October 29, 2024 • 9 mins
The Finance Minister has received early advice on how to better capitalise Kiwibank so it might compete better with the large Australian-owned banks.
The advice is in response to the Commerce Commission market study on personal banking.
Minister Nicola Willis says she hopes to bring more competition to the banking sector to improve things for Kiwi users.
"If you look over to Australia, they had a similar cosy oligopoly situation happening - Macquarie Bank played quite a disruptive role in that market, and the result was a better deal for everyday bank users."
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
With us right now, as Nikola willis the Finance minister.
Nicola Alo, hello here that do you know much about
this announcement on the building from Chris Pink today?
Speaker 2 (00:09):
He is your expert on that one. But look, this
is all part of our mission to make it simpler
and quicker, to get a building consent and to build
a house.
Speaker 1 (00:17):
Yeah. Because the reason I'm raising it with you is
because we spoke to him about an hour ago. But
since then I've been getting a lot of texts suggesting
that his plan's not going to work because basically it
puts the risk on the builders in their insurers. But
insurers don't ensure for defective work. Do you know if
that's the case.
Speaker 2 (00:32):
Well, I know that he will have taken a lot
of advice on this and he is intending to make
it simpler, but lock feedback from those building industry is
always relevant, and I'm sure that he'll keep working with
those at the caul face. Yeah.
Speaker 1 (00:46):
Also, what happens if, for example, Duval is listed as
one of these trusted builders that can check their own
work right, but then they end up in the situation
that Duval has there is defective work. Who pays then
does it not just come back on you and I
the taxpayer.
Speaker 2 (01:01):
Well, how those liabilities for depends, of course, in terms
of the whole receivership situation and where the funds sit
and who's responsible at the various bits. So I'd hesitate
to answer that example without having worked all of that through.
Speaker 1 (01:15):
Yeah, fair enough, Okay, listen, Kiwibank. Do you like this
listing idea?
Speaker 2 (01:19):
Well, as you know, I like the idea of Kiwi
Bank getting bigger. To get bigger, it needs the capital
for growth, and my viewers that capital can come from
more places than just the government. I've been seeking advice
from Treasury on what the best way is to raise
that capital and I'll be taking some recommendations up to
Cabinet in the next little while.
Speaker 1 (01:40):
Why do we need another bank if we've got four?
I mean, was actually quite a lot right to be
competing against each other. If we've got four and we're
not happy with what they're doing, why do we think
of fifth one's going to change things?
Speaker 2 (01:50):
Well, what the Commis Commission have said is that before
we have are a functional oligopoly. So rather than competing
for market share, which is when you get all of
the good things of com petition like better prices, more innovation,
better services. They're feeling very cozy and relaxed about just
hanging on to their current market share and competing around
the edges on on making as much profit as they
(02:12):
can as individual banks. That's not a good situation for
New Zealand bank users. So what the Commerce Commission have
said is, look, you need someone else in that market
to be disrupting. There's a couple of ways that can happen.
One through a big disruptor such as Kiwibank. Another way
is through getting more other financial companies competing on different
(02:33):
kinds of products. So we want to achieve both of
those things. And if you look over to Australia, they
had a similar cozy oligopoly situation happening. Macquariebank played quite
a disruptive role in that market and the result better
deal for everyday bank users.
Speaker 1 (02:50):
But how do we know that New Zealand Post, once
it's kind of reached its maximum share market share, won't
just settle into a nice little ol oligopoly situation as well.
Speaker 2 (03:01):
Well. What you ultimately want is each of those entities
to be competing harder and from my perspective. I don't
just want Kiwibank offering innovative products and services and good pricing.
I want it to be nipping so hard at the
heels of the big banks that they are forced to
do the same. And so I don't just see that
as sitting on the shoulders of Kiwi Bank. I also
(03:23):
want to see some of these new FinTechs coming through
offering more disruptive products. I think there can be a
bigger role in the future for non bank deposit takers
and non bank lenders, So the likes of the finance companies,
the building societies, that sort of thing. And what the
Comments Commission report helpfully said was, look, if you actually
got the regulation in this area a bit better, a
(03:45):
lot of which is done by the Reserve Bank, there's
every reason to believe those entities will compete more. So,
this is a classic one heither where that boring word
regulation actually really matters. If we get the ground rules right,
will get better competition.
