OnPoint by Keith Ng

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OnPoint: Election 2011: GO!

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  • DeepRed,

    The southernmost capital … • Since Nov 2006 • 4403 posts Report Reply

  • Ross Mason, in reply to Matthew Poole,

    Bingo Mathew. It staggers me that NZ Inc of 4 million can be thought of as a pure market. Regards power I thought it might be useful to consider what would happen if NZ decided to develop a national power (energy) policy. One that actually thought about how what resources we have might be used the most efficiently. As an example take household electricity metering. Imagine if we decided to develop our own standard for metering electricity. One set of protocols for communication to the seller. Allow manufacturers of meters to develop. Each could offer extras to customers. Allow time shifting of consumption to smooth peaks. Regulating - and here it is not a dirty word - would allow NZ industry to keep such a business running smoothly.

    Has this worked before? Sure as hell. Europe way back decided that the "Mobile of Choice" would GSM. And lo, Finland, Nokia and co jumped on the bandwagon and won the battle. Others joined the war later.

    What did we do? Russell points it out in his Telecom link. A complete and total mishmash of systems that screwed - and continues to screw - NZ. Just look at what a standard protocol for the Internet has allowed. Hopefully we may have taken heed with the national broadband strategy but who knows who and how it will be instigated. One common deleivery scheme??? I hope so.

    Muldoon nearly pulled it off with CNG. One of the world's biggest gas fields a few Kms off the coast. The ability to run the country on it - especially transport - was an opportunity jumped on by many - in the beginning. Again screwed by the oil companies, take or pay contracts, the gas to petrol plant and other gas Think Big projects. We could still have a sub industry of transport / gas operators here if it developed.

    It may sound far fetched but the above is evidence that it can be done. All of the above are ways to prevent our hard earned money disappearing overseas.

    Are there any more opportunities to regulate some sectors to allow home grown businesses to develop? The power one is the obvious. Coordinated public transport ticketing maybe another. Why not develop an industry of locally built commuter trains, buses and feeder systems to the main trunk? Solar and wind energy is another. Subsidised to the hilt they would easily outweigh the cost of more Clyde dams. Build in cost breaks for those closer to the generators. Move the population around the country abit more. Make it attractive to move businesses that rely on heavy power usage to move closer.

    Some suggest that once a country loses control of it's energy, transport and communication it is headed for a downhill slide. We have done it in spades and we are.

    As someone above pointed out we already have paid for the dams, why should we be asked to pay for it again. I used to "own" the local power company but then someone decided to "give" me some shares which I kept until they were eventually swallowed up and compulsorily acquired. This was one of the biggest scams ever perpetuated in our history. And we are still paying for it.

    Upper Hutt • Since Jun 2007 • 1502 posts Report Reply

  • Ross Mason,

    Off topic SIS report on Wilce.

    Hmm.....no mention of Momentum Consulting anywhere......

    Upper Hutt • Since Jun 2007 • 1502 posts Report Reply

  • Ross Mason,

    Jeez. Re SIS report

    Paragraph 22 says

    22. The NZSIS carried out the following required checks for an application of this kind:
     check against security database
     police history check
     credit and company check
     questionnaires from nominated referees
     interviews with nominated referees.

    Last part of Paragraph 30 says

    “Top Secret” clearances require the same steps to be taken as for “Secret” clearances. Because they require a higher degree of assurance about the candidate’s trustworthiness, however, the inquiries are more extensive. Referee and candidate interviews are required and a more rigorous assessment is made of the candidate’s suitability for access to highly classified information.

    From this....ummm.....if I am not mistaken, it appears they did not interview him......oh dear.

    Correection: Momentun IS mentioned in the timeline Annex B.

    Upper Hutt • Since Jun 2007 • 1502 posts Report Reply

  • Matthew Poole, in reply to Ross Mason,

    if I am not mistaken, it appears they did not interview him

    I think that oversight would've been mentioned very prominently indeed had it occurred. An interview with the subject isn't exactly a "check", which may be why it's not listed.
    Going to the trouble of interviewing two (or more) referees and not interviewing the subject? Whatever their other failings, I can't see that one happening.

    The pit from whence crawl… • Since Mar 2007 • 3925 posts Report Reply

  • Lilith __, in reply to Danielle,

    Hey Danielle, I can't hear that track without hearing this one playing in my head:

    (Ah, the 80s! How I miss them!)

    Dunedin • Since Jul 2010 • 3470 posts Report Reply

  • nzlemming, in reply to Ross Mason,

    From this….ummm…..if I am not mistaken, it appears they did not interview him……oh dear

    Having held a Top Secret clearance now and again, I can confirm that the SIS do not customarily interview the subject as part of the vetting.

