Small towns dying as banks exit
Regional towns are facing ‘‘death by a thousand cuts’’ as banks shut up shop.
Their residents will need to live off the grid as communities become increasingly cut off from services, economist Shamubeel Eaqub said.
Earlier this month First Union said Westpac was proposing to close up to 19 mostly rural bank branches, resulting in more than 70 jobs losses.
For some affected communities, such as the small South Island town of Fairlie, a branch closure would deliver a big blow.
Westpac is the last remaining bank branch in Fairlie. If that goes customers would need to drive to Timaru or Geraldine to do their banking.
Eaqub said the proposed closures were part of a bigger story of the decline of small town New Zealand.
Small towns did not have large enough populations with enough business and transactions to warrant a bank’s presence, he said.
‘‘Do the banks have a particular moral obligation to be there? I don’t think so,’’ Eaqub said.
Rural populations were ageing, as were their businesses. Advancements in technology had been driving a long-term trend towards urbanisation, he said.
‘‘It’s death by a thousand cuts. To think that somehow we’re going to be able to turn the tide around is unrealistic.’’
It was difficult to sustain a profit-making business in such communities, he said.
‘‘The reality is banks will be present wherever there is a buck to be made. If there isn’t going to be a buck to be made they’re going to leave.’’
Residents in small communities needed to understand they would not have easy access to services like banks in the future, he said.
‘‘If you want to live in those communities you need to make a choice to essentially live off the grid,’’ Eaqub said.
New Zealand Institute of Economic Research senior economist Christina Leung said there was no reason for banks to keep a branch open if it was not commercially viable.
‘‘They’re simply responding to demand,’’ Leung said.
If there were no other banks in a town it indicated the industry did not deem the town economically viable to have a presence, she said. ‘‘The reality is that it does come down to the numbers.’’
If residents travelled out of town to bank that could result in a flow of funds out of the local economy as people did their shopping elsewhere, she said.
Bruce Thompson, a spokesman for taxpayer-owned Kiwibank, said it would not be stepping in to fill a void left by Westpac in places that no longer had a bank branch.
‘‘There will always be some small communities where it’s not considered viable to operate a branch,’’ he said.
Kiwibank is a wholly-owned subsidiary of New Zealand Post, which is a 100 per cent state-owned enterprise. It operates through NZ Post’s 280 Postshops.
The bank’s website said its retail network has the largest reach of any bank operating in New Zealand, ‘‘servicing communities where the other banks have closed’’.