by frog
Great timing just before the marches in Auckland, and Nelson tomorrow.
You can sign on to help collect signatures to keep our assets. Someone will be in contact next week with more details.
The release:
Keep Our Assets Media Release
27 April 2012
Asset sale petition approved
The Clerk of the House has approved the wording for the petition to get a citizens initiated referendum on asset sales.
The agreed wording is – Do you support the Government selling up to 49 per cent of Meridian Energy, Mighty River Power, Genesis Power, Solid Energy and Air New Zealand?
The petition is being promoted by a coalition of community organisations and political parties. Keep Our Assets will be formally launched on the 10 May 2012, in Wellington.
“I am delighted that the Clerk has approved the wording. Now we can get on with the job of collecting signatures. It’s a big job, and there is no time to waste. Everywhere I go New Zealanders tell me they strongly oppose assets sales. This is their chance to have a say,” Grey Power National President and petition promoter, Roy Reid said today.
“The petition to keep Kiwi assets in Kiwi hands will hit the streets tomorrow at a march in downtown Auckland. New Zealanders rallying behind this petition are standing up for a country they own, not a country that can be sold off to the highest bidder.”
“The approval of the petition comes after a week of submissions which reiterated New Zealanders staunch opposition to the Government’s Mixed Ownership Model Bill. Kiwis know it makes no economic sense to sell our best performing assets. This petition will demonstrate unequivocally that Kiwis are dead against the sell-off.”
“We know from experience that privatisation of electricity companies means higher power bills for ordinary New Zealanders.
“There’s only winners from the sell-off of our assets- are the wealthy foreign buyers and the accountants and consultants clipping the ticket on the sale,” Roy Reid said.
Published in Economy, Work, & Welfare | Featured by frog on Fri, April 27th, 2012
Tags: Asset Keepers, asset sales, Keep it Kiwi, Keep Our Assets
on the trolls and those who are unable to keep on topic
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Will it be one of those petitions like the referendum against the anti smacking bill. You know the ones, where the public is hugely against it but the policy is rail roaded through.
When did this road to Damascus conversion occur that you all of a sudden so value public views?
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The assets that you think are some golden goose return around $2 per person per week to Kiwis (they average just a $400m return per year for 4m Kiwis).
Yet the last tax cuts of around $20 per week (1000% higher) were labeled by Greens as meaningless.
If the Greens think an extra $20 per week per person per week is meaningless, then their earnest protest about losing $2 per week (and gaining around the same in interest savings) is totally hollow.
$20 is meaningless, but a difference of a few cents per week is the end of the world to the Greens.
Why is that not surprising?
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Could you link to where the Greens have said $20 per week is meaningless photonz1? Clearly the $1 billion a year it’s costing us for the top income earners tax cuts is not meaningless. In comparison to inflation and GST increases under National, the $3 per week increase the poor received is largely meaningless.
The real equation is that the interest on the debt that National will apparently pay off is less than the SOE’s currently return. There is simply no financial reason to sell unless you’re planning to invest yourself?
How much debt exactly is National planning to pay off if they’re also going to use the money to build schools etc? Basically somebody needs to tell the bungling Bill English that he can’t spend money twice.
I’m glad there will be a referendum that will show the Natz don’t have a mandate to sell our profitable assets. They must be retained by New Zealand for New Zealanders. I would expect that some of those who support the sales would no longer support National if they moved undemocratically against the referendum.
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The real problem is the debt. We urgently need to reform.
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“if they moved undemocratically against the referendum.”
Ahh the sweet smell of hypocrisy.
Still waiting for an answer as to why this referendum should be listened to where others haven’t, or is that on a little difficult to spin out?
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Actually Andrew Atkin, the problem isn’t debt. The problem is that we, as individuals and as a nation, have been spending more than we earn since Muldoon’s days. The debt is merely the result of that.
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Our real export earnings have always exceeded our imports.
The deficit is due to interest, invisibles and off-shored profits.
14 billion a year. More than our dairy and tourist earnings together.
All the more reason to stop offshore banks and speculators from driving our prices up to increase their profits.
And doing our own banking. http://publicbanking.wordpress.com/
A success in such socialist States as North Dakota and Wisconsin.
And in New Zealand in the 30′s.
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How much of our “foreign debt” is the mortgages on the houses we live in? I know the banks are foreign and they borrow the money overseas to give us money… but how much of our foreign debt is tied up in our overpriced real-estate? What if they were priced at some more appropriate value (and the random stacks of firewood that are commonly referred to as “houses” here don’t generally have a lot) relative to our incomes?
A lot of people would be “underwater” really quickly. Who should take THAT haircut though?
http://www.dailykos.com/story/2012/02/24/1067831/-Iceland-Solves-Banking-Crisis-by-Indicting-Bankers-Forcing-Mortgage-Relief
Hmmmm…. and Iceland was UPGRADED to investment grade while everyone else in Europe, the ones doing the pretend and extend thing at the behest of the bankers, they all got downgrades. Interesting no?
When the bankers said to the taxpayers in Iceland “Bail us out” the taxpayers said “No way”.
We would do well to learn from the people who’s systems actually worked for them.
http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html
This is straying a bit from the asset sales issue, but it is important to understand that the relationships of our foreign debt, the putative (and false) excuse for the sales, our housing bubble, and the mortgages and interest being paid to foreign lenders are intertwined with this issue. Yeah… we’ll gather signatures. With luck there WILL be a referendum. The question is whether the government will ignore it and get kicked out on its butt in the next general election as a result? That sort of thing IS a real result.
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Bjchip: National ignored the results of the anti-smacking referendum and it didn’t seem to do them much harm.
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On the negative side we have
- $200m lost in dividends (half of the $400 annual dividends)
On the positive side we have
-$240 gained in interest savings (using a record low 4% interest rate on $6b, that will likely go back up significantly to the historical average in future years)
-$60m gained, when the $200m private profit is taxed.