Speaker 1 (04:00):
Do you know yet who your Wellington Crown observer is
going to be.
Speaker 2 (04:03):
No, And that is a decision for Simmon Brown, and
it's one that I'm leaving him too.
Speaker 1 (04:07):
And do you know how long he's going to take
making that decision.
Speaker 2 (04:11):
No, but I do know there's a ten day period
between him having informed Wellington cit he counts forul of
his decision and leaving them to give feedback on that.
So we still haven't run out that too. You don't know.
Speaker 1 (04:23):
I don't know if they're going to be able to
meet the ten day thing, because I don't know. If
you saw they had a twenty three minute meeting and
then they broke for morning tea today.
Speaker 2 (04:32):
Well, I can tell you that kit kevnet doesn't take
good approach.
Speaker 1 (04:35):
No, well, thank god, because otherwise would sack the lot
of you. And fortunately we get that opportunity with them soon. Hey,
have you been surprised by the reaction to the school lunches?
Speaker 2 (04:45):
I have been, because to me, this is just a
win win win. You get your school lunch program continuing
into the future. That by the way, Labor didn't put
money aside to fund, but we found the money to
fund it, and you get it done at a much
lower cost per pupil, so down from as much as
nine dollars ahead to more like three dollars ahead, and
(05:06):
it's nutritionally good food. So I think this is a
good solution and it's something that where the government should
be proud of totally.
Speaker 1 (05:13):
And people are weird about it. But here's the one
thing that I see as being a problem. Right, are
you absolutely absolutely sure that you have done all of
the things you need to do? Dotted the eyes and
cross the tea so that Compass group doesn't stuff you
guys in the end with crap food.
Speaker 2 (05:26):
Well, look, they're required to meet a series of guidelines,
and the nutritional guidelines are the same as they were
for the program previously, so there hasn't been a change here.
And realistically they'll need to use a range of local suppliers, right,
getting good nutritious products from them. So I think this
is a situation where there's no guarantee that a contract
(05:47):
continues forever. They need to perform in order to get
that contract. But by being more efficient, by getting a
decent competition up, we're getting a better price for everyone,
and that benefits the tax payer. And actually David Simol's
managed to get the program running in a way that
it can be more sustainable for the future.
Speaker 1 (06:04):
Hey, so I loved your speech where you told the
public servants to give you some bold ideas. Do you
reckon that that is it going to happen. I mean,
it's one thing to say to them, I'm here to
hear your crazy, kooky ideas, but it's quite another for
them to have the courage to come to you with them.
Speaker 2 (06:18):
Well, it needs two things. The first is it needs
ministers who are prepared to listen. And I can tell
you honestly, we are talking to all of the New
Zealanders who feel the same frustration that we do that
New Zealand hasn't been growing as fast, it hasn't been
delivering as good as services as they want to see,
and New Zealanders want bold ideas, So I think our
(06:39):
ministers are poised to listen. The second thing that it
requires is that public agencies themselves put forward the disruptive ideas,
and that often means putting in lights the ideas from
the people who are second or third tier in the organization,
who are looking at problems differently from the way leaders
in the past have done. And look between me and
(07:00):
the Prime Minister and other ministers, we've put a real
emphasis on this. Bring forward the fresh thinking, bring forward
the young, disruptive people, the new people who have different perspectives,
because if we do things the way we've always done them,
we will get the same result and that is not
good enough. We need to do much better too.
Speaker 1 (07:18):
Right now. On the performance pay, which is also something
that you've spoken about in the past week, are you
going to this is the bosses. Are you going to
drop their base salary back in order to then add
performance pay on top or does the performance pay just
get added to what they're already earning.
