Winston Peters: Privatisation no magical cure for Kiwis

It has long been a feature of advertising that so many of the products on sale, once purchased by the consumer, mysteriously fail to live up to the hype so influential to the purchase.
In the American Wild West, travelling snake-oil salesmen would appear at local county fairs offering amazing cure-alls. The peddlers always put a timeline on when the cure should take place. That e would, coincidentally, be about the time it would take the peddler to ride three towns away. Sadly, the snake-oil salesman was never around to share in the joy of the magical cure taking effect.
In this year's Budget, the Government signalled it was going to enter a new round of privatisation of state assets, including the announcement this week that part of the ACC account would be open to competition from private insurers.
Knowing such a policy has never been popular in New Zealand, however, its designers have chosen to call this a shift to the "mixed ownership model".
Words are important, for they trigger emotional responses, so it's a given that adverse reactions are to be avoided and sympathetic responses encouraged.
Not unexpectedly, two extremes have already lined up in readiness for mortal political combat over this issue. On the one hand, there are those who believe the State should not own anything because it is incapable of efficient, effective management. On the other those who believe the state should run everything because capitalism cannot be trusted.
As always, the truth reposes in neither side but somewhere in between. New Zealand's recent record with capitalism is not good. Remember that Black October event of 1987 when the International Sharemarket crashed? Of the world's worst 10 crashes, six were from New Zealand; of the worst four, all were from New Zealand.
Again from 2007-2010, well over 40 finance houses in New Zealand went west, owing more than $6 billion to mainly older investors. Which raises the question: Why should New Zealanders trust the "business acumen" of those advocating privatisation of high-yield state assets built up since Vogel's time and the birth of New Zealand Railways?
Let's examine a simple question. Is the return on infrastructure more than the cost of the debt to service that infrastructure? If so, then why would a sale be a good idea?
Time does not permit an examination of all the sales totalling over $20 billion which governments since 1984 have engaged in. Two will suffice: Telecom was sold to overseas interests for $4.25 billion in 1990. Since then it has made distributions to shareholders of $14.6 billion. And these interests still own Telecom, which is of real value on top of that $14.6 billion. As Treasurer in 1997, I was asked to meet Telecom's biggest shareholder, Capital Markets (America), in New York. I did. Their only interest was whether New Zealand proposed to bust Telecom's monopoly and allow competitors in.
On my return to New Zealand, I asked Treasury to write a Telecommunications Competition paper. Within a month of releasing that Treasury paper, which supported competition, I was sacked. Twenty one years on from privatisation in 1990, Telecom still enjoys an environment of unfair competition and heaven knows how many billions have been unfairly milked from New Zealand businesses and private citizens.
Second, the Bank of New Zealand was sold to National Australia Bank for $1.5 billion in 1992. Since then, its Australian parent has enjoyed $5.2 billion in dividends while the BNZ's estimated value is $7.2 billion based on its 2010 net earnings of $602 million and a price/earnings ratio of 12. So for $1.5 billion, the Australian owners were delivered a total value of $12.4 billion.
As Brian Gaynor, adviser to Prime Minister David Lange, wrote of Labour and National: "Politicians failed to realise they were establishing a domestic wealth destruction culture as wealth is mainly created through ownership rather than disposal." Working on the simple maths, New Zealanders should be able to decide on November 26 whether two and two makes four - or some other unexplained total.