It’s a road that New Zealand has gone down before, with the likes of Bolger, Shipley and Key selling everything from banks to energy companies in the 80s and 90s, and only a few state-owned enterprises remain.
Devon Funds Management head of retail Greg Smith told The Front Page he thinks that the Government isn’t good at owning some businesses and asset sales is a “win/win” if it’s “done right”.
Air New Zealand, for example, was privatised in 1989 but eventually ran into difficulties.
In 2001, the New Zealand Government invested $885 million into the national carrier to prevent it from going into administration. In 2020, the Government provided it with a loan facility of up to $1.5 billion.
“It hasn’t worked perfectly all the time. Obviously, Air New Zealand, Covid hit, so that was a fairly extraordinary circumstance. And if you go a bit further back as well, there’s been other examples where it hasn’t perhaps worked out particularly well.
“If you look at the 80s and 90s, it was very much a mixed bag. There was a transfer of value from taxpayers while a select few did quite well. You think of the Government Printing Office (GPO), which was sold in the late 80s, then there was Telecom New Zealand in 1990. Also, Transrail was sold and ultimately listed and effectively failed.
“But you think in more recent times, the mixed ownership model can and does work when it’s done right. It’s proved to be highly successful when you look at the gentailers – they really are a shining example,” he said.
The country’s major gentailers (electricity retailers) – Genesis, Mercury, and Meridian – operate under a mixed ownership model, where the Government holds a majority stake. Contact Energy is a private company.
However, Sir John Key told Newstalk ZB’s Mike Hosking there is “nothing to sell”.
“I think there are a few options here ... They [the Government] still own significant stakes in the gentailers. So, they could sell that down further as a port of call,” Smith said.
Late last year, the Government inched towards a part-privatisation of Kiwibank, asking KiwiSavers and local funds to invest $500 million to allow the bank to grow and become more competitive.
The UK privatised the Royal Mail about a decade ago and Smith thinks that a sale of New Zealand Post could also be an option.
“That’s an interesting one as well because you’ve seen, with NZ Post, it’s been supported by the Government for a long, long time.
“They’ve got a primary competitor now with the likes of Freightways, and it’s not been great for NZ Post. It’s been quite an uneconomic business and really ...
“I think that would be quite a good story as well in terms of a privatisation one. You’ve got a business that is not operated in an optimal fashion, but could perhaps do more so under private ownership,” he said.
Listen to the full episode to hear more about what else the Government could sell – and what it probably shouldn’t.
The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. The podcast is presented by Chelsea Daniels, an Auckland-based journalist with a background in world news and crime/justice reporting who joined NZME in 2016.
You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts.