    New Zealand’s approach to security clearances is not like the US. When you get a clearance here, it is at the request of the CE of the agency for the duration of the job, i.e. if you shift agency, the clearance officially lapses and you have to get a new one (unless they’ve changed it in the last 5 years). Of course, the SIS may recycle the ground work, but they usually touch base personally with the referees again. In the US (as I understand it) they go over you with a microscope once and you hold that clearance for life, unless someone raises a flag on you.

    What seems odd to me is that the SIS interviewed any of his referees and didn’t get a sniff of his short-comings (even though he nominated them himself). Even Momentum, had they bothered to check, should have picked that up. However, their failure is not a matter of national security – that of the SIS is.

    Waikanae • Since Nov 2006 • 2198 posts Report Reply

  • nzlemming, in reply to Matthew Poole,

    Going to the trouble of interviewing two (or more) referees and not interviewing the subject? Whatever their other failings, I can't see that one happening.

    You need to look again, then. It's your reputation that they're checking.

    Waikanae • Since Nov 2006 • 2198 posts Report Reply

  • Andy Fraser, in reply to George Darroch,

    Looking at the tax wedge overall, are we not 3rd least taxed in the oecd?

    Invercargill • Since Jun 2009 • 33 posts Report Reply

  • Joe Wylie, in reply to nzlemming,

    What seems odd to me is that the SIS interviewed any of his referees and didn’t get a sniff of his short-comings (even though he nominated them himself). Even Momentum, had they bothered to check, should have picked that up.

    Not much chance of Walter Mitty's secret life being exposed when he's probably vetted by his own kind. It was the SIS-affiliated Special Investigation Group that paid and encouraged the deluded provocateur Rob Gilchrist to spy on NZ activists.

    flat earth • Since Jan 2007 • 3597 posts Report Reply

  • Stephen Judd,

    I just realised I forgot to actually link to Bryce Edwards on asset sales.

    Gotta say that Bryce's blogging has really been speaking to me in the last year. All our parties, not just the left-wing ones, are lacking ideological backbone, lacking sincerity, lacking the commitment that comes from a base in the world outside Parliament. And he is dissecting that lack of commitment in a steady and very readable way. Love it.

    Wellington • Since Nov 2006 • 2972 posts Report Reply

  • nzlemming, in reply to Joe Wylie,

    Not much chance of Walter Mitty's secret life being exposed when he's probably vetted by his own kind. It was the SIS-affiliated Special Investigation Group that paid and encouraged the deluded provocateur Rob Gilchrist to spy on NZ activists.

    Hmm, well... I can only comment on the process, not the quality of the outcome ;-)

    Waikanae • Since Nov 2006 • 2198 posts Report Reply

  • BenWilson, in reply to Stephen Judd,

    Interesting argument he's making. He's suggesting that it doesn't really matter whether they're publicly or privately owned, because by orienting them towards profit, the damage is already done. They no longer serve either socialist OR capitalist purposes, only corporate purposes - they serve themselves, and even suck the life out of other business, let alone consumers.

    But I think that's not quite right. If they are publicly owned, they may well suck a great deal, but the profits from that go back into public funds. Essentially it's a stealthy consumption tax. When they're private, those profits go to whoever owns the assets, and you can bet your arse that's mostly not going to be NZers. That will surely suck the life out faster.

    But still, the idea that the very setting up of the principle that these organisations should turn a profit (rather than cover costs and grow) is responsible for stagnation, is most interesting. It's going to keep me awake tonight, anyway.

    Of course it's possible for privately owned businesses to go for 100% reinvestment of all profits. That's the model that would grow them the fastest that they could possibly grow, other than by pumping in money from some other source. But bugger all big corporate run companies do this, because shareholders demand dividends. To corporatize our assets, even if we still own them, is to take a line that their growth must by definition be suboptimal, just to pay the shareholders a living. So our Telecom, despite being a hugely profitable company has still utterly failed to deliver fibre to consumers, a technology was available way back in the early 90s. It's become way, way cheaper in the meantime, and they still won't do it. If Telecom had been state run, rather than just state owned, I can hardly imagine that they wouldn't have put in something better than the old copper wires that we've had for 30-40 years now. They'd also have probably picked the mobile network solution with the best all round compatibility with the world, not the maximum incompatibility with their competitors.

    Auckland • Since Nov 2006 • 8675 posts Report Reply

  • Matthew Poole, in reply to nzlemming,

    New Zealand’s approach to security clearances is not like the US. When you get a clearance here, it is at the request of the CE of the agency for the duration of the job, i.e. if you shift agency, the clearance officially lapses and you have to get a new one (unless they’ve changed it in the last 5 years). Of course, the SIS may recycle the ground work, but they usually touch base personally with the referees again. In the US (as I understand it) they go over you with a microscope once and you hold that clearance for life, unless someone raises a flag on you

    A clearance here lasts five years, after which you must be vetted again. If you change agencies and it's less than 12 months since your last vetting, and the duties are broadly comparable, the new CE has the option to grant you clearance without a new vetting. The new clearance should be granted only for as long as the old clearance would've been valid. This is based on Security in the Government Sector from NZSIS, which is NZ's security clearance bible.

