer wanted anything to do with an aussie bank.
          Best banking decision I ever made.
          But they do not have many branches in rural communities outside of the Taranaki. I don’t live anywhere near New Plymouth and indeed never even entered a TSB bank to set up my accounts.
          Actually I hardly ever cross a banks door these days – all my banking is on line and if I need assistance TSB’s help desk is only a phone call away and very very efficient.
          Where I can see a problem for small towns with the loss of banking facilities – and it is a very real one – is the loss of a safe deposit for large amounts of cash. Small towns still need to have some place to get and store cash. (local markets galas etc all run on cash). It should not be the responsibility of the local grocer or dairy owner.
          I like the Dukes suggestion of the Bendigo model. Obviously aussie has been down this track before us and it seems a very viable solution.

        • Lanthanide 2.2.3.3

          If each community, the size of Fairlie (population 700), started their own bank, how many mortgages do you think they’d be able to offer? Where is the capital coming from?

    • millsy 2.3

      We did have. They were called savings/trustee banks. Then Roger came and folded them all together, and they got sold off to…….Westpac.

    • jcuknz 2.4

      My thoughts too but to answer Henry F the solution is existing business sharing counters as I notice my local Kiwibank has done with a separate counter for Post and Banking if needed. Agencies instead of full blown banks and of course better web connections to the far reaches of the country.

  3. RedBaronCV 3

    It’s not just the regions – try counting the number of Westpac banks around central Wellington, or for that matter service stations.

    But the banks have other people doing their work for them and they are charging them for it – businesses that have to pay the bank through the nose to deposit cash and who do then do “cash withdrawals” to customers so the bank doesn’t have to pay tellers.

    All this online banking may be just fine if you have the money for computers, the connections, the ceaseless software upgrades etc. and the ability to access decent line speeds which cuts out a fair chunk of rural New Zealand and also to assume the level of liability that the bank stick you with for online transactions that go wrong.
    Then there is the crowd who want to stop cash being used or cheques being used. And look at the mess when all the IT goes down as happens from time to time. We are mad unless we retain a residual off line system to take the place of an online system when it’s hacked and destroyed.

    But there is an answer – to be bank in NZ you need a banking license and these need to come with a truckload more conditions about service levels. Credit card companies need the same treatment. The Reserve Bank should get onto it.

    Everything from
    – ensuring that all transaction processing takes place onshore so we are not at the mercy of cable failure, we are not handing out our sensitive personal data overseas and for local jobs ( and that it still works even if we are isolated as a country.)
    – that non online services are available within a certain distance for various populations clusters ( make the banks bid and compete to offer the remoter services in a sort of reverse auction where their license fees go up and up the fewer of these services they provide)
    – insist that a residual non IT system still works ( leave cash alone – what are remote communities supposed to do under the current system – barter for FFS? a lamb for a load of firewood??)
    – keep and fund the local competition – Kiwibank etc.

  4. alwyn 4

    I can feel very little sympathy for the people in Waikanae. These are the ones covered in the story about people being angry at the Westpac closers linked to in this posting.

    There are, within a one minute walk of the Westpac bank, branches of BNZ, ANZ and Kiwibank. It isn’t really that hard for people to change banks. I have done it on a couple of occasions without any trouble.
    There is, of course, a reduction in competition. Many of the people who comment on this site are actually in favour of that. They really want nationalisation of the banks and the total removal of competition after all.

    Places where there is only a single bank are a different matter. However the main thing causing it is the ever increasing use of internet banking. I know plenty of people who say they haven’t been in a bank for years. Are you one of them? Start using your bank branch again. There may be a few extra fees but you’ll have to accept that you must pay the extra cost of providing the service if you expect the bank to provide it.
    About all that can be done to help the people in the shrinking rural centres is to provide them with high speed reliable broadband. This seems to be being achieved.
    However people who live there aren’t that interested in supporting local businesses. Most small town dwellers will make a weekly journey to buy their groceries at a large supermarket in a town, rather than pay higher prices at a local store with much less range. They can hardly complain when the small local businesses close down can they?

    • RedBaronCV 4.1

      If we go into a branch for service we shouldn’t be paying any extra costs as there were no fee reductions when so many services went online.

    • RedBaronCV 4.2

      And the taxpayer should pay for all the rural reliable broadband so the bank’s can make more money? Really?? Change the government, stop allowing corporate freeloading on the taxpayer

    • Lanthanide 4.3

      “About all that can be done to help the people in the shrinking rural centres is to provide them with high speed reliable broadband. This seems to be being achieved.”

      If you mean UFB, then no, it’s not being achieved. UFB is only being rolled out to the 33 largest towns and cities in NZ.

      Places like Fairlie are definitely not in that top 33 bracket – which is why the bank is shutting up shop after all.

