OnPoint by Keith Ng

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OnPoint: Election 2011: GO!

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  • Jimmy Southgate,

    As others have pointed out elsewhere, it would seem that asking Treasury for advice on whether or not to sell off state owned assets its pretty much pointless.

    Wellingtown • Since Nov 2006 • 100 posts Report Reply

  • Stephanie Thompson,

    I have nothing of substance to add except hells yes!

    Auckland • Since Jan 2011 • 1 posts Report Reply

  • Geoff Lealand,

    Keith Ng for Minister of Finance, I reckon. If only our politicians and policymakers could think and argue so intelligently.....

    Screen & Media Studies, U… • Since Oct 2007 • 2311 posts Report Reply

  • Lyndon Hood,

    The Chairman seems to know, but perhaps someone can help me out: How will part-selling Solid Energy help it raise capital?

    Wellington • Since Nov 2006 • 1096 posts Report Reply

  • Christopher Dempsey,

    Honestly, why do people bag the Herald? Mr Brown spent not a considerable amount of broadband width analysing it recently, and essentially the complaint made was the same as the one made several years ago. What is the point? Granny isn’t about to change any more than Garth George is about to discover that climate instability is all too real.

    But yeah, Key’s basic math doesn’t stack up: 300m/weekly borrowings. That’s a cool 1.2billion a month. And asset sales will realize just 10b, or 10 months or so of borrowing. And he calls himself a finance man? That kind of math is plain stupid.

    Parnell / Tamaki-Auckland… • Since Sep 2008 • 642 posts Report Reply

  • Danyl Mclauchlan,

    Conor Friedersdorf wrote this passage describing the dutiful editorials political editors feel obliged to churn out about the State of the Union speech:

    He still loves his wife. But after 25 years of marriage, he has lost his enthusiasm for sex with her. Still. It is Valentine's Day. And she has been hinting. So he takes her to a nice dinner, uncharactertistically orders an after-dinner drink, and feels extra discouraged when it only makes him more tired. He is 55. And so tired. Upon returning home, he wants more than anything to just fall asleep, but damnit, he makes the effort. He surprises her with a gift, lights candles, and dutifully makes love to her in the fashion he thinks that she will most enjoy.

    I think the Herald's editorial voice takes the same approach to any new National policy. They don't really know what it is. They don't really care. They just support it, whatever it happens to be, because that's what they always do.

    Brian Fallow - Granny's Economics Editor - isn't impressed with what passes for economic policy from either main party.

    Wellington • Since Nov 2006 • 901 posts Report Reply

  • andin,

    Seriously. WTF is wrong with you people?

    Maybe you have to say that a bit LOUDER. It hard to hear over the roar of the twin turbo diesel's. Or maybe you sound just like a nagging wife.... to them........and the volume is adjusted accordingly.
    Great column btw.

    raglan • Since Mar 2007 • 1221 posts Report Reply

  • Andre Alessi,

    ...as there are a lot of indirect issues like efficiency gains...

    I've always been skeptical of the "privately owned companies are more efficient" meme, especially in the context of the New Zealand economy and work culture. Yes, I don't doubt that in some specific cases businesses can be made more efficient when they're not owned by the government, but that's because those specific businesses are allowed to get away with specific bad business practices due to either poor ministerial/managerial oversight or to specific political considerations related to the nature of the products or services being supplied.

    Those conditions are, I am sure (after working with and for a bunch of companies both state-owned and not) not especially common in today's economy, so selling off these assets with the belief that they'll suddenly become more profitable (with the corollary that any state-owned asset is automatically not efficient) is questionable at best-or perhaps the word is "aspirational"?

    There are also issues around the small labour market we have here (even if you sell these assets off, the reality is that the majority of people you have working within the company-who thus determine its efficiency-are likely to remain working for said company after its sale) and the relatively light investment in productivity-increasing technology within New Zealand business generally.

    A minor point, I guess, within the overall discussion, but I think it's a key one when it comes to tackling the psychology of why Joe Twitter thinks asset sales are always a good thing.

    Devonport, New Zealand • Since Nov 2006 • 862 posts Report Reply

  • Keith Ng, in reply to Jimmy Southgate,

    Yeah, Treasury's probably going to come out in favour, but I want to know what their case is and whether it stacks up.

    Auckland • Since Nov 2006 • 535 posts Report Reply

  • Keith Ng, in reply to Lyndon Hood,

    The Chairman seems to know, but perhaps someone can help me out: How will part-selling Solid Energy help it raise capital?

    I think the argument is that, free from meddling government ownership, they can raise more capital.

    Auckland • Since Nov 2006 • 535 posts Report Reply

  • Juha Saarinen,

    Sorry, Keith... I don't understand. What has this got to do with Goff and Key dyeing their hair?

    Since Nov 2006 • 523 posts Report Reply

  • Andre Alessi, in reply to Juha Saarinen,

    Sorry, Keith… I don’t understand. What has this go to do with Goff and Key dyeing their hair?

    You know, I can't even remember the names of their spouses. A refresher is obviously in order!

    Devonport, New Zealand • Since Nov 2006 • 862 posts Report Reply

  • Gareth Ward,

    This logic tells us to sell assets to avoid debt, even when it's unprofitable
    I don't believe the logic says that - because the counter would be that you're arguing a Government should continue to issue debt to buy more and more profitable private companies.
    There's a variety of reasons why a society would choose to own assets collectively through it's Government, and I think it's quite correct for a Government to choose which assets it owns within an overall total constraint. If, for example, the cash from 49% of Meridian Energy was invested in, say, a national fibre network or another asset that will not only earn dividends but could also lead to broader societal outcomes then that seems pretty important to me and a better deployment of constrained capital. Continuing to be invested in assets simply because that's the way it's always been is really poor governance of both the financial and political variety.*

    * Don't take this as a necessary endorsement of the national fibre investment but I'm sure you follow the point. And yes, I'm arguing for a move from one asset to another - not using the cash for operational spending.