-100% of gst retained.
-100% of PAYE retained
-100% of tax on profits retained.
People who think selling assets will make or break NZ are in dreamland.
The TOTAL of ALL dividends from SOE don’t even make up 1% of government income – they make up just 0.57 of 1%
That’s just $1.77 per week per person total. Even if we GAVE them away, that’s all we’d lose.
The arguement over whether we will end up being $100m worse off or $100m better off is an arguement over less than 50 cents per week per person.
Compare 50c per week with the $175.00 we spend on education every week for every primary school child.
Compare 50c per week with teh $358.00 we spend on average for every man woman and child on govt services every week – that’s just 1/700th.
And people are trying to argue that our future depends on whether our income goes up or down by this 1/700th of our income – it’s dreamland.
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Since it is such a small amount of money, why is it important to sell them instead of actually taxing the “have mores” ? ? ?
The problem here is that this is a one-shot deal which ekes out a couple more years of government deficiencies in income and investment in infrastructure – all to avoid the imposition of taxes on the people who are so greatly advantaged by the tax structures in this country. The structure of our finances that led us INTO the hole is not fixed and the year on year deficits will swiftly bring back all the debt and the interest paid on it, exactly as was.
It ties the hands of government with respect to the use of the assets, the “profit” motive being uppermost in the minds of the foreigners who will eventually own them, and it gives those foreigners a larger say in how we govern ourselves. Much as our current subservience to the banks is working out. This nation has done a lot wrong, but we do recognize that this IS wrong, and the referendum will show that.
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Andrew Atkin, there is no pressure on us to sell the assets, nor does the government say that is the case.
It’s argument has either been to allow more options for investors on the stockmarket or to fund infrastructure spending.
We simply do not have a public debt problem, and we are well down the list of nations at risk of any IMF pressure over government debt levels.
Our public debt to GDP ratio is one of the lowest in the OECD. How many of those 5 who agreed with you is prepared to explain why?
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Kerry Thomas, historically we were a colony with foreign investment and this meant a trade surplus and a balance of payments deficit due to repatriation of investment returns. But since we floated the currency we have borrowed from offshore for home mortgages, and thus now most of our offshore debt (over 50%) is to finance our home purchases.
David Parker put it this way
“Let’s say we want an independent monetary policy (to control inflation), a border open to capital flows (so that our growth rate is not hobbled by only having as much investment as we are prepared to fund though our own saving) and to control the exchange rate. We have to pick which two we want most; we can’t have all three.”
Our foreign debt problem is private debt (and so so selling public assets does not address it), and only measures to reduce capital inflow for consumption (purchase of homes/rentals/bach’s, farms, cars, hire purcahse etc) address it. Investment capital that grows the GDP does not increase debt per GDP, but may reduce it.
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bj says “The problem here is that this is a one-shot deal…”
That’s a failure to understand basic econmomics.
Paid off debt saves you interest EVERY year you don’t have that debt.
So you can GUARANTEE that in ten, twenty, thirty years time, NZ is still benefiting as we won’t be paying interest on the debt we’ve paid off.
bj says ” Since it is such a small amount of money, why is it important to sell them instead of actually taxing the “have mores” ? ? ? ”
1/ Lowers govt debt
2/ Lowers govt debt even more in the future as they are only required to put in 51% of new capital.
3/ Strenghtens our stock exchange.
4/ Give kiwisaver schemes New Zealand investments to invest in (they need to find investments for $20 in the next few years)
5/ Encourages Kiwis to start investing in our productive sector again instead of into houses. This will help encourage savings and encourage reduction in private debt.
6/ Potential to benefit from expertise of new shareholders i.e. introduction of new technology.
7/ Potential to benefit from collaberation i.e. Air NZ and Virgin bought each others shares and now code share, so you can now buy an Air NZ ticket to many more destinations than you could previously.
8/ Significantly more options for generators to raise capital to build new generation.
bj says ” the “…the foreigners who will eventually own them, ”
Did you not know that over the last decade less and less of our sharemarket is owned by overseas investors?
However the fact we do have some is a good thing. One company I have shares in is planning a road show to the States to get new investment. They could get it here, but it makes the company stronger to have a better geographical spread of investors.
Having overseas investors means the company is stronger because
- the company has more options of raising capital, particularly during periods when there is little chance of getting it in NZ.
- there is less risk and volatility than if it was 100% Kiwi onwned. i.e. Economic events here may mean investors all want out at the same time.
New Zealand has had enormous benefits from overseas investment into a large number of our companies. We’ve had
- badly needed capital injections.
- international experience
- access to international distribution chains that we wouldn’t otherwise get.
- access to new technology that we wouldn’t otherwise have had
etc etc.
When there is obvious huge benefit to NZ from foreign investment, it’s real head in the sand stuff to write it all off as detrimental.
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You lose the dividends from sold assets every year as well photonz1. I don’t know what figures you’ve been looking at, but it works out as a loss after only a few years. It is a short term fix, with longterm detrimental effects. No wonder 70% of Kiwis are against selling our future.
Big protest through Auckland today… and likely to be even bigger when it reaches Wellington.
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“BOOO” to asset sales
“BOOO” to the ‘Key-party’
60 ‘fore’ versus 57 ‘against’ & a handful of ‘maybes’ does not a majority make ! The ‘Key-party’ does NOT have a mandate to RAM through any legislation they choose !!
May I suggest they do so at their PERIL !
Kia-ora to those OPPOSE to ANY Asset sales.
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If this Govt. really wants to ‘fix the economy’ & get us ‘back in black’ they should reverse the TAX-CUTS they gave to the rich & maybe even increase the tax on the fat-cats & introduce a CGT (as the Greens have recommended & most other countries have).. We ALL need to pay our FAIR share.. NOT just the bottom 49% !