Speaker 2 (07:34):
It has to be additional because there are existing employment
agreements that exist between the Public Service commission and chief executives.
So you can't after the fact renegotiate that and say
some of your pay is at risk. So the employment relationship,
as you'll appreciate, is not between ministers and chief executives.
It's between the Public Service Commissioner and chief executives. And
(07:57):
so what we've asked the Commissioner to do is to
designer performance pay scheme and so that will advised to
sit on top of their current pay arrangements. But we
want it to be very strict that they would only
get these bonuses if they deliver performance to New Zealanders
above and beyond the status quo. And I have been
working with the Public Service Commission to say, let's make
(08:19):
this as transparent and accountable as possible, so New Zealanders
can see for themselves what's required for a bonus to
be paid and whether or not it's been paid.
Speaker 1 (08:28):
Nichola, listen to you. Guys at the ministerial level have
the ability to go to New Zealand posts and say,
all right, enough with the sort of like death by
a thousand cuts nonsense. Just cut the mail back to
one delivery a week for everybody for the rest of time.
The end.
Speaker 2 (08:42):
Well, I guess that would be just middling at a
degree of operational detail that we don't think is necessary.
Because instead what we say to them is, look, we
want you performing well as.
Speaker 1 (08:53):
A commissioner to tell you how many million dollars.
Speaker 2 (08:57):
Yeah, so they haven't been performing well. So that's why
they've come to us and said, okay, in order for
that to happen, we're going to need to make some
changes to our business model, including reducing some of our
delivery days, and they've gone out for consultation on that.
So they go out for consultation on that with our blessing,
because we're realistic, you know, the male model has completely
(09:17):
changed and in order for that business to be viable,
to be sustainable into the future, they're going to have
to change the way they do some things.
Speaker 1 (09:23):
Do you get any mail that you love?
Speaker 2 (09:28):
No, I do. In my beehive office, I occasionally get
a lovely little handwritten note and it tends to be
from someone either very young or quite elderly, and it
can be very sweet.
Speaker 1 (09:39):
I love it. Hey, Nicholas, thanks very much appreciated, Nichola,
Willa's Finance Minister. For more from Heather Duplessy Allen Drive,
listen live to news talks. It'd be from four pm weekdays,
or follow the podcast on iHeartRadio.
With us right now, as Nikola willis the Finance minister.
Nicola Alo, hello here that do you know much about
this announcement on the building from Chris Pink today?
Speaker 2 (00:09):
He is your expert on that one. But look, this
is all part of our mission to make it simpler
and quicker, to get a building consent and to build
a house.
Speaker 1 (00:17):
Yeah. Because the reason I'm raising it with you is
because we spoke to him about an hour ago. But
since then I've been getting a lot of texts suggesting
that his plan's not going to work because basically it
puts the risk on the builders in their insurers. But
insurers don't ensure for defective work. Do you know if
that's the case.
Speaker 2 (00:32):
Well, I know that he will have taken a lot
of advice on this and he is intending to make
it simpler, but lock feedback from those building industry is
always relevant, and I'm sure that he'll keep working with
those at the caul face. Yeah.
Speaker 1 (00:46):
Also, what happens if, for example, Duval is listed as
one of these trusted builders that can check their own
work right, but then they end up in the situation
that Duval has there is defective work. Who pays then
does it not just come back on you and I
the taxpayer.
Speaker 2 (01:01):
Well, how those liabilities for depends, of course, in terms
of the whole receivership situation and where the funds sit
and who's responsible at the various bits. So I'd hesitate
to answer that example without having worked all of that through.
Speaker 1 (01:15):
Yeah, fair enough, Okay, listen, Kiwibank. Do you like this
listing idea?
Speaker 2 (01:19):
Well, as you know, I like the idea of Kiwi
Bank getting bigger. To get bigger, it needs the capital
for growth, and my viewers that capital can come from
more places than just the government. I've been seeking advice
from Treasury on what the best way is to raise
that capital and I'll be taking some recommendations up to
Cabinet in the next little while.
