The folly of Kiwibank, along with its parent NZ Post, is becoming more and more obvious by the month. Both alike face a long, lingering death. Neither can overcome the commercial challenges facing them.
Let's consider NZ Post first. It has long been part of received wisdom that the government must ensure a functioning reliable, inexpensive postal service. Consequently, most postal services around the world have been government owned and operated. New Zealand took a gigantic step forward some years ago when it was decided that NZ Post needed to run along commercial lines. It was made a State Owned Enterprise, which meant that it had to function as an independent commercial entity and make a profit for its owner, the government.
It did. So far so good.
NZ Post became a model for the deregulation of monopoly postal services around the world. NZ Post discovered a nice little earner in being hired as an expert consultant to governments around the world looking to go down a similar path. Then came e-mail. An elephant walked into the room. The traditional letter and postal communication service is now going the way of the dodo. It is as inevitable as the passing of the horse and buggy.
The Chairman of NZ Post, Dr Michael Cullen (former Labour Finance Minister) made the case bluntly, according to Stuff.
In a toughly worded letter to State-owned Enterprises Minister Tony Ryall, NZ Post chairman Michael Cullen said most short-term fixes had been exhausted. Cost-cutting and new products could no longer match the falling mail volumes. In the letter, released under the Official Information Act, Cullen said 2012 "must be the year in which we take the first steps in making fundamental changes to our operational models". . . .The only way forward is to cut costs by cutting mail delivery services. In other words, NZ Post must downsize to the point where it can eventually be sold off or shut down. This is no-one's fault. It is commercial reality. NZ Post operates in a sunset service industry. Nothing can be done, except a rapid sell-off (which is politically impossible) or a long, lingering wind-down. Wind-down it will be.
However, mail volumes are in free fall. It had forecast a drop of 5 per cent a year as the long-term trend to electronic mail bit. But in the six months to the end of December 2011 the decline had steepened to 7 per cent; the fastest ever, "which may be the new norm", Cullen said. "The trend will not reverse and cannot be ignored."
Kiwibank, owned by NZ Post, is more problematic. It is the product of socialist ideology. The idea was that New Zealand needed a state owned bank to keep the capitalist banks honest. The people's bank was the brainchild of one Jim Anderton whose commercial vision of the future did not extend beyond his nose. Ironically, Kiwibank has been wildly popular amongst the commercially naive, in particular one Dr Michael Cullen, who ardently defended the bank in his day. Now he is having to face the very same commercial reality he blithely ignored when Minister of Finance. The irony is delicious.
In order to develop, Kiwibank needs more capital. As we know, socialism and socialist projects eventually run out of other people's money. That time has come. The government has little appetite to put more money into its own bank as it runs up national debt to the levels approaching the entirety of annual GDP. Very, very low on the priority list is the people's bank.
We are confronted with a sight rarely seen. A former politician is faced with the task of cleaning up a mess substantially of his own making. This time around, however, Dr Cullen will be subjected to rigorous commercial disciplines. Welcome to the real world.
The former Minister of Finance, who once infamously boasted that he had spent all of the nation's fiscal surplus, is now having to face up in some small way to his own gargantuan recklessness. Hoist on his own petard indeed.
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