Partial asset sales will make New Zealand's debt problem worse and borrowing from mum and dad investors may be a better solution, a new report says.
A report released by the Green Party and Ganesh Nana of Berl, an economic research company, found the Government's financial situation could not be used to justify partial asset sales.
Dr Nana likened overseas borrowing to borrowing from a loan shark and said it left New Zealand in a more precarious position.
The report found that the flow of profits to foreign buyers would result in "permanent deterioration in the external deficit and the level of external debt", Dr Norman said.
It also said the Government and the economy would be worse off in terms of debt, debt ratio and net worth.
Dr Nana said the report used a simple set of hypothetical accounts to assess the impact of a programme of partial asset sales on the Government's accounts.
Dr Norman said it was critical to rebalance the economy but said assets sales were "bad news".
He said that after nine years of a Labour government, New Zealand had high private sector external debt and a large current account deficit.
"There has been surprisingly little done about the long-term fiscal and economic implications of the proposed asset sale programme," he said.
Dr Norman said the Government said its 2010 tax switch would be broadly fiscally neutral but the Green Party argued that over the 18 months since it had come into effect it had resulted in a $2 billion deficit.
"When we've asked the Government to release any evidence around that they've failed to do so. We've put our numbers out there, we've put our analysis out there - but so far the Government has failed to produce any evidence to show that the tax switch was actually fiscally neutral," said Dr Norman.
The Greens suggested an alternative to asset sales could be accessing the $100 million New Zealanders had in term deposits.
Dr Nana said New Zealand would be permanently worse off if asset sales went ahead.
"The key question is, can we borrow more and where from. My suggestion is we borrow from within the family."
Dr Norman said New Zealand would have to pay for National's poor economic choices - including borrowing about $2 billion to finance 2010 tax cuts and spending $14 billion on uneconomic motorways - through higher charges on prescription medicines and cuts teaching and affordable housing.
A 49 per cent share of four state-owned energy companies and Air New Zealand would be sold to private investors under the Government's proposed partial asset sales programme, set to make between $5 billion and $7 billion.
- APNZBy Kate Shuttleworth