Speaker 1 (01:40):
Why do we need another bank if we've got four?
I mean, was actually quite a lot right to be
competing against each other. If we've got four and we're
not happy with what they're doing, why do we think
of fifth one's going to change things?
Speaker 2 (01:50):
Well, what the Commis Commission have said is that before
we have are a functional oligopoly. So rather than competing
for market share, which is when you get all of
the good things of com petition like better prices, more innovation,
better services. They're feeling very cozy and relaxed about just
hanging on to their current market share and competing around
the edges on on making as much profit as they
(02:12):
can as individual banks. That's not a good situation for
New Zealand bank users. So what the Commerce Commission have
said is, look, you need someone else in that market
to be disrupting. There's a couple of ways that can happen.
One through a big disruptor such as Kiwibank. Another way
is through getting more other financial companies competing on different
(02:33):
kinds of products. So we want to achieve both of
those things. And if you look over to Australia, they
had a similar cozy oligopoly situation happening. Macquariebank played quite
a disruptive role in that market and the result better
deal for everyday bank users.
Speaker 1 (02:50):
But how do we know that New Zealand Post, once
it's kind of reached its maximum share market share, won't
just settle into a nice little ol oligopoly situation as well.
Speaker 2 (03:01):
Well. What you ultimately want is each of those entities
to be competing harder and from my perspective. I don't
just want Kiwibank offering innovative products and services and good pricing.
I want it to be nipping so hard at the
heels of the big banks that they are forced to
do the same. And so I don't just see that
as sitting on the shoulders of Kiwi Bank. I also
(03:23):
want to see some of these new FinTechs coming through
offering more disruptive products. I think there can be a
bigger role in the future for non bank deposit takers
and non bank lenders, So the likes of the finance companies,
the building societies, that sort of thing. And what the
Comments Commission report helpfully said was, look, if you actually
got the regulation in this area a bit better, a
(03:45):
lot of which is done by the Reserve Bank, there's
every reason to believe those entities will compete more. So,
this is a classic one heither where that boring word
regulation actually really matters. If we get the ground rules right,
will get better competition.
Speaker 1 (04:00):
Do you know yet who your Wellington Crown observer is
going to be.
Speaker 2 (04:03):
No, And that is a decision for Simmon Brown, and
it's one that I'm leaving him too.
Speaker 1 (04:07):
And do you know how long he's going to take
making that decision.
Speaker 2 (04:11):
No, but I do know there's a ten day period
between him having informed Wellington cit he counts forul of
his decision and leaving them to give feedback on that.
So we still haven't run out that too. You don't know.
Speaker 1 (04:23):
I don't know if they're going to be able to
meet the ten day thing, because I don't know. If
you saw they had a twenty three minute meeting and
then they broke for morning tea today.
Speaker 2 (04:32):
Well, I can tell you that kit kevnet doesn't take
good approach.
Speaker 1 (04:35):
No, well, thank god, because otherwise would sack the lot
of you. And fortunately we get that opportunity with them soon. Hey,
have you been surprised by the reaction to the school lunches?
Speaker 2 (04:45):
I have been, because to me, this is just a
win win win. You get your school lunch program continuing
into the future. That by the way, Labor didn't put
money aside to fund, but we found the money to
fund it, and you get it done at a much
lower cost per pupil, so down from as much as
nine dollars ahead to more like three dollars ahead, and
(05:06):
it's nutritionally good food. So I think this is a
good solution and it's something that where the government should
be proud of totally.
Speaker 1 (05:13):
And people are weird about it. But here's the one
thing that I see as being a problem. Right, are
you absolutely absolutely sure that you have done all of
the things you need to do? Dotted the eyes and
cross the tea so that Compass group doesn't stuff you
guys in the end with crap food.
Speaker 2 (05:26):
Well, look, they're required to meet a series of guidelines,
and the nutritional guidelines are the same as they were
for the program previously, so there hasn't been a change here.