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photonz – nearly gave you an uptick on the last one … but a few things
1. selling assets, earning sufficient to cover the public debt cost, to reduce public debt – when this is comparatively low – is no gain in terms of public debt management as Treasury has pointed out. The government gives other reasons.
The relevant issue is whether could borrow to finance infrastructure spending (rather than sell the assets) – the answer is probably they could, but this would mean they would be unable to realise their goals for tax – lower top rate and lower company tax. Of course those not having these goals and intending to bring in a CGT have no need to sell the assets to fund infrastructure spending within a reasonable public debt level.
2. foreign investment buying up existing assets exacerbates the existing invisibles deficit and without growing the economy.
3. Kiwi Saver etc needs to spread its investment offshore and our earning revenue to reduce our BOP deficit is necessary – this too is part of globalisation.
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Uh no Photonz… if we pay off a bit of debt with this purchase, it will take us less than a decade to replace it with new debt in the same or greater amount. Because the UNDERLYING problem isn’t being addressed.
If that were not the case it still would not be excusable because it is not property of this government, but property of the NZ people that this government proposes to sell, and the NZ people will explain that detail to this government in the referendum and if necessary in subsequent general elections.
( Investments for $20 ? You mean $20 billion perhaps? )
Most of those notional advantages are achievable without selling a damned thing. Resolving the underlying problem of our excessively LOW taxes on big money and the way we actually define and manage our monetary system would address the underlying issues far better.
National are doing a one-shot deal… every Kiwi without your blinkers on can see it, and can see it clearly as a means of balancing books that cannot be balanced without reversing National’s policy of favoring the well off. Which of course their owners won’t allow. It will become still clearer in time, even for New Zealanders, just how bad this government actually is for New Zealand as a whole.
Foreign investment in our companies is not necessarily good or bad… but it has as a not infrequent downside, the subsequent departure of those companies, or their best talent. I don’t mind foreign investment where the investment stays in NZ. Nor foreign investment in a company.
This isn’t a goddammed company Photonz, it is a sovereign nation. Even if it probably ought to simply be part of the United States of Australia or some such…
(lets see how much trouble we can stir up).
Overall this nation DOES need to invest in itself. For the most part it cannot do so because it has not broken the grip of the foreign owned banks. The changes required are more fundamental, and the asset sales are a distraction. THESE asset sales, of our power generating companies, are worse than that, as the definition of wealth is control over work-done.
Never signed up for the government to own an Airline Photonz, don’t really care if we do.
It DOES need to own and run the prisons though. Moral obligation, not able to be discharged through the private sector. It needs to run the Railroad as a natural monopoly. Public Health, Safety and Schooling are its obligation. National Defense. The ports and airports are again natural monopolies. The electric lines, and the renewable power generation and storage schemes are in the same category.
The drive to privatize every damned thing is ideological. It is based in part on the delusional belief in “the invisible hand”. I don’t reckon it is possible or safe to make “everything” publicly owned either… it has to be ticked off asset by asset.
http://blogs.hbr.org/cs/2012/04/there_is_no_invisible_hand.html?
For the rest, the issue is really a matter of the definition of money in the first place. We aren’t broke… as Kerry points out above… we are just being taken advantage of.
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Our growth rate SHOULD be hobbled by our willingness to fund investment through our own “savings”, or something very similar. If that is not the case the arrangement is not sustainable. There is no “surplus” money in the system overall. Any gain of ours comes at cost to someone else… and vice versa.
We screwed the pooch with the policies that gave us the property bubble and the prices have not been forced down, and the banks have not been forced to eat those losses and so our debt overall is very large.
This COULD be corrected. The banks would not like it.
BJ
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jackal says “You lose the dividends from sold assets every year as well photonz1″
Yes – but they’re less than the interest saved (on the years we get dividends).
Saving on interest has a 100% guarantee, every year, FOREVER. Dividends don’t have a guarantee even for one year,
bj says “it will take us less than a decade to replace it with new debt ”
That’s really dumb. Because a primary school child could tell you that new debt would be ADDITIONAL to existing debt.
Just because you have new debt, doesn’t magically make the old debt dissappear.
If I have a $100g loan, and take out a additional $200g loan, it doesn’t mean my $100g loan is forgotten.
For gods sake BJ – my primary school kids could cut down your arguement.
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SPC says “1. selling assets, earning sufficient to cover the public debt cost, to reduce public debt – when this is comparatively low ”
As I pointed out earlier, the extremes of the arguement that selling our assets will make us $100m per year worse off, or $100m per year better off – is an arguement about the difference of about 1/700th of govt income.
Whether or not we have that 1/700th is largely meaningless
The dividends from the SOEs have little fiscal effect on the future of NZ.
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1. $6B of assets earning money covering $6B of debt cost means NO NET DEBT.
2. The assets will double in value to $12B over x number of years in nominal terms – because of either inflation and or because of the rising value of hydro assets as energy pricing changes – yet $6B in debt remains just $6B in debt.
People like those in the IMF must know this stuff and know our debt position is worse for selling the assets.
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Photonz, that’s the reason we don’t run our economy using only the judgement of primary school children.
The ongoing overspending vs income that governments indulge in is NOT fixed by this one shot deal. If my household income is chronically 10K short of my outgo, I can sell any damned thing I like and still be in debt next year. That’s us. In particular since this government took a voluntary pay cut so that the people who own it could “keep more of THEIR money”. They offset that tax cut partially by whacking up the GST, the regressive tax, and so it goes.
Not well.
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SPC says “The assets will double in value to $12B ”
Which under your policy of never selling is completely worthless to Kiwis, ever.
