OnPoint by Keith Ng

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OnPoint: Election 2011: GO!

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  • George Darroch,

    It's like living in a country run by Ricky Gervais.

    - Gordon Campbell

    WLG • Since Nov 2006 • 2264 posts Report Reply

  • Russell Brown, in reply to Matthew Poole,

    As has been said many times, it wasn’t the wholesale flogging-off that improved Telecom’s performance, it was turning it into an SOE.

    This is sooooo true. The SOE period of Telecom's existence was one of significant capital investment and substantial improvements in performance. Under Deane, Telecom's capital investment fell to below the rate of depreciation and money was channelled into shareholder dividends. This would eventually have a serious adverse effect on the business.

    Here's one I prepared earlier:

    http://publicaddress.net/2954

    Auckland • Since Nov 2006 • 22850 posts Report Reply

  • giovanni tiso, in reply to George Darroch,

    Gordon and Lyndon both deserve columns at a major newspaper

    It's the newspapers that don't deserve them.

    That said, I'd so live in a country run by Ricky Gervais...

    Wellington • Since Jun 2007 • 7473 posts Report Reply

  • Paul Williams,

    Stephen said:

    This relates to my earlier comment about private ownership and the corporate model making it hard for state operations to implement policy goals. To me, it is the extent to which state ownership enables policy that justifies that ownership. When we neuter the state's ability to direct the governance of an operation, why then sure, what's the point of the state owning it?

    I largely agree with this although there are arguments that ownership isn't the only way in which you can achieve public policy goals, regulation and incentives are others. Ownership is just more direct. Interestingly, in the UK new Community Interest Companies have been established for "social enterprises". They're intended to strike the balance between benefits enjoyed by trading corporations without requiring organisations to be as restricted as charities are. I don't know much more than this sadly... perhaps the PA community includes UK residents who can tell us how they're going?

    Sydney • Since Nov 2006 • 2273 posts Report Reply

  • Sacha,

    No doubt a coincidental story that our legacy of leaky schools will cost $1.5b to fix.

    "There just isn't the money to go out and borrow one-and-a-half-billion dollars and start repairing schools," Mrs Tolley said.

    She planned to consult Finance Minister Bill English on getting more cash, but would also have to look at paring back existing education programmes.

    Ak • Since May 2008 • 19745 posts Report Reply

  • Craig Ranapia, in reply to Lyndon Hood,

    Case studies: Goff throws around numbers on the contact energy sale.

    Do they bear any relationship to reality? The guy can't justtify the costings of his own policies, so a smidge of scepticism would be in order.

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

  • Sacha, in reply to George Darroch,

    The disgustingly discriminatory secondary tax rate still applies, right?

    And why hasn't any government tackled it?

    Ak • Since May 2008 • 19745 posts Report Reply

  • Matthew Poole, in reply to Paul Williams,

    ownership isn't the only way in which you can achieve public policy goals, regulation and incentives are others. Ownership is just more direct.

    And in a country where unbridled capitalism is still the flavour du jour in many levels of bureaucracy and government, regulation is a word that engenders responses similar to those one gets from bringing angels on horseback to a kosher dinner party.

    Sadly, those same types also believe that ownership by the state is bad, but at least they accept that it's legitimate for owners to exercise control even if they disagree with the ownership holding itself.

    Auckland • Since Mar 2007 • 4097 posts Report Reply

  • DexterX,

    Correcting Dismal Sonya

    Dividend yield is a calculation of a return on capital - it is the ratio that shows how much a company pays out in dividends each year relative to its share price.

    The share price is the cost of the capital.

    The Div yeild calculation = annual dividend per share / share price.

    Auckland • Since Nov 2006 • 1224 posts Report Reply

  • Stephen Judd,

    there are arguments that ownership isn't the only way in which you can achieve public policy goals, regulation and incentives are others.

    Oh, absolutely. My point is simply that even partial privatisation effectively closes off a government's options. In some cases, of course we won't care about that, but I think it's a case-by-case sort of decision, whereas the neolib wisdom is that it's always best that governments don't own things.

    Wellington • Since Nov 2006 • 3122 posts Report Reply

  • Matthew Poole,

    I know where the government can save $10b of capital spending over the next couple of decades: the Roads of Significance to National.
    Any takers?

    Auckland • Since Mar 2007 • 4097 posts Report Reply

  • Dismal Soyanz, in reply to DexterX,

    I was trying to simplify because the share price in the dividend yield does not include the funding cost, whereas the return on capital should.

    ETA: The share price is not the cost of capital in financial analysis terms. The share price may be a reflection of the market value of the capital but is not its cost especially when attempting to work out a return on capital as per the original question.

    Wellington • Since Nov 2010 • 310 posts Report Reply

  • Sacha, in reply to Stephen Judd,

    the neolib wisdom is that it's always best that governments don't own things

    And as Gordon Campbell observed:

    In the circumstances, the fact that our captains of industry dare to lecture the public about the innate superiority of private sector performance is simply breathtaking.

    The opposition needs to find some balls and proclaim loudly and repeatedly that the emperor has no clothes.

    Ak • Since May 2008 • 19745 posts Report Reply

  • George Darroch,

    regulation is a word that engenders responses similar to those one gets from bringing angels on horseback to a kosher dinner party.

    For good reason

    Regulators, mount up!

    Warren G.

    WLG • Since Nov 2006 • 2264 posts Report Reply

  • Danielle, in reply to George Darroch,

    I am perhaps the only person on earth who didn't know this, but I recently discovered the (deeply square) sample source for 'Regulate':

    Heh.

