Source: Radio New Zealand
Winston Peters. RNZ / Mark Papalii
Winston Peters’ threat to nationalise a major Australian-owned bank would send a “bad signal” to potential foreign investors, a veteran economic analyst says.
Peters’ party NZ First said if re-elected in November it would merge BNZ and Kiwibank under state ownership. BNZ was sold by the state in 1992 and is owned by National Australia Bank (NAB), which has not indicated it is looking to sell the profitable subsidiary.
Peters on Monday morning said the price would likely be “$7.5 billion upwards”, and if its owner was not keen to sell, “they always face the prospect of nationalisation”.
“I blanched at that point,” Michael Reddell told Midday Report. Reddell has more than 30 years’ experience in economic analysis, including stints at the Reserve Bank, Treasury and the International Monetary Fund.
“I mean, as a country, we’re supposedly keen on encouraging foreign investment – perhaps New Zealand First not so much – but generally across the parties, across the economic advisers, we’ve said over the years that we’ve actually made it too hard for foreigners to invest here.
“If you go down a nationalisation route, even if you pay a fair price, it seems a pretty bad signal.”
Michael Reddell. Supplied
Peters claimed Australia was in a recession, making this a good time for New Zealand to make an offer.
“Contrary to what the minister said, I mean, Australia is not in a recession at the moment,” Reddell said. “There’s no reason to suppose that NAB would be particularly interested in selling unless we paid an over-the-top price. And if we pay an over-the-top price, what’s in it for the taxpayer?”
Peters’ intention was for the new entity, which he dubbed the National Bank of New Zealand, to be commercially run and designed to compete more aggressively with the major Australian-owned banks operating in New Zealand.
Reddell noted that merging two of the five biggest banks in the country would mean fewer banks competing with each other.
“The argument, I suppose, would be that the motivation of a government entity was different than a private entity. But the way we set up [state-owned enterprises] in this country over multiple decades has been that we expect them to operate on a commercial basis. So you’d hope that this new bank would operate commercially successfully.
“The risk is that it wouldn’t, and the political imperatives would drive it. And what’s happened with too many government banks over the years is without the market discipline of being listed on the share market, they take bad credit risks and they end up coming a cropper and costing the taxpayer a lot when that bad stuff happens.”
Instead, Reddell said it should be easier for foreign firms to set up new banks in New Zealand.
“Those are the sort of people that we should be looking to get into the market – private entities taking risk for their shareholders, not getting the government back in the business of banking in some throwback to the 1970s.”
Prime Minister Christopher Luxon, whose party National is in coalition with NZ First at present, dismissed the idea and said it would cost far more than Peters thinks.
“That would be $30 billion of more borrowing that we don’t have. And, you know, that sounds like a Labour or a Greens policy, frankly… that just doesn’t make sense, you know, to borrow more money to buy a private company for the government to own.”
Peters predicted any potential coalition partners after the votes were counted would “cave in” and go ahead with the plan.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand