Kiwibank is being privatised by stealth

Written By: - Date published: 8:37 am, November 2nd, 2016 - 31 comments
Categories: ACC, David Farrar, Economy, Financial markets, national, Privatisation, same old national, the praiseworthy and the pitiful - Tags:

wavegoodbye_kiwibank

With everything else that is happening this week the partial privatisation by stealth of Kiwibank has escaped scrutiny.

Two days ago the Government announced that the NZ Super Fund and the ACC had taken a share in Kiwibank. The NZSF will own 25% and the ACC will own 22%.

Through financial sleigh of hand the Government will receive a $200 million “dividend” that it can then use for other purposes. Basically money paid to the NZSF for retirement and to ACC for future payment of accident compensation is being invested in Kiwibank. These organisations get the income stream and the Government gets a cheque but loses some of its income stream through NZ Post. And there are now three organisations that are going to review Kiwibank’s performance.  The amount of treble guessing of matters is going to increase considerably.

National’s pollster thinks it is a good idea because the NZSF and ACC have professional fund managers “who will do a far better job monitoring the performance of Kiwibank than a couple of staff at Treasury”. Interesting that he thinks that National’s oversight of government activity is that appalling that it has to be outsourced. Although he may have a point.

This week it was confirmed that the Government had run Solid Energy into the ground with the business being sold to private entities and the expected return for creditors would be 50c in the dollar. On top of this the Government has assumed responsibility for acid mine drainage from the Stockton plateau at a current estimated cost of $36 million. A performance of this kind would lead to people losing their jobs in the private sector. Shame the same rules do not apply to this Government.

The Kiwibank deal is slightly different to that announced in April this year. Back then ACC’s share was 20% and now it has increased by 2%. As well as that the purchase price was reduced and parent company NZ Post had to leave a further $90 million cash in Kiwibank increasing its value.

James Shaw has been criticised because he has said that the transaction is the start of the privatisation of Kiwibank.  The NZSF and ACC cannot sell shares for five years and do need to offer the shares back to the Government first but given they have bought the shares at a discount the buy back could be expensive.  And a Government declining to buy the shares will mean that they will almost inevitably be sold to private interests.

If only the ministers of this Government could do their job properly this financial sleight of hand would not have to occur.

31 comments on “Kiwibank is being privatised by stealth ”

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  1. Draco T Bastard 1
    2 November 2016 at 9:35 am

    If only the ministers of this Government could do their job properly this financial sleight of hand would not have to occur.

    This government is doing what it sees as its job properly – impoverishing the many to further enrich the already rich.

    We need Labour/Greens to come out and say that they will fully renationalise that which has been privatised.

    • DoublePlusGood 1.1
      2 November 2016 at 11:16 am

      Yep, and without compensation to boot.

      • NZJester 1.1.1
        2 November 2016 at 5:36 pm

        All those who got the privitized companies shares have already received back their investment money and lots of profit on top of it that anyway. The money should have gone into the public purse and not their pocket. A lot of it was also purchased with their extra money from the tax breaks given to them by National.

    • Chooky 1.2
      2 November 2016 at 12:43 pm

      +100 DTB…where is the Labour Party on this?…and the Green Party?…and NZF?

  2. dukeofurl 2
    2 November 2016 at 9:49 am

    Once another entity makes a ‘very good offer’ the investment shareholders would be obliged to accept- its out of the governments hands they would say.

  3. Siobhan 3
    2 November 2016 at 10:24 am

    “Interesting that he thinks that National’s oversight of government activity is that appalling that it has to be outsourced.”…isn’t that pretty much their admission on, well, everything.
    Whoever voted for National voted in a Government who can’t manage and are having to outsource the running of of Schools, housing, prisons, health etc etc.

    It’s like they voted in a stockbroker to run the country’s resources.

    Oh yeah, thats right, they did…

  4. Michelle 4
    2 November 2016 at 10:31 am

    Agree with your Siobhan you have summed it up nicely whoever voted for National voted for a government that cannot manage anything full stop

  5. johnm 5
    2 November 2016 at 10:36 am

    Despairing: But they still keep voting them in don’t they! 🙁
    Oh Yeh! Then there’s the million who can’t even be bothered to vote! No wonder we’re in the sh*t eh?

  6. save nz 6
    2 November 2016 at 10:48 am

    The government is just following the private sector into sweating the assets… and moving money and assets around.

    Why pumpkin patch went into receivership…

    “Muir’s annual remuneration had increased to $551,000, Prendergast received $587,000 and a company associated with the latter was paid $22.5m for providing store fixtures and fittings to Pumpkin Patch in the four years following its 2004 NZX listing.
    But one of the biggest issues was the huge increase in debt. The company raised $101.3m through its IPO but $61.3m of this was used to purchase shares from existing shareholders.

    The post-IPO store expansion programme was funded mainly through borrowings, with the company’s short and long term debt increasing from $4.7m in July 2004 to $81.3m four years later.”

    Why Wynyard are in voluntary administration….

    “In December 2011 Wynyard was incorporated as a non-trading subsidiary of Christchurch based Jade Software. In early 2012 “Wynyard Group” was launched as a brand and discrete business unit of Jade. The Wynyard Risk Management and Wynyard Investigations products were relaunched and Wynyard also assumed management of several Jade financial services accounts, which were the foundations of the Wynyard Intelligence product.

    In June 2013 the company issued a prospectus for the sale of shares to the public at an indicative price range between $1.10 and $1.65 a share. The final price was $1.10, which enabled it to raise $66.1m from the public. However, $23.6m of this was used to purchase intangible assets from Jade Software.”

