Greens dig a deeper hole with Kiwibank
Not content with Dr Cullen slapping them down, the Greens are persisting with some nonsense arguments. James Shaw blogs:
It will be easier for the Super Fund and the ACC Fund to sell off their shares in Kiwibank than it would have been for the government to privatise the bank. These funds’ decisions aren’t made by ministers, whereas with 100 percent Government ownership ultimately any decision to privatise Kiwibank would have been made around the Cabinet table.
Part of the deal will be that ACC and the Super Fund can’t sell their shares for at least five years though. After five years, the Government will have the have the first right to buy back Kiwibank shares if the Super Fund and ACC want to sell them. And Bill English has promised to exercise that right if it comes down to it.
But Bill English almost certainly won’t be the Finance Minister in five years’ time. Labour and the Greens have both promised we’d buy Kiwibank back if there’s a threat of it being privatised. But who knows what a future National Government might do?
It amazes me James can not see the flaw in his argument.
Under the status quo any decision to privatise Kiwibank would be made around the Cabinet table.
Under the Cullen proposal any decision not to buy any shares offered by the two funds would be made by a future National Government. And how do Governments decide things? Around the Cabinet Table!!
1/10 for logic.
That’s the billion dollar question. NZ Post will get about $495 million for selling Kiwibank shares. But we’ve done the numbers and if Kiwibank keeps growing the way it has in the past (and we hope it does), then those shares will be worth between $800 million and $1.1 billion in five years’ time.
So basically selling 45 percent of Kiwibank for $495 million today could mean buying it back in five years for double that amount.
This argument is even worse!
James is worried Kiwibank may be successful and grow in value. So any future purchase of shares would cost the Government more to buy them back.
But they will be buying them off two funds they 100% own!!
Let’s say the shares cost $400 million more. NZ Super Fund and ACC gain $400 million and the Government spends 400 million (more). The net change for the Crown is zero!
Sounds like the worst pawn-shop deal ever.
Sounds like the worst financial argument ever.
Probably not. Kiwibank’s problem is that it needs capital to grow, so it can compete with the big Aussie banks. The Government’s new plan won’t actually see Kiwibank get any new capital right now.
The proceeds from the share sale will go to NZ Post, and NZ Post will give most of them back to the Governmentas a special dividend. If Kiwibank wants more capital, it’ll need to ask for some from its new shareholders, the ACC and Super funds.
Missing the point that they have lots of capital to spare if they think it is a good investment. NZ Post does not.