The assets could increase by 50 cents, $1, $1m dollars, or $1 billion dollars, or a trillion dollars, and under your never sell policy, it would never ever pay for a single $2 vacination in a hundred years.
They could be worth more than the whole planet, and it wouldn’t pay for a single prescription in a hundred years.
Your policy of never selling means any added value of assets has ZERO benefit to anyone, ever.
It’s a great example of how your blind ideology turns billions of dollars of additional public assets into something that will never benefit anybody, ever.
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BJ – every time you call paying off debt a “one shot deal” you only emphasise your lack of comprehension of basic economics.
When I pay off $10,000 of my debt, it’s gone, and it’s gone forever.
And regardless of whether I pay of more debt next year, or take on more debt, the intial $10,000 is still paid off.
Every year, forever, I save the interest, compared to if I never payed it off.
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A March is being planned in Invercargill on April 12 to tie in with Grey Power’s national convention there the same week.
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So photonz you concede that the assets will double in value to $12B – it’s only a matter of time. Contact Energy shows how little time is involved.
You say it matters little, if there is no intention to sell – well that argument also applies to retaining half the assets as National intends to do. So regardless of the market establishing a value that rises, they will sit on the 50% left.
And it only takes a sale of 1 to 5% to establish a market value – and that allows any future sales to be at the market price – so we could in future sell the shares when they are highly valued, rather than as we are doing in a depressed market as if we were doing so under duress in mortgagee sale/receivership scenario. Dumb.
As for having assets worth (now 12B) $24B and income from them covering debt cost at $6B or assets of (now 6B) $12B and debt at zero I would pick the former every time. So would every corporation on the planet, their capitalisation would be $18 not $12B (and few corporations intend to sell earning assets). I don’t know what to make of anyone who would argue otherwise, nor would any banker – they lend and assess credit rating on net market value. Our credit rating will end up lower from National’s decision.
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Photonz, every time I give a drunk a bottle of booze, it is a one-shot solution to his problem. He’s happy for a while, but I can’t break him of the habit by doing that. It is not a solution, and the booze is gone forever too.
You are trying to promote an unsustainable solution to a Green. It won’t work (as in no member of this party could accept it) and it IS annoying. On that basis it would be YOU who are being ignorant. The selection of a drunk as representative of the government is not unintentional as all governments have always been seen to have the same thirst.
You will not persuade us of anything but your own ignorance of sustainability.
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SPC says “it’s only a matter of time. Contact Energy shows how little time is involved.”
That proves you have no idea of what you are talking about.
Contact is worth less now than it was five years ago. When you take inflation into account, it’s worth the same now as when it was sold in 1999, 13 years ago. It hasn’t gone up in value at all.
SPC says “So photonz you concede that the assets will double in value to $12B”
Under your “never sell” policy, the assets could be worth all the money in the world and it won’t provide and extra $1 benefit to any Kiwi – not a dollar. It wouldn’t even benefit the country by a single childs vaccination.
Under your never sell policy, there’s not a single dollars benefit to a single New Zealander if their value increases by a trillion dollars.
It just shows how stupid the never sell policy is – not a single kiwi will ever benefit from any increase in value, ever.
SPC says “and few corporations intend to sell earning assets. ”
This is ignorant nonsense. Companies I have shares in buy and sell assets every week. They sell assets to pay back debt, invest in other ventures, because return is low, and sometimes just to have cash in hand for oportunities.
The NZ Superannuation fund sells and buys billions of dollars of assets per year. So does ACC. Nearly every week there are notifications from ACC on the stock exchange of what they have sold and bought
I sold Contact shares four years ago for significantly more than they’re worth now. And I sold them to pay down debt.
And now I’m substantially better off because I sold my generation assets and paid off debt. Even if they stayed the same value, I would still be better off.
Historically, generation companies return and average 4-6% dividend. After tax that’s around 3-4%. Please let me know where I can borrow money at that rate.
NZ electricity needs grow at just 2.5% per year, though in the last year, with emphasis on becoming more efficient, our electricity demands didn’t go up at all.
Your claim that assets are never sold is complete and utter nonsense.
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bj – if I pay off my debt, it’s gone forever. Regardless on whether I take on more debt or not.
And now you are trying to say paying off debt is an unsustainable solution.
Planet earth calling bj – come in. Anyone there????
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photonz, the issue of debt repayment is credit rating and cost of that public debt. Our position is worse via the National approach.
The assets earn enough to cover the debt cost, and the assets rise in value whereas the debt does not. It matters not at all whether this rise in asset value is only inflation as it was for Contact (it’s rise in share value alone covered inflation and its dividend payouts on top of this ensured a total return to shareholders above inflation) – because assets increase in value over years while the same amount of original debt remains the same year after year.
For a company this means holding onto the assets increases market capitalisation/net value after debt. So its $12B of assets rising to $24B while holding onto $6B of debt or its paying off this debt and having $6B of assets rising to $12B (having paid off $6B of debt). I would want stock in a company worth $18B, not $12B.
Of course the government intends to spend the money from selling the assets, not in paying down debt but on infrastructure that cannot/will not be sold or earn money. Whereas a company would only replace earning assets with earning assets or sell assets to pay debt if the assets were not earning enough to cover the debt cost. Dumb on the government’s part.
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Photonz –
If you don’t have a plan to cure the problem there’s no point in treating the symptom.
If the problem isn’t being addressed I am NOT interested in masking the symptom, I want it to get worse until you DO treat it.
What you are advocating is to mask the symptom.
This is EXACTLY wrong. So completely wrong that one could use it as as sort of anti-compass to find the right direction.
BJ
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Do you see an energy crisis looming?
For me, the idea of selling off energy assets is more ludicrous now than ever.
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photonz1
You’re arguing against Treasury’s figures there photonz1. The Government has low interest rates, meaning that even when you factor these in, it does not make good economic sense.
