Sir Michael Cullen hasn't ruled out selling a majority share in Kiwibank, should it need more capital to expand.
The former Finance Minister, currently New Zealand Post Group chair, announced on Wednesday plans to sell 45 percent of the bank to ACC and the New Zealand Super Fund.
Kiwibank is owned by NZ Post and since its inception in 2001 has grown to make up 85 percent of the company's market value.
Sir Michael -- who set up the NZ Super Fund in the same year -- told Paul Henry this morning he would be comfortable with NZ Post relinquishing control of the bank.
"In a couple of years if Kiwibank needs $50 million or $100 million in order to engage in some expansionâ€¦ the three partners will say, can we do that proportionately? The probability is that the Post Group will say no, it can't.
"What the deal provides at that stage is, new shares will be issued, bought by the Super Fund or ACC, so the Post shareholding would dilute as a proportion of the total. That new capital would then be fed back into Kiwibank."
NZ Post's mail business has been steadily losing money as fewer people send letters, while Kiwibank has been a commercial success -- but needs the kind of cash injection NZ Post can't provide if it is to grow.
"Looking forward say to the 2030s, Kiwibank is capable of being a much bigger, much stronger bank, producing a very strong dividend flow to help pay for New Zealand's superannuation," says Sir Michael.
"It's clear the mail and communications side of the Post Group is not going to be in a position to provide that capital for any foreseeable period into the future. On that side of the business we're trying to restructure, downsize, change the focus -- which in itself is consuming capital."
Sir Michael says the Super Fund has no debt obligations and plenty of cash -- around $28 billion -- so giving it a stake in Kiwibank is a "natural marriage" he has been thinking about since 2011.
"If the deal falls through it's not a disaster -- it just means that Kiwibank is really constrained."
The Green Party has claimed the proposed sale -- from one Government-owned entity to two others -- is a "step down the road to privatisation of the bank", which Sir Michael rejects.
"The people clearly don't want to happen. They want it to stay 100 percent New Zealand-owned. As long as the public believe that, I think we can assure it stays that way.
"I think it's important for the financial system it does stay that way. We need to ensure we have a big player in the financial market."
The Government will collect a dividend from the sale, even if it is to itself. Sir Michael has indicated it's likely to be higher than $50 million. The total value of the offer is $495 million, which up to half is expected to be spent on paying down debt.
NZ Post recently announced plans to cut 500 more jobs, mainly at the managerial level.