    Auckland, NZ • Since Mar 2007 • 1721 posts Report Reply

  • BenWilson,

    Thanks Keith for posting on this. I agreed with all you said, and I'm glad I'm not crazy in thinking that there's been a total flip-flop on the value of balancing books by National and it's support. I distinctly remember howls of outrage when Cullen kept producing surpluses. The fact that these surpluses have disappeared into the global financial meltdown is misdirected as Labour's irresponsible mismanagement. What tosh.

    Auckland • Since Nov 2006 • 8541 posts Report Reply

  • Sandra Simpson,

    And we all remember how well the sale of the railways, Telecom and Air NZ went?? Why would the Gummint pick an essential service like power generators, for goodness sake. Security of supply, not being held over a barrel by foreign owners that sort of thing.

    Tauranga • Since Jan 2007 • 6 posts Report Reply

  • Sandra Simpson,

    Oh, and can anyone tell me where the Public Address "printable version" option has gone?
    Ta

    Tauranga • Since Jan 2007 • 6 posts Report Reply

  • Andre,

    The power companies all overcharge us anyway - can you imagine how gouged we'd be on prices post-privatisation? Between 2001 and 2007 generator-retailers made at least $4.3 billion excess profits from high spot prices. In the 1990s, electricity lines companies made excess profits which allowed a lump-sum wealth transfer of $2.6 billion from consumers to shareholders. That was while we owned them.
    Maybe they are having problems instituting the outcomes from the Ministerial Review into Electricity Market Performance.
    http://www.med.govt.nz/upload/70927/summary-of-decisions.pdf
    How much are we losing under the ETS - power companies stood to benefit?
    From 2004 - 2008, the state made a profit of $3.27 billion (after tax) from the energy sector. And now they want to sell 49% of them off for $7.8 billion? It doesn't make sense. Prices rose by 76% from 2003 - 2008 as well - almost triple the CPI. We're being screwed either way in reality.

    New Zealand • Since May 2009 • 277 posts Report Reply

  • Mike Moore,

    The post opens "Yes, you can sell your house to pay off the mortgage, then you’ll be mortgage-free. But you’ll also be minus a house."

    Not necessarily. You could be mortgage free, but with a smaller house.

    To simply rule out any asset sales carte just doesn't make sense. (Otherwise, logic would lead to the view that the government should purchase the rest of Air NZ and by implication, that would be a good use of government funds).

    To build on the opening analogy, it's not just about having a house or not having a house, but the size and nature of the house. And it would be a fool that would not actively consider what is best along that continuum.

    Wellington • Since Jan 2011 • 1 posts Report Reply

  • Tom Beard,

    if you’re an editorial writer for the Herald, you might consider John Key’s case for asset sales to be “powerful”. Despite the fact that he HASN’T MADE A CASE YET

    Well, obviously his argument is so powerful it's not necessary to talk about it.

    Wellington • Since Nov 2006 • 1039 posts Report Reply

  • Tom Beard,

    Not necessarily. You could be mortgage free, but with a smaller house.

    A better analogy might be selling off your downstairs flat that you're currently renting out to some nice tenants who pay a handsome rent. You'd reduce your mortgage, but lose more in rental income, and the new owners might decide to convert it into something loathsome like a P lab or childcare centre.

    Wellington • Since Nov 2006 • 1039 posts Report Reply

  • Geoff Lealand,

    A new arrival to the discussion. Mike Moore. hmm...I wonder....

    Screen & Media Studies, U… • Since Oct 2007 • 2311 posts Report Reply

  • Geoff Lealand,

    @ Tom. Or turfing Granny out of her granny flat?

    Screen & Media Studies, U… • Since Oct 2007 • 2311 posts Report Reply

  • Geoff Lealand,

    @ Christopher. Why do we bag the Herald? Because it is a monopoly news source in NZ's biggest market and because it is so damn sycophantic.

    Screen & Media Studies, U… • Since Oct 2007 • 2311 posts Report Reply

  • Keith Ng, in reply to Gareth Ward,

    I don't believe the logic says that - because the counter would be that you're arguing a Government should continue to issue debt to buy more and more profitable private companies.

    The current stated reason (in Key's speech) for privatisation is that we can't acquire more debt, therefore we need to sell assets to raise capital. The "we can't acquire more debt" part is without qualification, which makes it possible (and necessary) to argue for selling profitable assets, simply because "we can't acquire more debt".

    Saying that this is an illogical position doesn't mean that the state MUST therefore take every opportunity to invest in profitable enterprises.

    Of course, there are good reasons for the state to limit its investments, and it does. It invests exclusively in natural monopolies, in sectors that are heavily regulated (because they are natural monopolies). That's a pretty clear and logical line to draw, whereas the current proposal: "the state should be invested at whatever level it stands at in 2011", regardless of benefit, that's entirely arbitrary.

    Auckland • Since Nov 2006 • 535 posts Report Reply

  • Tom Beard, in reply to Geoff Lealand,

    That too. Though that might be the analogy for selling RNZ.

    Wellington • Since Nov 2006 • 1039 posts Report Reply

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