Westpac closures reflect bigger trend affecting small town New Zealand
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 – some distance away – 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 and 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."
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 another bank branch was closer than the nearest Westpac then customers should switch to that bank, she 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.
"It's of little comfort to the towns themselves but that's how it works."
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 tax payer-owned Kiwibank, said it would not be stepping in to fill a void left by Westpac in communities which no longer had a bank branch.
"We're not looking at expanding our network at this stage," Thompson said.
Kiwibank is a wholly-owned subsidiary of New Zealand Post, which is a 100 per cent state-owned enterprise.
Set up in 2002, it operates through New Zealand Post's 280 PostShops.
Its website said its retail network has the largest reach of any bank operating in New Zealand, "servicing communities where the other banks have closed".
Thompson said it would be unlikely the Government would dictate where Kiwibank should operate.