    In the US it's 10 years, I believe. It's very definitely not life-long, and as with NZ they're granted on a per-agency basis. A DOD clearance is not automatically transferable to DOE, or DHS, but a sufficiently recent vetting can be used to support granting clearance.

    The pit from whence crawl… • Since Mar 2007 • 3925 posts Report Reply

  • nzlemming, in reply to Matthew Poole,

    This is based on Security in the Government Sector from NZSIS, which is NZ's security clearance bible.

    Sure, as I said, it's been 5 years. But going by that book, Wilce should not have been cleared. As to the US, they may have changed that since 9/11 but it wasn't the case preciously.

    Waikanae • Since Nov 2006 • 2198 posts Report Reply

  • Gareth Ward,

    NO. In fact, that's the most deceptive part of the argument.
    Let's say borrowing costs 5%, current SOEs return 7%. Let's say the government is faced with a project that's expected to return 6.5%. Should they a) sell current SOEs to fund this project, b) borrow, or c) not do it at all?
    Think carefully about it.

    YES! It is fucking crazy (if I may quote you) to assume that because an asset presents you with a theoretical rate of return slightly higher than the cost of new debt that you would fully debt fund it (especially when said return is only last years, and said debt cost is only what it is currently). If I may ask you to think carefully about it - what if public debt was running at 200% of GDP? I know of no business or government that simply keeps leveraging up and up solely because each new project has a slightly better rate of return than the initial interest cost of the new debt. Outside of private equity funds circa 2007, nobody is comfortable running something so massively leveraged because it can turn against you so quickly. I also think it's appropriate for the Government to discuss with society what levels of investment they should hold on their behalf.

    However, I think we're in agreement here, as we're talking theoreticals above. This boils down to "is the Government running at a level of debt that is unsustainable and it's therefore unable to extend that leverage further, even for net positive paper returns". I agree that we aren't - our debt problem is loaded in the private sector, and they're going to have to get the money from somewhere to buy into this share float, so you're debt problem doesn't really go anywhere. And the giving up of the dividend return from these assets is something that seems to be largely ignored (the Herald's "Guide To" today seems to completely miss it). I'm just a little frustrated by the general lack of reasoned and specific critique's of this stuff (yours excepted).

    But I'm also not that fussed about SOE's remaining in Government control at a lower equity stake. I'd perhaps be happier to have a single power company fully Govt owned and the rest sold down almost entirely - I like the Kiwibank model because to me it says "we're happy to let the market do what it wants, we're just one player in that, but we're representing our 'shareholders' interests, which I'm afraid aren't purely profit-driven and the other players in the market have to live with that because it's now just part of the competitive landscape". A single Govt owned power company that could operate at appropriate levels of profit, investment and therefore pricing would be a useful brake on the rest of the industry - if not, then we'd all just end up buying power through the Govt one. That would require a slight watering down of the SOE model though I suspect (to allow for some execution of Govt policy as the shareholder)


    I'd much rather we focussed on the fact that neither major party is willing to actually spend within their income and THAT'S why we're seeing a debt problem - if Labour could man up and suggest honestly taxing people at a level commensurate for their spending desires, and/or National could do the same and properly communicate all the things we can't have if we don't what to pay much in tax then we'd be able to have slightly "clearer" discussions around asset investment without the need to fund ongoing operational deficits muddying the waters.

    Auckland, NZ • Since Mar 2007 • 1722 posts Report Reply

  • Kyle Matthews,

    it seems at a first hack at the problem I’m better off if the govt owns the shares because if I own them I have to pay tax on any income from them

    No difference there. The government pays tax on them if they own the shares.

    Assuming same dividend: same tax income for the government, the difference is where the net dividend goes - you or the govt.

    So as Keith points out, it really comes down to the relative difference between you owning the shares and the govt in relation to your taxes, user pays on services, and what they use the income from the asset sales on compared to what they used to use the dividend income on.

    As im not much of a financial person, could you give insight into which would be the more appropriate figure to use in this case?

    (my amateur understanding) Return on capital = income from capital - cost of getting capital (in this instance dividend income from shares - interest cost of borrowing money to buy shares. 2% would indicate that on the face of it, it's financially worthwhile to borrow money and buy shares, as you'll come out with money left over after you pay the interest. So 7.6, 5.5, and 2% would make sense as figures.

