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The Government has confounded pundits by agreeing to provide uncalled capital to New Zealand Post and Kiwibank, thereby keeping them out of the hands of the private sector.
Finance Minister Bill English and State-Owned Enterprises Minister Simon Power announced yesterday the Government had agreed to provide $150 million of uncalled capital to Support NZ Post's credit rating and assist in Kiwibank's continued growth.
"We're confident this provision of uncalled capital, on commercial terms, will give NZ Post and Kiwibank the financial certainty they need to pursue their plans," Mr English said.
Mr Power said the move sat alongside other Government measures, such as allowing Kiwibank to retain profits and requiring a lower dividend from NZ Post.
Immediately after the May Budget, Mr English was quoted as saying he would support privatisation of Kiwibank. That was later overruled by Prime Minister John Key.
Craigs Investment Partners broker Chris Timms said there would be surprise in some circles that the Government had not moved to privatise both NZ Post and Kiwibank.
"NZ Post was looking for equity and if the Government had not stepped up the only other place it could have looked was the private sector. They would have had to float, or partially float, to get the equity it required.
"This goes completely against those who said the Government will sell off state assets. And the best part is the Government has done it without having to put its hand in its pocket. It's just agreed to provide the support."
Maintaining a Standard & Poor's AA credit rating was essential to Kiwibank being able to compete with the Australian banks, Mr Timms said.
A drop in credit rating would mean funds would cost more to borrow for the bank.
NZ Post chief executive Brian Roche said Kiwibank was a vital part of the NZ Post group.
The Government's decision was a major boost in helping the bank grow and expand its range of services to the market.
The uncalled capital could only be utilised as protection against a significant unforeseen external event and was not available to fund growth activities or support deterioration of earnings in regular business.
"What the uncalled capital does provide is the base for a stable credit rating from which NZ Post Group can launch ambitious and exciting growth plans for Kiwibank."
The group wanted Kiwibank to expand into new sectors, such as business banking, he said.
The Government's decision was welcomed by Green Party co-leader Russel Norman.
"In only a matter of months, the Minister of Finance has moved from a position of wanting to privatise Kiwibank to one of Government support."
By keeping profits in New Zealand, Kiwibank had fuelled a small but virtuous cycle of reinvestment in New Zealand's long-term economic prosperity, Dr Norman said.