And realistically they'll need to use a range of local suppliers, right,
getting good nutritious products from them. So I think this
is a situation where there's no guarantee that a contract
(05:47):
continues forever. They need to perform in order to get
that contract. But by being more efficient, by getting a
decent competition up, we're getting a better price for everyone,
and that benefits the tax payer. And actually David Simol's
managed to get the program running in a way that
it can be more sustainable for the future.
Speaker 1 (06:04):
Hey, so I loved your speech where you told the
public servants to give you some bold ideas. Do you
reckon that that is it going to happen. I mean,
it's one thing to say to them, I'm here to
hear your crazy, kooky ideas, but it's quite another for
them to have the courage to come to you with them.
Speaker 2 (06:18):
Well, it needs two things. The first is it needs
ministers who are prepared to listen. And I can tell
you honestly, we are talking to all of the New
Zealanders who feel the same frustration that we do that
New Zealand hasn't been growing as fast, it hasn't been
delivering as good as services as they want to see,
and New Zealanders want bold ideas, So I think our
(06:39):
ministers are poised to listen. The second thing that it
requires is that public agencies themselves put forward the disruptive ideas,
and that often means putting in lights the ideas from
the people who are second or third tier in the organization,
who are looking at problems differently from the way leaders
in the past have done. And look between me and
(07:00):
the Prime Minister and other ministers, we've put a real
emphasis on this. Bring forward the fresh thinking, bring forward
the young, disruptive people, the new people who have different perspectives,
because if we do things the way we've always done them,
we will get the same result and that is not
good enough. We need to do much better too.
Speaker 1 (07:18):
Right now. On the performance pay, which is also something
that you've spoken about in the past week, are you
going to this is the bosses. Are you going to
drop their base salary back in order to then add
performance pay on top or does the performance pay just
get added to what they're already earning.
Speaker 2 (07:34):
It has to be additional because there are existing employment
agreements that exist between the Public Service commission and chief executives.
So you can't after the fact renegotiate that and say
some of your pay is at risk. So the employment relationship,
as you'll appreciate, is not between ministers and chief executives.
It's between the Public Service Commissioner and chief executives. And
(07:57):
so what we've asked the Commissioner to do is to
designer performance pay scheme and so that will advised to
sit on top of their current pay arrangements. But we
want it to be very strict that they would only
get these bonuses if they deliver performance to New Zealanders
above and beyond the status quo. And I have been
working with the Public Service Commission to say, let's make
(08:19):
this as transparent and accountable as possible, so New Zealanders
can see for themselves what's required for a bonus to
be paid and whether or not it's been paid.
Speaker 1 (08:28):
Nichola, listen to you. Guys at the ministerial level have
the ability to go to New Zealand posts and say,
all right, enough with the sort of like death by
a thousand cuts nonsense. Just cut the mail back to
one delivery a week for everybody for the rest of time.
The end.
Speaker 2 (08:42):
Well, I guess that would be just middling at a
degree of operational detail that we don't think is necessary.
Because instead what we say to them is, look, we
want you performing well as.
Speaker 1 (08:53):
A commissioner to tell you how many million dollars.
Speaker 2 (08:57):
Yeah, so they haven't been performing well. So that's why
they've come to us and said, okay, in order for
that to happen, we're going to need to make some
changes to our business model, including reducing some of our
delivery days, and they've gone out for consultation on that.
So they go out for consultation on that with our blessing,
because we're realistic, you know, the male model has completely
(09:17):
changed and in order for that business to be viable,
to be sustainable into the future, they're going to have
to change the way they do some things.
Speaker 1 (09:23):
Do you get any mail that you love?
Speaker 2 (09:28):
No, I do. In my beehive office, I occasionally get
a lovely little handwritten note and it tends to be
from someone either very young or quite elderly, and it
can be very sweet.
Speaker 1 (09:39):
I love it. Hey, Nicholas, thanks very much appreciated, Nichola,
Willa's Finance Minister. For more from Heather Duplessy Allen Drive,
listen live to news talks. It'd be from four pm weekdays,
or follow the podcast on iHeartRadio.
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