We asked Labour's Jacinda Ardern and National's Nikki Kaye: Is a partial sell-off of Government assets to raise funds a good idea?
There has been a common theme in parliament lately. To explain New Zealand's current economic situation and their response, the Government has decided to liken the country to a family. For the sake of argument, let's put aside images of Bill English in a pinny, Gerry Brownlee tending the vegetables, and Anne Tolley reading aloud by the fireplace and just run with the idea for a bit...
If we do pretend for a moment that our economy is a family budget, we're a family that's in the shtoook. We have a deficit of $16 billion dollars, an economy that is heavily weighted towards property rather than the productive economy, and rising unemployment. In the equivalent situation, of course you would expect a household to look at making savings. But important questions would need to be asked. Where would these savings come from? Would, for instance, it include selling of the on-going source of family income? If you were smart, that is probably the last thing you would do; yet that is exactly what the Government has proposed.
John Key recently told us all of his plans to partially sell of $6.8 billion of state assets, including Mighty River, Meridian, Genesis and Solid Energy, and part of the government's stake in Air New Zealand ('mixed model ownership', they like to call it, or 'privatisation', if you're using the accurate turn of phrase). The government claims that the revenue from these sales will help pay down our debt, and that mum and dad investors will be able to buy shares. Lovely.
But this rhetoric ignores the facts, and history. Firstly, we already own our state assets. All of us. It's naive to claim that selling them off gives us more of a stake. In fact, when Contact Energy was sold, the shares may well have started out being owned by Kiwis, but when a better price came along, who could blame them for selling them to the highest bidder. The result is that 2/3 of Contact energy dividends, in excess of $1billion worth, are now owned offshore, by mums and dads in distant lands.
Leaving the ownership question aside, there's still the question of revenue. Our assets make us money, plain and simple. Meridian energy alone has a rate of return of 15%. If we sell them, not only by Treasury's own estimates will we pay between $300-350 million in fees to merchant bankers, lawyers and international financiers, we lose an on-going source of income; a profitable one.
So then the question is this: if you are a family, with debt building, why would you sell your profitable family business to get out of it? You wouldn't.
The reality is that we have a choice in all of this. There is an alternative, and last week I talked about ours. We could get out of the debt we're in at the same rate that the government has projected while still holding onto our assets, if we adopt a Capital Gains Tax. This, alongside our plan for rebuilding and growing our economy through greater support for our exporters presents a stark choice for New Zealanders. We can stay in a rut, flicking off everything we own, or we can build a way out.
If I was running the family books, I know what I'd choose.
As the debt crisis continues to swirl around the world, countries like ours with a solid plan to return to surplus sooner are in better shape than many. In fact our economic plan will see us return to surplus in 3 to 4 years which means we will be one of only a few countries in the OECD to be in that position.
Over the last couple of years I have had many discussions with friends who have spent years working overseas and have lost their jobs through the global financial crisis. A lot of our conversations have been about their feeling of vulnerability and insecurity as a result of losing their jobs. They have felt that they have not had adequate control of their futures for their families.
Many people in New Zealand have also had to experience that in the last couple of years due to the recession. I sense more than ever people want to see our leaders providing a plan that will ensure greater economic security for their families.
Returning to surplus sooner gives more choices to future Governments and generations of New Zealanders. Borrowing a lot more and hoping things come right in this time of uncertainty is not the pragmatic answer and will leave our country in a much more vulnerable position.
This is where I think our Government has got the policy mix right. The mixed ownership model that the Government is proposing is part of that mix.
We want to give people with Kiwisaver accounts the opportunity to invest more in New Zealand rather than overseas companies. We want to give the New Zealand Super Fund more opportunity to invest in New Zealand enterprises. We want to ensure Kiwi mums and dads are able to put their savings into reliable, local investment opportunities which provide good returns, rather than undertake risky investments.
In the 80s the Labour Government sold off 17 state assets worth around $10 billion. I note that Phil Goff now appears to agree they got it wrong. In some cases, clearly they did. I believe we can learn from those mistakes, which is why we are not proposing asset sales.
Instead we are proposing a mixed ownership model, where the majority stakeholder is still the Crown on behalf of all taxpayers. Our policy will ensure that Kiwi mums and dads will also be first in the queue to buy shares.Even the previous Labour Government recognised the value of these sorts of mixed ownership models. Few people question the Air New Zealand arrangement.
When the previous Government sold shares in Air New Zealand they said it was to ensure market transparency and free up Government capital for priorities in health and education. I see this as a sensible pragmatic solution.
In the energy sector Consumer New Zealand suggests the mixed ownership model may result in more transparent setting of power prices. Instead of state-run firms "price gouging" as they did during the previous Government's term of office, these companies will face the transparency of market reporting and shareholder scrutiny. Air New Zealand has been a beneficiary of this sort of approach.
I know the Opposition is suggesting that its alternative budget would benefit from the dividends that these companies pay. Unfortunately for Labour, they have already spent the money from those dividends many times over. In 2009 Phil Goff said the money would be forgone so power companies could lower prices. This approach, coupled with the confusing messages, lacks credibility. In my view the mixed ownership model will deliver more, not less economic sovereignty. It is about giving Kiwi investors a real opportunity to invest in our economy and our businesses, not someone else's.
This policy will free up between $5 and $7 billion to help pay for new public assets such as schools and hospitals
National wants to build new assets and improve our critical infrastructure. Over the next five years we expect to invest $34 billion to ensure New Zealanders and their families have public transport networks, schools, hospitals, broadband, and other infrastructure that we really need. Our policy is about reducing our reliance on foreign debt while providing greater investment opportunities for Kiwis here at home. This will give New Zealanders more opportunities to invest and more security and prosperity for future generations. If we can do this then we are actually better empowering New Zealanders to be able to chart their own futures.
Debate on this article is now closed.