$360M lost dividends – $266M (presuming National isn’t going to build any schools with that money) in reduced interest payments = $94 million worse off per year by 2016. No wonder there were people the entire length of Queen Street yesterday protesting against selling off our children’s future.
On the years we get dividends? It has also been revealed that National can and probably will sell all the shares in the power companies, but retain 51% of the voting rights. That will not return any dividends to the government, no future debt will be paid off and no new schools will be built. Your neo-liberalism is going to send New Zealand down the gurgler.
It will however return dividends to the wealthy who can afford to purchase shares. It’s a completely unfair situation… National gives a huge tax cut that mainly benefits the wealthy, which means we have to borrow an extra $1 billion per year. National then use our debt as an excuse to sell our assets whereby power prices will increase, which will effect poor people the most.
The rich people who have already benefited from a tax cut, can now use that money to invest in our sold assets, whereby they are gaining more of the people’s money without working for it. What makes you think you have a right to even more of the people’s money photonz1?
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Selling looses money, increases power prices and exposes us to the substantial downside risk, in future, with inevitable energy cost increases and scarcity that private owners will find someone more lucrative to sell the power to.
Or they may decide they want to make more money short term by, cutting investment and/or asset stripping.
In either case we would have to buy the power companies back at their much increased value. Like that other cock up with privatising essential infrastructure, rail.
We gain from the increased value of power companies by, controlling our own power supply without having to pay a much greater cost in future to buy it back, lower prices (As the Government cannot rig prices to help private buyers make money), benefits to our export competitiveness from cheaper and better planned power supplies.
In fact, as an investment for the future we should be re-nationalising Contact and the other private companies.
Unfortunately our idiots in power are signing treaties and making deals which will limit our control over our own assets..
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The only constraint is ability to service the debt so if the assets earn enough to cover debt cost (and Treasury say they do and are forecast to continue to do so – earning 4.1% on a rising asset value) they should be held.
Contact was sold for $2.3B in 1999 and is now worth $3.3B (that is little more than the inflation increase), yet only $2.3B debt was paid off. Government would have a net worth $1B higher if we had not sold it then at that value to pay off a mere $2.3B. Growth since 1999 also means the same $2.3B of debt declines in value relative to GDP.
Are those who sold their personal income earning investment property asset in 1999 (that was earning enough to cover debt cost) to pay off debt better off for having done so? Clearly not.
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Let’s use the example of businessman with $20B in property (having a reputation of not intending to sell any property invested in) and the rent covered a debt cost of $15B (and this was forecast to continue) and the total debt was only $10B. His credit rating for a $2.5B loan to buy another income earning (rising in value) asset would have been good as the risk to the bank remained low.
What about a family trust that ran farmland “never intending to sell” (so if no one in the family wanted to farm they would appoint a manager and wait for the next generation to have the choice to farm the ancestral farmland or not) – as the farmland rose in value would the bank be happy to lend against the rising value of the land? Well the banks did across New Zealand. So much so that the untaxed (unrealised) capital gain was the major revenue flow for farmers in some low farm return years.
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Mr Photo’s crystal ball is fogged-up, samiam, from his hot-breathed panting-support for all that is Right.
He sees nothing but clouds of aspiration.
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If National flogs off our assets in the same manner that they jacked up the ‘sky convention center’ or in the same way they take ‘anonymous political donations’ then there will be secret deals and New Zealanders will get ripped off while National party backers will make a lot of loot.
National …… selling our future and corrupting our politics.
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Even Photo knows the value of never selling, essential,appreciating assets is not having too pay the full cost, again, when you need them, in future.
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I don’t know about Photo’s Crystal ball, but I bet the Greens wished they had a better one a few years back.
Who would have thought that a referendum could have been so useful, but alas, the concept has been reduced to loud whining at best.
Oh the friggin irony.
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Max Bradford’s electricity market reforms were based on a false belief – that electricity generation is like other markets and market forces apply. Unfortunately the electricity market is not like most other markets. Companies do NOT necessarily increase their profits by increasing their sales – because the cost of generation to meet the last sales can be significantly higher than the sale price. In addition, much of the power generated and used is not traded in this market, as the companies generate that electricity for their own market share, i.e. the domestic users that they have signed up. One result of this is that certain consumers are hit hard by high spot prices whenever there is a power shortage, while most consumers are unaffected.
Rather than spreading out the ownership of our power generation even further, we should be moving the other way, with centralised control ensuring that we have enough generation, and investment in renewable resources promoted to reduce the CO2 emissions and to reduce the consumption of our natural gas resources. We can always sell off that gas by keeping the methane to methanol plant working and shipping the methanol to overseas buyers.
I’d like to see Contact Energy re-nationalised too but I don’t expect that to happen any time soon.
Trevor.
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Most of you opposing the asset sales in this thread are going to lose your argument, and here is why: you are arguing the wrong points.
The electricity companies are run as profit making corporations right now, even though they are owned by the State. If the electricity generators are sold at a “fair” market price, then the net financial impact on the state of selling them will probably be minimal if the money is put into paying off debt or sensibly re-invested in some other profit making industry. You’re failing to argue the really important points about the state owing the assets, such as using them to help implement various government policies (be they renewable energy policies, providing subsidised electricity to low income people or whatever).
Now as a consumer of electricity, ask yourself this simple question:
Which is better:
a) Being ripped off by a state owned corporation
b) Being ripped off by a privately owned corporation with New Zealand owners
c) Being ripped off by a privately owned corporation with foreign owners
Then defend your answer. Simply answering (a), and then saying the profit goes to the state instead a private shareholder is not good enough. Photonz et al. will be able to easily pull apart this argument.
You need to stop restricting yourself to the neo-liberal playing field left to you by Douglas et al. in the 1980s. Look at the bigger picture, and consider alternatives which are currently not on the table.
