Under statutory management

After a sustained period of growth following the war, the PSIS faced a series of challenges in the 1970s: high inflation was undermining saving; it lacked a long-term capital base; and from 1973 onwards it began to run operating deficits.

All of this made the society vulnerable to a run on funds and in 1978 the board took remedial measures, including lowering interest rates on savings and raising them on loans.

These measures created a reaction from PSIS members and expressions of concern about the accountability of the board, with the PSA worrying that it had lost control over the society that it had established. In 1978 the PSA was successful in gaining an effective majority on the board, which then reversed some of the rate changes but faced the huge challenge of falling sales and rising retail losses in a difficult environment.

The confidence of members in the PSIS was not helped by this tussle for control, but it was the introduction of the Public Service Association De-Recognition Bill by the Muldoon government in June 1979 that precipitated a run on the PSIS, as some members found it difficult to distinguish between the PSA and the society.  The PSIS was too significant to fail and on 28 June 1979 the Public Service Investment Society Management Act went through parliament under urgency. The Act halted withdrawals, replaced the board with a statutory manager and prevented the society from becoming insolvent. PSIS remained under statutory management until 1987. Subsequently membership was opened up to the general public and it refocused its attention on to finance – the reason it had initially been established. It survives today in the form of the Co-operative Bank.

Sources: Bert Roth, Remedy for Present Evils: A history of the New Zealand Public Service Association from 1890, New Zealand Public Service Association, 1987 and Gordon Boyce, Over half a million careful owners: A 75 year history of PSIS, 1928-2003, Dunmore Publishing, 2005

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