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11737770

    • tc 6.1
      2 November 2016 at 1:07 pm

      Greg muir chaired hanover finance at a time it was obvious what hotchin and watson were up to and was dumped as warehouse ceo some years prior….a paid up boys clubber.

      the club members never lose out they always get paid top dosh and its never their fault when it inevitably falls over.

  7. Mike the Lefty 7
    2 November 2016 at 12:57 pm

    ditto New Zealand Post.
    National is very good at redefining terms such as privatisation, unemployment, fish stocks, poverty and many others.
    I suppose its easy when you have the arch spin meister Steven Joyce in your cabinet.

  8. fisiani 8
    2 November 2016 at 2:57 pm

    Since when was the Super Fund and ACC private?
    Do you not understand what privatize means?

    I despair for the Left. Must try harder.

    • Bearded Git 8.1
      2 November 2016 at 5:12 pm

      @fisiani You don’t seem to understand this transcation fisi. ACC and the NZSF would ordinarily be spending the money they are spending to buy 47% of Kiwibank on non-public investments. Not only is the government getting $200m now but it is privatising 47% of Kiwibank-a future government is very unlikely to be able to afford to buy the shares back.

      This is NOT privatisation by stealth; it is privatisation pure and simple.

      I despair for the Right. Must try harder……. but then we have seen this government stuff up the public’s finances on many occasions ; a cool billion on South Canterbury Finance, Solid Energy, hugely discounted energy company sell-offs, ballooning government debt* etc etc

      * before you come back with the old Earthquake excuse on this, it was reported yesterday that insurance companies have paid out $19 billion to date (and more than $20 billion when all settlements are done) on the earthquake. When EQC payments of several billions are added to this, only a relatively small increase in government debt was created by the earthquake.

    • Mike the Lefty 8.2
      2 November 2016 at 7:05 pm

      I think it is you that must try harder fisiani.
      It is an open secret that National want to privatise ACC.
      They don’t even deny it.

    • Lara 8.3
      2 November 2016 at 9:27 pm

      You do realise that ACC and the Super Fund can sell the shares in five years time? To anyone they like?

      Did you even read the OP?

  9. pdm 9
    2 November 2016 at 3:05 pm

    It cannot be privatisation because both the NZ Super Fund and ACC are quasi government entities so in the strictest terms the 47% remains in government hands.

    Having said that and even though Kiwibank is a rapacious fee charger, It has been a noose around the neck of Postbank and will therefore not provide competitive returns to its new investors. There must be better investments nationally and internationally than Kiwibank and the Trustees of both organisations have an obligation to New Zealand taxpayers to pursue these.

    • Cinny 9.1
      2 November 2016 at 4:12 pm

      Isn’t it ironic that the government won’t even support Kiwibank by using it? They would rather give any bank fee’s/transactions accumulated to Westpac so the Aussie bank profits over the Kiwibank.

      Shouldn’t act surprised I guess, they haven’t been supporting the super fund either for years. Outgoing government should putting their money where their mouths are and support Kiwibank by using it.

      Rather the outgoing government go against the public majority of a referendum and sell another portion of an asset, aren’t we in surplus? Why are we selling everything if the government is so fiscally responsible?

    • DH 9.2
      2 November 2016 at 7:10 pm

      @pdm the troll.

      Annual reports for Kiwibank can be found here;

      https://www.kiwibank.co.nz/about-us/investor-centre/reports-and-presentations.asp

      2015/2016 Nett profit before tax $165 million.

      Rolling annual return on equity 12.1%

      “It has been a noose around the neck of Postbank”

      Postbank was sold to ANZ in the ’90s, wtf are you on?

  10. Cinny 10
    2 November 2016 at 4:07 pm

    Robbing Peter to pay Paul lololz. Government should be gifting it to the super fund, How much does out going government owe super fund now? It’s been many years since they gave the fund some monies.

    If ACC is ever privatised does it mean that a portion of kiwibank will end up in private ownership as a result?

  11. Infused 11
    2 November 2016 at 4:17 pm

    Good. Shitty bank.

  12. pdm 12
    2 November 2016 at 4:37 pm

    Cinny 4.07pm

    The Clark/Cullen Government didn’t support it either.

    That probably shows the quality of Kiwibank which should be sold as it is neither use nor ornament and certainly does not do anything like Jim Anderton said it would for its customers. Still most thinking people did not expect it to so it has lived up to our expectations.

    • Siobhan 12.1
      2 November 2016 at 4:53 pm

      I’m curious as to what you think Australian owned banks are doing for us that makes Kiwibank look so shitty??.

    • Ch_ch chiquita 12.2
      2 November 2016 at 5:13 pm

      Funny that. I’m actually in the process of moving all our accounts (personal and business) from Westpac to Kiwibank for one simple reason. At Kiwibank we get a local account manager that is making an effort to find ways to help us; doesn’t guarantee an outcome we wish for but at least not talking to a call centre that slams the door shut in your face and not even trying to think creative how to help a small business.
      I’m not interested in fancy offices and smart machines to deposit money at. I want personal service when I need it.

    • Lara 12.3
      2 November 2016 at 9:26 pm

      You’ve left some ridiculously nonsensical comments here pdm

      I’ve used Kiwibank for all my business banking for years now. I love them. When I call with a query I get a Kiwi, here in NZ, who knows our systems and helps me. I hardly have to wait very long for my call to be answered.

      And their fees are pretty standard. In fact, they’re ridiculously low. And I have a LOT of transactions.

      So I’m calling bullshit on your “does not do anything…. for it’s customers”.

      It’s done more than live up to my expectations.

  13. millsy 13
    2 November 2016 at 10:31 pm

    The era of privatisation is over. The era of privatisation with New Zealand characteristics has begun.