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Ridiculous samuiela, the assets earn enough to cover the debt cost and the assets are rising in value. It is simply bad economic management for ideological reasons, so much so Treasury won’t back it and the IMF does not recommend it.
Unsurprising the same incompetence has created a blow out in the budget via a “tax revenue nuetral” budget change. It looks like the $6B for the sale of the assets is only going to cover the cumulastive increase in budget deficit since the tax change.
In reality the sale of assets is being made to sustain a low tax policy on top income earners and corporates. It’s this policy of the government that imperils our nations future credit rating. It’s hard for a government without income earning assets or a budget surplus to borrow at low cost.
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If only the Greens had have had some respect for democracy over the S59 debacle, then perhaps we would have a chance at having our voices heard.
Oh well, that’s what happens when you preside over the erosion of democracy, but of course, the Greens believed they were really, REALLY right on that one, right?. Just like National thinks they’re right now.
This country is extremely vulnerable to ideological extremists, the damage you all do is destroying my kids future.
The Greens and National should “get a room”.
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When have referenda decided policy in the past?
It seems they are seen as the method to establish mandate for electoral change, but other matters have been decided in parliament – and this by a majority there.
This is the precedent, long established before the Green Party was formed, so whining about some policy proposed by one former Green MP that received majority support in parliament and effective backing from both Labour and National is a bit precious.
Maybe Shunda barunda and either NZF or the one man party “Conservatives” should get a room.
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SPC, that is a slightly better argument: that the
proceeds from the sale will go to support
unsustainable expenditure.
However, you are still fixated on the financial
reasons for the state owning an asset. Here is
an example of where concentrating only on the
economic aspects causes problems. Suppose the
state owns a coal mine which is being run as an
SOE. What should it do:
a) Continue to own the mine and run it as a
profitable business;
b) Privatise the mine;
c) Close the mine and leave the coal in the ground.
If you focus only on the economics of the situation
you’ll end up choosing option (a) or (b). On the
other hand, option (c) may be the best long term
choice if you are interested in maintaining a
livable environment. If the state owns the mine,
then it can easily take option (c) (though it
will cost in terms of lost profit). If the mine
is privately owned, what can the state do to
reduce the environmental impacts of mining coal?
Your answer as a Labour supporter may be to
introduce environmental regulations. Well that is
all well and good, but what happens when the private
owners object to your regulation? I’ll tell you
what; the private owners will put pressure on the
government, which will then likely cave in to most
of their demands. Look at what happened in
Australia when Kevin Rudd tried to implement
a mining super-profits tax; he was toppled and
the new PM Gillard caved in to the big mining
interests.
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Some valid points on the wider ownership issue … (but I have only once voted Labour, that in 1999).
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I remember the debate on S59 here SPC, and I remember explaining the damage that was being done to this party by it… and the better alternatives available to accomplish that same goals.
The failure to fix those problems led to a decisive referendum defeat, and that referendum and the response of the labour government (with Green support) TO that referendum, laid the groundwork for the current and previous NATIONAL led government.
You may dismiss it if you wish to make similar mistakes in future. I don’t. It was, like running Nader against Gore in 2000, a decision made without consulting the real world.
However…
With any luck National will make the same mistake with this referendum.
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Went to select committee on asset sales this morning. Nick Smith got schooled by my mum. He asked her, given the govt’s fiscal position, which of 3 options would you choose:
1 borrow more
2 cut services
3 sell assets
She nailed it: told him there are more options e.g. stop pouring billions into the so-called Roads of National Significance programme, given rising oil prices and climate change. Boo-yeah.
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it is very difficult for the politician to speak in favor. because they are the big culprits. Law is only for poor people… For rich ones there is a thing called as PROTOCOL.
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Dunne on assets (apologies for linky-dinking)
http://robertguyton.blogspot.co.nz/2012/05/dunne-in-southland.html
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SPC says “Ridiculous samuiela, the assets earn enough to cover the debt cost”
Treasury says, quote “Over the mixed ownership programme, the forecast finance cost savings exceed the forecast forgone dividends.”
SPC continues “…and the assets are rising in value. ”
Which under the Greens “never sell” policy is worth NOTHING to the govt.
If you never sell then regardless of if the value goes up $1 or $billion or $1 trillion – it will never benefit a single Kiwi by a single dollar.
The value could go up by any figure you care to give, and it will never benefit the country by enough to pay for a single weeks benefit, or even a single childs vaccination.
Your policy is to lock up billions of dollars of asset value, so they can never ever be of any benefit to anyone.
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No, it is to retain control of infrastructure which is of major benefit to everyone.
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@ photonz1
We’ve gone over this ground before but value and benefit, in the sense of public good, does not have to have a dollar amount associated.
In that sense, you are correct that it doesn’t matter if an asset has a monetary value $1 or $1bn – it’s the public good or perception value that is important, particularly in the case of essential utilities which tend to be natural monopolies.
It’s also more pertinent to rather than look at market value (which fluctuates greatly and is dependent on management, etc.) of any given critical asset to determine ‘worth’, to look at the replacement cost.
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Gregor says “… it’s the public good or perception value that is important..”
With a “never sell” policy, the public good from an increase in asset value is zero.
It’s a policy that means any increase in value can never benefit a single person.
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With a “never sell” policy, the public good from an increase in asset value is zero. It’s a policy that means any increase in value can never benefit a single person.
Again, only f you associate ‘value’ and ‘benefit’ with a monetary calculation.
Another point: when you look at assets of this nature, the sum is often worth more than the whole of the parts.
It’s that intangible social good and incremental Cost to Serve / efficiency analysis that you rarely see in the discussions around the benefits of privatisation.
Furthermore, financial benefits of public utility are often boiled down to the smallest possible increment to make it look unattractive.
