PAUL MCBETH: You can bank on Winston Peters to shake things up

Paul McBeth is the editor of The Bottom Line and Curious News, and worked at BusinessDesk for 15 years. He’s been a customer of Westpac NZ for decades and ASB since 2016, while Curious Media banks with BNZ.

This column was meant to dive into the thoughtful meditation on all things New Zealand by the Organisation for Economic Cooperation and Development’s policy wonks, but a chest-thumping speech from the one and only Winston Raymond Peters put paid to that.

Junior government coalition partner New Zealand First has been branding its mark on a return to small ‘i’ interventionism since handing the keys to Jacinda Ardern’s sixth Labour government in 2017, when Shane Jones was running up and down the country as the self-appointed prince of the provinces with his $1.5 billion provincial growth fund spreading the pūtea for all manner of projects aimed at reviving the regional economy.

But the current iteration of the country’s only genuine swing party has much bigger ambitions in a world that’s become punctuated by ‘insert nation’s name here’ first policies.

In the latest stump speech on the campaign trail in working-class Labour heartland – Auckland’s Henderson – Peters revealed NZ First’s next big industrial policy – buying back the Bank of New Zealand.

I’ll just let that sink in for a moment.

Twenty-eight years have come and gone

Peters wants the BNZ to return to the bosom of the taxpayer, bundle in the little Kiwibank that never quite could, and create a local lender for local people to genuinely shape competition among the top-tier oligopoly that controls the bulk of the banking system.

In years past, we’d simply shrug this off as the theatrics of a master politician well-versed in the ways of capturing voters’ imagination without having to follow through on big promises.

But a decade of Donald Trump’s stamp on the world has upended everything.

The standoff with China and undermining of international rules-based bodies in his first term gave way to a genuinely power-based reality in the second iteration. Tariffs and conflict are used as a form of coercion for negotiating wins and the federal government trades off grants and financial support for substantial skin in the game in industries deemed critical to the national interests of the world’s biggest economy.

Against that backdrop, NZ First’s proposal to buy the BNZ might seem sedate, even if parent National Australia Bank’s earnings multiple implies a valuation heading towards $20 billion for the Kiwi lender before adding the usual sweetener needed to wrestle a highly profitable business from its owner who paid $1.48 billion for the bank in 1992.

It's a sacrifice working day to day

The NZ First brains trust has put enough effort into how to cover such a price tag without it being entirely pie in the sky stuff.

There’s the obvious increase in government borrowing, using BNZ’s earnings to cover the interest bill. And then a special bond would be offered to local retail investors and KiwiSaver schemes to sit alongside that, as well as a little raiding of the party’s proposed NZ Future Fund and Accident Compensation Corp’s hefty investment portfolio to widen out the sources of finance.

Grabbing BNZ’s market leading position in business lending ticks the boxes in trying to unlock bank finance for a broader array of riskier commercial ventures, although an owner with strategic ambitions would certainly have to give up some of that healthy profitability the big four are known for. Peters’ promise of a commercial lender doesn’t quite stack up if he wants it to have a broader impact on competition.

After the admission of Kiwibank’s undercapitalisation in its latest letter of expectations – plus the coalition’s dominant National party flagging the bank’s future funding as an election issue – the NZ First policy provides a simple, if dubious, answer to public discontent with the nation’s biggest bankers.

They managed to get off the latest earnings round quite easily as the public distaste for Trump’s war in Iran overrode the usual round of bank-bashing whenever they reveal how healthy their profits are.

But let’s compare buying BNZ as an answer to excess bank profits to the OECD’s prescription for opening debt markets to small high growth firms.

The Paris-based policy analysts suggested those firms could access cheaper finance by pooling their loans into a securitisation vehicle to tap institutional money on their behalf like the Local Government Funding Agency does on behalf of councils.

She works hard for the money

One of those ideas is an exceedingly cheap and relatively simple initiative that requires an entrepreneurial flair to go out and market itself along with institutional backing that the money would flow, while the other requires billions of upfront investment and injects another layer of sovereign risk to a nation that’s becoming more willing to shut down people’s ability to have their day in court.

Not that those who feel like they’re bearing the brunt of it would embrace the more nuanced approach. When our leaders roll up their sleeves and do something, they’re at least leading.

God save us all from another parliamentary term of governance by working group.

And as outlandish as a major nationalisation programme sounds, let’s not forget that the privatisation push of the ‘80s and ‘90s remains such a divisive issue that politicians can’t bring themselves to do something as easy as selling new shares of Kiwibank to give it a fighting chance.

Buying back BNZ might sound like a lot of hot air, but there’s definitely a lot of heat coming from a swelling group of the population.

Image from Curious News.