    Charo World. Cuchi-cuchi!… • Since Nov 2006 • 3828 posts Report Reply

  • Glenn Pearce,

    Treasury was saying in Oct that the ave. dividend yield for top 8 SOE's was about 2% compared to 4.5% for NZX top 8, Bernard Hickey is saying the average for 4 power companies potentially up for sale is 7.6%

    http://www.stuff.co.nz/business/4433678/Treasury-to-lay-out-case-for-against-asset-sales

    So either someone's calculations are wrong or the other 4 in the top 8 are performing very poorly to bring the average down to 2%

    Who's right ? 'Cause it makes a diff to *pure investment decision* argument that Hickey and others are throwing out there at the moment.

    (Assuming the 4 enregy SOE's are in the top 8 SOE's ?)

    Auckland • Since Feb 2007 • 504 posts Report Reply

  • Paul Williams,

    Stephen, Matthew, I understand your views and largely agree them but I confess I'm less certain about all this than I used to be.

    I've been somewhat convinced that the benefits of ownership might be overstated by some of the applied behavioural economics thinking/writing of several groups in Australia, percapita being the main one. My take on their arguments is that it is possible to design markets that deliver long term public good thus alleviating the need for governments to necessarily own or directly provide.

    This rhetoric/thinking is pretty influential in Australia, at least in so far as it's clearly identifiable in many of the PMs speeches and in various Commonwealth-led reforms. Gillard said, pre-election:

    As far as I am concerned, there is no inherent superiority in a public sector or a private sector provider - certainly not on ideological grounds. The challenge is not whether to combine public and private resources in these essential sectors, but how best to do it.

    For instance, in my own area, vocational education, there's a good number of private and not-for-profit providers that can be just as effective, efficient and sustainable as the public provider so long as regulatory and funding policy permits them to be.

    Sydney • Since Nov 2006 • 2273 posts Report Reply

  • Richard Llewellyn, in reply to Glenn Pearce,

    Glenn, the Treasury figures citing poor comparative SOE performance against NZX listed companies comes from this Crown Monitoring report (I think). See pg 21. But as to how this has been calculated - dunno.

    Mt Albert • Since Nov 2006 • 399 posts Report Reply

  • Sam F, in reply to Danielle,

    I am perhaps the only person on earth who didn't know this, but I recently discovered the (deeply square) sample source for 'Regulate':

    Ha, nice. New to me too - I remember reading somewhere that Warren G had deliberately decided to chose one of his dad's favourite songs to g-funkify, but hadn't actually heard which song it was.

    Square as it is I have to admit I kind of like it - or maybe it's impossible to hear now without mentally laying the newer song's attitude onto it...

    No! This cannot become a thread about frivolous happy things! Leopold expects more of us!

    Auckland • Since Nov 2006 • 1611 posts Report Reply

  • Glenn Pearce,

    The treasury figures do include the energy SOE's and are based on a 3 year average whereas Bernard Hickey's are for latest financial year only.

    Auckland • Since Feb 2007 • 504 posts Report Reply

  • Greg Dawson, in reply to Christopher Dempsey,

    Something like, oh, USIREBOH (USual IRrational non-fourth Estate Behaviour of (the) Herald)?

    Possibly you're being far too clever for me, but that seems overly complicated. Why not simply refer to the heralds underlying (irrational and terrifying) beliefs, or the hubtext for short?

    Wellington • Since Nov 2006 • 294 posts Report Reply

  • Stephen Judd,

    Paul Williams: I have just finished reading John Quiggin's Zombie Economics, and am about to re-read it, so I confess I may be unduly influenced by the chapter on privatisation. I suspect many PAS participants would enjoy this book.(related article here.) Quiggin is an Australian, and I'm afraid New Zealand features as a cautionary tale in many places. Not without justification, either.

    Wellington • Since Nov 2006 • 3122 posts Report Reply

  • Matthew Poole, in reply to Paul Williams,

    it is possible to design markets that deliver long term public good thus alleviating the need for governments to necessarily own or directly provide.

    Oh, it absolutely is. The problem is that NZ has no history of such things that inspires any sort of confidence. Our single biggest contribution to the entire field of neo-lib economics is as an example of how it can go horribly, horribly wrong when "the market will sort it out" is coupled blindly with "the market is never wrong" and the above-mentioned attitude toward regulation.

    NZ also has a population the size of Australia's largest city, making for rather different market dynamics. It makes for some serious challenges in trying to establish a competitive market for things like electrons with which there is no scope for product differentiation and it's prohibitively expensive to create divergent delivery streams.

    Auckland • Since Mar 2007 • 4097 posts Report Reply

  • Paul Williams, in reply to Stephen Judd,

    Quiggin is an Australian, and I'm afraid New Zealand features as a cautionary tale in many places. Not without justification, either.

    I've not yet read it yet but follow his blog closely and admire his work.

    NZ also has a population the size of Australia's largest city, making for rather different market dynamics. It makes for some serious challenges in trying to establish a competitive market for things like electrons with which there is no scope for product differentiation and it's prohibitively expensive to create divergent delivery streams.

    Good points Matthew, I admit I'd strayed from the specifics to the theory a little.

    Sydney • Since Nov 2006 • 2273 posts Report Reply

  • Lyndon Hood,

    Gordon and Lyndon both deserve columns at a major newspaper

    Aw, shucks.

    Y'all may or may not be aware that Gordon is syndicated in sundry Fairfax community papers. Which may be by way of emphasising your point.

    Wellington • Since Nov 2006 • 1115 posts Report Reply

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