Also, while a $400m divided equates to a nominal amount per person in terms of benefit, it means a hell of a lot more in terms of benefit potential when it is treated as capital formation.
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Gregor says “Again, only f you associate ‘value’ and ‘benefit’ with a monetary calculation”
I’d rather use billions of dollars of our assets to vaccinate children, provide education, infrastructure etc – than have no financial benefit but maybe make sonebody somewhere feel good.
Gregor says “Also, while a $400m divided equates to a nominal amount per person in terms of benefit…”
No – $400m are the total annual dividends. Only $200m will go to private owners. Of that the govt will claw back $60m in tax, so that means they only lose $140m
Much of that will go to ACC, the NZ superannuation fund, Kiwisaver funds, and other superannuation funds.
And then there is the $240m savings in interest in $6b. But that saving will skyrocket when interest rates climbs for a record low of 4%.
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@photonz1
I’d rather use billions of dollars of our assets to vaccinate children, provide education…
So personally, I regard a functional energy infrastructure with minimum 50year central planning that is not prey to cost-out economics as having absolute financial and public benefit, not merely ‘feel good’.
I guess it comes down to what you regard as important.
Re the $400m comment; I wasn’t meaning to quibble about the what goes to whom – more a point on using the aggregate numbers, rather than framing it in terms of incremental benefit.
Also, it’s impossible to speculate on the tax clawback potential. $60m is the maximum potential tax gain – much of it is likely to be offset if the holders are institutional.
As a side note, the govt could also massively slash the deficit by upping the top tax threshold and means testing the pension – but real long term strategic thinking is all a bit too hard I guess.
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Gregor says “So personally, I regard a functional energy infrastructure with minimum 50year central planning that is not prey to cost-out economics as having absolute financial and public benefit, not merely ‘feel good’.”
Telecom, Railways, and our power system have all been poorly managed and underfunded under government control.
Just because something is centrally managed by govt doesn’t mean it will get adequate funding, and be well managed.
Under govt control the railways was badly managed and lost hundreds of millions of dollars every year, telecom was massively under funded and massively ripped off it’s customers, and our power generating system has also been badly managed and underfunded by successve governments.
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’d rather use billions of dollars of our assets to vaccinate children, provide education, infrastructure etc – than have no financial benefit but maybe make sonebody somewhere feel good.
I would rather we had taxation adequate to fund those vaccinations on an ongoing basis instead of relying on a one time sale of assets to get it done for a couple of years.
You are still here Photonz, and you are still wrong.
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“You are still here Photonz, and you are still wrong.”
Elegantly put and heart-stirringly true.
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BJ says “I would rather we had taxation adequate to fund those vaccinations on an ongoing basis instead of relying on a one time sale of assets to get it done for a couple of years.
If I pay off my mortgage, I save the interest I was paying every year, year after year, forever.
The fact you think the benefit only lasts for a couple of years, backs my arguement that we need basic education on economics taught to every Kiwi as a compulsory subject in our schools.
We have people who think paying off debt is a single hit, or only lasts “a couple of years”.
We have others thinking that our future is doomed if we don’t have the income from SOEs, when the worst case scenario is predicting we’ll lose just 1/700th of govt income.
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“the worst case scenario is predicting we’ll lose just 1/700th of govt income.”
No, the worst case scenario is private business being in control of our power.
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I’d rather use the billions of dollars from the sale of our assets to vaccinate children, provide education, infrastructure etc but if it was used it to pay off debt it would save the interest payments every year, year after year, forever. But if we spent it … but if we saved it … Quack.
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fin says “No, the worst case scenario is private business being in control of our power.”
Ooohhh the horror. All those poor customers of contact, trustpower, vector etc who who have suffered so horribly all these years.
The private sector is in control of my telecommunications, and I have much better service, at a much reduced cost, compared to when the government ran it.
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Why would the value of an asset increase?
Because its earnings increase. Therefore the dividend payments would increase – a benefit to the asset holder. Photonz is simply wrong.
Trevor.
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Trevor says “Why would the value of an asset increase? Because its earnings increase.”
So you can use any earnings increase, but under a “never sell” policy any increase in asset value is forever locked away so it will never benefit a single person.
A “never sell” policy effectively means any increase in asset value is completely worthless to everybody.
If you could buy shares in a company – say an electricity generator – where you could bank the dividends, but were never allowed to sell and get any benefit from any increase in asset value, nobody would touch it.
It would be complete madness put money into such an assett where you could never ever benefit from any increase in value.
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@photonz1
Telecom, Railways, and our power system have all been poorly managed and underfunded under government control.
All of your examples have also been appallingly managed under private control. So the issue is the capability of the management across the board, not whether they are publicly or privately owned.
Unfortunately in the case with critical infrastructure, unlike a normal business being run into the ground by ineffective management with any losses being footed by creditors, the taxpayer always ends up footing the bill.
So why sell something you know you might well be forced to end up buying back at a loss?
Just because something is centrally managed by govt doesn’t mean it will get adequate funding, and be well managed.
No one is suggesting this. It’s a red herring.
Under govt control the railways was badly managed and lost hundreds of millions of dollars every year, telecom was massively under funded and massively ripped off it’s customers, and our power generating system has also been badly managed and underfunded by successve governments.
Lets look at some facts:
Rail – Poorly run by both state and private interests? Yes. Hundreds of millions of costs p/a? Wrong.
Telecom – Inefficiently managed as a department? Yes. Underfunded? Absolutely not. Made more efficient by SOE corporatisation? Yes. Milked once privatised? Definitely.
Power – Under SOE Electricorp one of the most effective generation and distribution networks in the world. Post 1996 split, Contact has been milked and very poorly managed. Meridian, Genesis and MR have all maintained strong investment profiles in generation as SOEs and return a healthy dividend to the shareholder. The real failure in this sector has been the lack of regulation around wholesale power cost and supply.