      This illustrates that the government got the UFB rollout backwards – they are focusing on the urban areas, which are already well-served with telecommunications, instead of the rural areas, which need an economic boost up. It’s particularly silly to have dairy farmers operating on dial-up modems because they can’t get any cost-effective alternative.

      • dukeofurl 4.3.1

        Yes
        “Because UFB isn’t feasible for every rural community, broadband internet with peak speeds of at least 5Mbps (megabits per second) is being provided to more than 90 per cent of homes and businesses outside of UFB areas.”

        5MB/s !
        Allthough other sites mention getting Wireless 4G

        • alwyn 4.3.1.1

          5MB/s would provide a lot more speed than you will really need for Internet banking. I used to use it with dial up, although not for very long.
          What it does not provide is sufficient speed for video which is where most of the demand is these days.

    • jcuknz 4.4

      I support as far as I can my local dairy for that reason ALWYN …. another closure in the future … they have already lost their NZ Post agency…. B’ Big Business run from Auckland 🙁

  5. Colonial Viper 5

    Westpac only makes a billion or two dollars profit in NZ. So they need to close these branches in order to fulfill their shareholder responsibilities to make a satisfactory return.

  6. Keith 6

    The Nats lost Northland because of the reason their former MP resigned, that National knew all along but covered it up and that there was a tolerable alternative to vote for.

    Honestly the National Party routinely ignore their electorates and get rewarded by increased majorities. Just wait, Craig Foss will be returned in spades even though Hawkes Bay has diseased drinking water and Nats did stuff all during Havelock North crisis to help them.

  7. ScottGN 7

    It will never happen because of competition and the current mindset between the big banks but what if the big 4 banks plus Kiwibank banded together and opened omnibus branches in the towns that apparently aren’t big enough to support a single bank branch? What if we had a government that cared enough to try and facilitate this?

    • Incognito 7.1

      I was thinking a similar thing. It occurred to me that there’s fierce competition in the (international) airline industry but they do codeshare flights and by and large it seems to work well. Sometimes competition means that it makes sense, from a business perspective, to join forces & services, without actual merging and/or acquisition. https://en.wikipedia.org/wiki/Codeshare_agreement

  8. KJT 8

    I am sure that if Kiwibank opened a branch in these smaller places, even as a franchise in a local store, the other banks would move back.

    However National’s politicians have to much of a fixation on their, after politics, rewards from the banks, like a recent National retiree, to allow Kiwibank to keep the others honest.

    • dukeofurl 8.1

      Yes thats whats happening in Australia with Bendigo Bank and its Community Bank network

    • Reddelusion 8.2

      I suggest not, people who actually go physically to a bank weekly I suggest are very high cost cutomers so I doubt it really has any material impact at all I can’t see the issue here, online banking is not difficult, no ATM in town is a bit rough though, saying that your housing is cheap thus pros and cons to small town living

    • Chooky 8.3

      +100 KJT

      KiwiBank, the peoples bank, should fill the void left by Westpac….which is afterall an Australian bank and takes profits out of the country

      and many older rural people including quite wealthy people don’t trust online banking

      …they will vote with their feet if given a choice to go to KiwiBank and if not given the choice they will vote against jonkey nactional as well

    • Lanthanide 9.1

      And…? What?

      People post this video like it’s some amazing problem with our society – and I don’t necessarily disagree – but there’s no suggestion as to what we should do instead, or how that alternative economy would work in practice.

      • Reddelusion 9.1.1

        agree no big secret fractional banking, it does talk about nationalising banking with no interest and money created based on govt spending and consumer need, not debt, with inflation and deflation controlled via tax and govt spending, also proposed all bank interest could be redistributed as a UBI, thus no bank interest or profit in reality. The real issue is how you, and the cost of transition from our old system to new, can a country go alone in such a financially globally connected world likewise, no critique if such a system would work or not, downside upside, unintended consequences hence an interesting documentary but vary incomplete and just another cut and paste bomb by Paul

        • reason 9.1.1.1

          Good to see you took the time to visit and watch Pauls link RedD … 🙂

          ….. derivative money men like our Prime minister don’t worry about debt …. they call it leverage.

          The Nacts are leveraging our country to exciting new levels …… and although the results have appeared like inflating a cow-pat …….. you do get these bubbles that inflate on the surface …… and then go pop with fecal matter being projected out to splatter on nearby things.

          A good way to think is imagine New Zealand as being like a Hotel room ….. and the nacts economy as a Rock-star ….

          The fans pay for the trashed room ……………..

  9. millsy 10

    There is no reason why a mobile banking service cannot be set up. We do have the technology after all.

  10. Andrea 11

    A bank bus. A dentistry bus. An optometry bus and mail order glasses. Even a travelling medical service to cover a district.

    Couldn’t be any worse than the current ‘wait forever for an appointment’ services we have now.

    If we can push house prices sky high – why not a geo-stationary satellite to improve communication and internet connection?

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