The sell-down of Kiwibank to Government-owned entities should be both congratulated but approached with caution, say Opposition parties.

The Government announced on Wednesday New Zealand Post would sell off 45 per cent of its subsidiary Kiwibank; 25 per cent to the New Zealand Super Fund and 20 per cent to ACC.

NZ post chair Sir Michael Cullen said the deal was valued at $1.1b, and if it went ahead, the embattled NZ Post would receive $495 million.

ROSS GIBLIN\Dominion Post NZ Post to reap almost $500 million from partial sale of Kiwibank, but bank will stay in Kiwi ownership.

Finance Minister Bill English said NZ Post had significant debt to pay down.

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* NZ Post to sell 45 per cent of Kiwibank for $495m cash injection

LAWRENCE SMITH/FAIRFAX NZ Labour's foreign affairs spokesman David Parker says NZ must be tougher, but Australia ought to say if we're being used as a springboard for people to pour across the Tasman.

He rejected suggestions it was a sell-off of a state asset, because it remained solely-owned by the Government.

"It's essentially a transfer within the Government balance sheet. It'll give benefits to Kiwibank with more commercial owners, better access to capital."

The amount that would be paid to the Government in the transaction was still a matter for negotiation.

Prime Minister John Key said it was good solution.

"For some time now, the chairman of the board has been expressing to us concerns about the bank wanting to grow, about it wanting access to more capital.

"This is a way of providing that, but also providing greater expertise on their board because ultimately if the deal goes through ACC and the NZ Super Fund - who have tremendous financial expertise - will actually ultimately have board members on the KiwiBank board."

Key rejected suggestions it was a compromise to get around the Government's opposition to further selling off of state assets.

The response of opposition parties has been mixed, with the Greens calling it a step down the path of privatisation.

Labour leader Andrew Little said it was important Kiwibank stayed in public ownership.

"And this does that, there are some good conditions around it," he said.

"This provides a way to get extra capital from these sovereign wealth funds, and hopefully for NZ Post to use the funds that they raise from the sale, to put more capital into Kiwibank.

Meanwhile, Labour Party state-owned enterprise spokesman David Parker said Cullen should be congratulated on the idea.

"Michael Cullen should be congratulated for securing a route to expand KiwiBank and keep it in public ownership, given the refusal of National to provide more capital for NZ Post or KiwiBank.

"Michael Cullen's solution only works to ensure the bank will remain in public ownership if National promises that if ACC or the Super Fund sells its shares, then the government of the day would exercise its first right of refusal and buy them back."

Parker said Labour would commit to buying the shares back if required.

English said the Government had given an assurance it would buy the shares back.

"No sale can occur without Government agreement. In this case, it's a right of first refusal. This Government, if it was offered the bank, would buy it back."

Green Party co-leader James Shaw said the move opened the door to partial privatisation.

"This deal makes it harder for the Government to use Kiwibank to drive competition in the banking sector, as the Green Party announced we'd do, because the Government can't direct the Super and ACC funds in the way it could have directed Kiwibank," he said.

The Greens announced last week they would inject $100m of capital into the bank, and allow it to keep more of its profits to foster a faster expansion.

"The fact is the Government forced Kiwibank's hand and today's announcement will make it easier than it was before to move Kiwibank into private ownership."

But Cullen said Shaw's argument, that the Government was able to direct Kiwibank, was "completely incorrect"

"Kiwibank is a 100 per cent owned subsidiary of New Zealand Post but in terms of the Companies Act and Reserve Bank requirements it must act independently in terms of its activities.

"The Government cannot direct New Zealand Post, nor through New Zealand Post can it direct Kiwibank."

ACT party leader David Seymour said the Government should have gone further and sold the shares to private investors.

"This odd in-house partial privatisation is just reshuffling deck chairs," says ACT Leader David Seymour. "The New Zealand taxpayer will still bear all the risks of investing in a bank."

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