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Gregor says “All of your examples have also been appallingly managed under private control. So the issue is the capability of the management across the board, not whether they are publicly or privately owned.”
All? I agree that both private and govt can badly manage a business – that was the point.
Railways in NZ is a basket case and regardless of who runs it they will always lose money in the long run.
When Telecom privatised our rediculously high phone prices plummeted, we were provided with many more services, and a much higher standard of service. Under govt control we used to have our name put on a waiting list to apply for a new phone, then wait weeks. And it would regularly take days before a technician would come to fix a phone. And a half hour call to the UK would cost a weeks wages.
And Contact, Trustpower, Vector etc have all been “appallingly managed”? Yeah right.
And you say the SOEs deliver a “healthy dividend”. The last few years ALL SOEs have averaged a dividend of $400m per year. For $12+billion of assets, that’s just a 3% return. I look at two to three times that percentage before I’d call the dividend returns “healthy”.
Gregor says “Hundreds of millions of costs p/a? Wrong.”
When I worked for the railways under govt control, it was haemorrhaging money – losing hundreds of millions per year to the point where is was over ONE BILLION DOLLARS in debt.
Now that the govt has bought it back, Treasury has advised govt that Kiwi Rail is an unsustainable business, and that it would require $750m additional spending from govt over 3 years just to remain as it is now – unviable.
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@photonz1
When Telecom privatised our rediculously (sic) high phone prices plummeted….
As I said above, there is no doubt TEL was terrifically inefficient as a govt dept. However, it certainly did not underinvest which is what you stated. Also, the significant service improvements and price drops were as a result of corporatisation to an SOE model and competition, not privatisation.
The last few years ALL SOEs have averaged a dividend of $400m per year. For $12+billion of assets, that’s just a 3% return.
In not sure where you get your figures but from the respective annual reports:
Meridian(FY1011) – Underlying ROE 18.5%, div yield $683m, tax $81m
Genesis (FY0910) – Underlying ROE 4.9%, div yield $39m, tax $38m
MightyR (FY1011) – Underlying ROE 14.6% div yield $110m, tax $58m
So accepting Genesis returns as a approximation, div yield is over $800m p/a plus an income tax take of about $150m.
Genesis is the outlier for a number of reasons but the other 2 are extremely healthy.
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also re railways…
When I worked for the railways under govt control, it was haemorrhaging money
NZ Rail was operating fairly effectively until the 80s when the lions share of that debt was accrued. You infer that rail was losing vast sums of money throughout its history which is incorrect.
Now that the govt has bought it back, Treasury has advised govt that Kiwi Rail is an unsustainable business, and that it would require $750m additional spending from govt over 3 years just to remain as it is now – unviable.
Indeed. But who is to blame? Those that looted a viable business by asset stripping and cost out; Fay Richwhite and later Toll.
To blame rail for its predicament is to blame the bank for holding too much money and being too tempting to the robbers.
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Gregor says “In not sure where you get your figures..”
$400m is the average figure for total dividends for the last few years used by Treasury, the govt, business commentators, the media, and the opposition have been quoting it as well.
Your claim of a dividend of $683m from Meridian is misleading, because $500b of that is from the sale of a power station to Genesis. It was paid for with debt, and the govt owns both SOEs.
So it is totally misleading to
a/ include the half a billion dollars of Meridian’s dividend as profit
and
b/ claim that that is what they earn p/a – every year.
It’s a one off, and it’s not profit.
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“When Telecom privatised our rediculously (sic) high phone prices plummeted….”
but that does not imply that privitisation cause phone prices to fall.
Improvements in telecommunication equipment have made a huge difference. Technicians no longer need to go to exchanges to take measurements or move phone lines – they just use their computer to communicate with the exchange computer. Rather than needing dozens of trunk lines, there is now one optical fibre or a high speed data line. Exchanges no longer have cables run up to the ceiling just to get enough of them to the equipment. Even the hundreds of individual phone lines that run to the exchanges are disappearing as cabnetisation takes place.
The changes have been so rapid, at some points Telecom were virtually duplicating their capability every few years but still fitting that capability into the same exchange buildings.
And of course the modern solid-state exchange equipment is more reliable that its predecessors.
That is why prices fell and services improved – not privatisation.
Trevor.
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Trevor says “Improvements in telecommunication equipment have made a huge difference. ”
You are in denial of reality.
As soon as telecom was privatised, two things happened.
1/ There were massive price reductions in phone prices.
2/ Profit went up by 56% in just two years, despite (probably partly because of) phone charges becoming much more affordable.
You are vainly trying to rewrite history because the real world doesn’t fit with your ideology.
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If I pay off my mortgage, I save the interest I was paying every year, year after year, forever.
The fact you think the benefit only lasts for a couple of years, backs my arguement that we need basic education on economics taught to every Kiwi as a compulsory subject in our schools.
Ignoring the difference between growing debt on an ongoing basis due to the imbalance of income and outgo, and a mortgage on a capital asset, is an indication that you would be one of the chief beneficiaries of such a policy.
If we are losing money every year, selling the silverware only postpones the inevitable. One has to address the IMBALANCE… but that would require raising taxes… which is ideologically impossible for National. So they opt for the postponement and hope for some sort of reprieve. In the MEANTIME our dollar is killing us, and it is in the grips of a similar ideological blindness.
respectfully
BJ
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photonz1 – can you explain how in your version of reality privitisation can lead to a 56% increase in profit in just two years despite reduced prices?
In the real world, Telecom increased the prices of other monopoly services and outsourced much of their technical work to the technicians they made redundant, who were then pretty much forced into inferior pay and working conditions or unemployment. Some services improved, such as phone connection times although these were improving anyway, but other services went downhill causing Telecom’s customers to wear additional costs.
Trevor.
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