loosening of bank capital rules<\/a> ended up meaning Kiwibank no longer needed the capital imminently).<\/p>\nSpecial bank bonds could cost the Crown more <\/p>\n
NZ First conceded it was \u201cpossible\u201d the special bank bonds it would issue would cost the Crown more than if it issued regular government bonds. <\/p>\n
Investors typically deem government bonds to be the least risky type of bond, therefore demand lower yields (returns) than they do for corporate bonds or bonds linked to specific government initiatives.<\/p>\n
NZ First said the bank bonds would add diversity to investors\u2019 portfolios and be attractive to those wanting to increase New Zealand\u2019s sovereign wealth. <\/p>\n
Who would buy all the debt?<\/p>\n
NZ First believed there would be enough appetite among investors to absorb the issuance of more regular government bonds, as well as bank bonds, to fund the purchase of BNZ. <\/p>\n
To put $24b in context, Treasury is currently issuing about $35b of NZGBs a year. <\/p>\n
While demand for these bonds is high, yields are rising. <\/p>\n
Investors worldwide are increasingly worried about conflict in the Middle East causing inflation, and therefore interest rates, to rise. They are also wary of the amount of debt governments have taken on since the Covid-19 pandemic. Hence, US and British government bond yields have spiked. <\/p>\n
The reason the Reserve Bank of New Zealand created money to buy NZGBs during the pandemic was to suppress yields, which jumped when investors started panicking about how much debt the Government was going to have to issue to pay for its response to the crisis.<\/p>\n
NZ First sees credit ratings improving<\/p>\n
While New Zealand has very strong credit ratings, agencies have recently revised their outlooks for the country to negative over concerns about how long it is taking the Government to pay down debt. <\/p>\n
Nonetheless, NZ First believed issuing more debt to buy BNZ would not put upward pressure on bond yields. In fact, it believed the purchase could make New Zealand more attractive to investors.<\/p>\n
\u201cThis will have the net effect of increasing our credit ratings as, for example, the OECD and ratings agencies have already called out that our uncompetitive banking sector is a drag on our economy,\u201d it said. <\/p>\n
\u201cOwning our own bank will decrease our cost of capital, reduce monopolistic behaviour and increase competition.\u201d<\/p>\n
ACC and the Super Fund would \u2018welcome\u2019 investment, despite flogging off Kiwibank<\/p>\n
Finally, NZ First would get ACC and the Super Fund (which have funds under management worth about $50b and $85b respectively) to invest in the bank.<\/p>\n
The party believed ACC and the Super Fund would \u201cappreciate the opportunity\u201d to make an investment that contributed towards New Zealand\u2019s sovereign wealth. <\/p>\n
If they didn\u2019t want to invest, the party would look at ways of requiring them to do so.<\/p>\n
\u201cCommon sense will be our first port of call, first right of refusal is another option, a requirement in their constitution could be another,\u201d NZ First said. <\/p>\n
\u201cHowever, bank investors do well and there are other investor options, such as KiwiSaver funds.\u201d<\/p>\n
The reason Kiwibank became 100% Crown owned in 2022, is because its former owners \u2013 the Super Fund, ACC and NZ Post \u2013 wanted out of the investment.<\/p>\n
NZ First\u2019s pitch to buy BNZ is unlikely to go ahead as National and Labour oppose the idea.<\/p>\n
Jen\u00e9e Tibshraeny is the Herald\u2019s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.<\/p>\n
Stay ahead with the latest market moves, corporate updates, and economic insights by subscribing to our Business newsletter<\/a> \u2013 your essential weekly round-up of all the business news you need.<\/p>\n","protected":false},"excerpt":{"rendered":"Asked by the Herald to elaborate on how the Crown would fund the purchase, a spokesman for the…\n","protected":false},"author":2,"featured_media":437949,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[26696,1643,5195,29385,28500,2852,3167,5098,5232,5341,10808,5399,6204,1888,266,5838,1426,95012,6964,13840,4754,223964,111,43,139,69,5493,1136,68689,312,223,61,14638,1533,102,6730,80],"class_list":["post-437948","post","type-post","status-publish","format-standard","has-post-thumbnail","category-new-zealand","tag-agencies","tag-bank","tag-be","tag-believes","tag-bnz","tag-burden","tag-buy","tag-buying","tag-create","tag-credit","tag-crown","tag-debt","tag-fine","tag-first","tag-government","tag-help","tag-investment","tag-kiwibank","tag-kiwisaver","tag-like","tag-members","tag-merging","tag-new-zealand","tag-news","tag-newzealand","tag-nz","tag-open","tag-private","tag-rating","tag-says","tag-the","tag-to","tag-wants","tag-will","tag-with","tag-would","tag-zealand"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/437948","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=437948"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/437948\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/437949"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=437948"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=437948"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=437948"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}