    As Gareth points out, there's other factors and complications.

    If there were clear policy objectives that could be met by doing so, then there would be an argument for owning fashion stores. That’s why we own a bank, for example. The fashion stores idea strikes me as wrong basically because I can’t think what important policy problem that would solve.

    Jeans hanging down around your thighs. I'd be in favour of the govt investing in fashion stores if it solved that.

    The point about the government owning 51% is interesting. That would give them a controlling interest and presumably enable them elect the majority of board members.

    I do wonder about other legal constraints. Isn't there a rule about companies having to return maximum reasonable return to shareholders? Could a minority sharesholder sue the company board if they tried to do anything other than return as much money as possible to shareholders?

    Since Nov 2006 • 6221 posts Report Reply

  • DexterX,

    The justification for the sale of power generation is to raise capital from Mum and Dad investors for the purpose of funding infrastructure development in schools hospitals etc.

    If that is what this govt really want to do they could issue limited amounts of government stock that can only be subscribed to by private individuals in amounts of say $5,000 up to $50,000, that are non tradeable and tied to fund the a specific project.

    The rub is that the purpose they are touting is not likely to be true – I doubt they could supply a list of what schools, hospitals and other infrastructure they are going to fund or how much they are going to get from this sale of power generation.

    I do not favour the government proposal for a wide range of reasons, many which have been expressed here. NZ power largely comes from Hydro and if there is a massive drought that affects power generation what will happen.

    I noted that one opinion pole showed 73% of participants were opposed, I hope this issue brings down the Govt.

    Winston rising on an anti power sale platform will be entertaining and hopefully assist in making Key a one term PM.

    Selling parts of the pie, whilst shrinking the pie, so that you can eat more of the pie doesn’t help grow the pie.

    Auckland • Since Nov 2006 • 1208 posts Report Reply

  • Dismal Soyanz, in reply to Kyle Matthews,

    I do wonder about other legal constraints. Isn’t there a rule about companies having to return maximum reasonable return to shareholders? Could a minority sharesholder sue the company board if they tried to do anything other than return as much money as possible to shareholders?

    In a nutshell, no.

    Much depends on the constitution of the company and shareholders may have the grounds for an action against management/the board if they act ultra vires.

    ETA: In effect, if you buy the shares of a company you are agreeing to the constitution. You could try to get the other shareholders to change a constitution to impose a requirement of a payout of some kind.

    But as far as the Companies Act goes, there is no statutory requirement for any return (whether it be dividend or capital appreciation). Indeed, some companies are set up with the intention of them being loss making.

    Wellington • Since Nov 2010 • 296 posts Report Reply

  • Sacha, in reply to Dismal Soyanz,

    Indeed, some companies are set up with the intention of them being loss making

    Something that deserves tackling

    Ak • Since May 2008 • 16838 posts Report Reply

  • DeepRed,

    The southernmost capital … • Since Nov 2006 • 4403 posts Report Reply

  • Sacha, in reply to DeepRed,

    Some rich person probably didn't invite her to a party or something. I believe Bernard's road to Damascus was somewhat more thought out.

    Ak • Since May 2008 • 16838 posts Report Reply

  • Dismal Soyanz, in reply to Sacha,

    That read like she had been at the sherry a little too much.

    She is correct in that many of the key players behind the global financial crisis have yet to be held accountable - and may well never be.

    But she spoilt it by lapsing back into incoherent rant mode with

    What really irks me though, is the righteous rich's bogus pretensions to doing good.

    So they should liquidate their holdings and start wearing hairshirts? Or does being successful in business automatically mean that helping others can have no other interpretation than self-adulation?

    Someone wearing snob-clogs must have trod on her toes.

    Wellington • Since Nov 2010 • 296 posts Report Reply

  • Joe Wylie, in reply to DexterX,

    NZ power largely comes from Hydro and if there is a massive drought that affects power generation what will happen.

    Much the same as happened in 1992, when South Island lake levels fell and Aucklanders were reduced to taking cold showers. The conventional corporate wisdom propounded by State Enterprises Committee Chairman John Robertson and Electricorp Chairman John Fernyhough was that the drought was a "one-in-100-year" crisis. They continued to repeat that mantra right through to the following year as they argued for Electricorp's full privatisation.

    As corporate received wisdom doesn't appear to have evolved, the next real drought seems due in around 2092.

    flat earth • Since Jan 2007 • 3597 posts Report Reply

  • giovanni tiso, in reply to Joe Wylie,

    As corporate received wisdom doesn't appear to have evolved, the next real drought seems due in around 2092.

    Great. I'm fully determined to die before I have a cold shower.

    Wellington • Since Jun 2007 • 7404 posts Report Reply

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