Prime Minister Christopher Luxon wants a ‘bigger, bolder, braver conversation’ on asset sales

Prime Minister Christopher Luxon has called for a “bigger, bolder, braver conversation about asset recycling”.

Asset or capital recycling is the practice of selling one asset and using the proceeds to buy something else.

Luxon made the remarks as he and other members of National drop hints they will campaign on a policy of some asset sales after the next election.

Luxon made two main points in support of some asset sales: the first, is mounting evidence at least some of the assets the Government owns are performing poorly.

Second, the Government could use money raised from the assets to buy other, better-performing assets.

“We want to make sure every Government asset is managed and performing well,” Luxon said.

He said that half of the Government’s “big capital intensive agencies haven’t got asset management plans in place”.

“We expect the assets we do own to be run well and to be managed well,” he said.

Luxon used the metaphor of a car to describe some of the Crown’s assets, noting it was common to use the money raised from selling a car in order to buy a new one.

“You don’t just own the asset forever without questioning why you are owning it. When you look at places like Singapore, the assets they had in the early 70s versus the assets they have today. They’ve sold assets to be able to buy new assets,” Luxon said.

Both Labour and National governments have received advice from Treasury advocating for some form of asset recycling. A favoured model is Singapore’s Temasek, which is a holding company that manages a portfolio of state assets.

It sells down stakes in some assets to help buy new ones. Temasek is now worth more than New Zealand’s GDP and has some dealings in this country.

A Treasury report to the Labour Government in 2022 noted the part-privatised firms had performed well while the wholly state-owned assets had “underperformed their cost of capital. Revenue, earnings and dividends have all trended down over the past five years”.

The report went on to say that some of these firms performed duties that were not entirely commercial and had broader public policy aims. The likes of NZPost, KiwiRail and TVNZ have not performed particularly well commercially, but run important public services.

Labour is campaigning on putting some assets into a “Future Fund” with dividends recycled into other investments.

The party has not said what it would do with the lost dividend revenue, which currently flows into public services.

Labour leader Chris Hipkins said Luxon was only selling asset sales to fill a Budget hole.

“He has failed to manage the books, so he is reverting to type, turning to selling off the family silverware to fill the hole in his Budget.

“Selling off what little we have left won’t fix the economy. It will just rob future generations and drive more young Kiwis out of the country.”