The 10% cap for SOEs
September 1st, 2011 at 8:36 am by David FarrarThe Government has announced a 10% cap for any one shareholder in the SOEs which will have minority stakes sold off, if the Government is re-elected.
This will have two impacts. The first is that it does mean that the Government won’t receive quite as much money as it would otherwise, for the minority stakes.
If your only aim is to maximise the initial share price, then you would sell them with no restrictions as Labour did in the 1980s. Buyers will pay more if they can gain a controlling interest or even a significant minority interest.
The cap will however make it less likely that a significant number of shares will be purchased by foreign companies. A 10% cap means that a foreign company won’t have enough shares to expect to appoint a director (in theory the Government with 51% could veto such appointments anyway) or be able to gain a sizeable enough stake so that they become an effective co-owner with the Government.
Now for a foreign company to gain shares in an SOE, means they have to be prepared to pay more for those shares than a NZ company or individual would. Now this will still happen to some extent as everyone can have a different view of a company’s value, but the proportion which end up overseas is highly likely to be quite modest due to the 10% cap.
I suspect there will be strong demand for the shares not just from individual NZers (who have around $300b in financial investments) but from KiwiSaver providers $9b (according to Min of Finance release), Crown investors (ACC, GSF, NZSF) $40b and Iwi $10b. All of those are likely to be long-term investors, not buying shares in an IPO to flick them off six months later.
Related posts:
- An advantage of listing SOEs
- Consumer on Power SOEs
- Minority ownership stakes in SOEs
- Is NZ Labour more ideological than the Lao People’s Revolutionary Party?
September 1st, 2011 at 8:43 am
It’s a dumb business decision but entirely consistent with the rest of their decisions (such as retaining a 51% stake). It wont reallly limit the upside for any investor as the 51% hold is already precluding a takeover.
Vote:September 1st, 2011 at 8:53 am
The logical next step is for the government to add new rules around how soon investors can re-sell their shares.
After that there’ll be quota added reserving shares for racial minorities (or, should I say, minority).
After that, the government will be writing law on what you can spend your returns on.
Bunkum, all of it. We LIKE foreign owners because a) they introduce new ideas and business practices and increase capital stock, b) government captures that surplus in the sale provided it is competitive, and c) foreigners pay higher wages!
Key understands all of this. Could National be any weaker?
Vote:September 1st, 2011 at 9:23 am
Or in other words, this SEO sale will be a significant failure.
Just like every other National policy so far.
But don’t worry, our kids and the Chinese will lend us more money!
Vote:September 1st, 2011 at 9:25 am
Wait for the claim by Iwi that they should be given their shares free – SOE’s are of course exploiting natural resources which Maori claim to own.
Vote:September 1st, 2011 at 9:29 am
I think all of this wrangling makes it pretty clear that the motivation for selling off part of the SOEs isn’t wholly economic. If the Government is putting so many strings on the sale that it can’t get the best price for the assets, then it is doing it for other reasons. My concern is that we end up with a buggers muddle that pleases nobody. The taxpayer forgoes 49% of the profits, but doesn’t get the best price in return, and the shares end up overseas anyway. I have difficulty with the argument that public sector institutional investors like the Cuillen fund and ACC will be long-term cornerstone investors because they are not independent and the Government keeps mucking about with them.
Vote:September 1st, 2011 at 9:54 am
Even without this 10% cap the concerns about foreign control are idiotic.
There are two types of investor – financial investors and strategic investors.
Financial investors invest in a company because they think it will give them good financial returns. Both institutional investors and “Mums & Dads” are financial investors.
Financial investors very very rarely have shareholdings of over 5% – at which point they have to publicly identify themselves as significant shareholders. They are portfolio investors who spread their bets and who don’t put so much money on any one horse that it unbalances their portfolios.
Typically, major financial institutions have investment policies which would restrict them getting even close to a 20% shareholding. And even if their investment policy did allow it – a very very big if – then the Takeovers Code would stop them going above a 20% shareholding.
Yes, some of the financial investors will be offshore institutions, such as Aussie superannuation funds. But I’ll wager none of them will want to have more than a 5% shareholding in any one SOE.
And financial investors rarely, if ever, seek to get appointed to boards and exert direct influence themselves because they’re smart enough to know that’s not what they’re good at and its not the best use of their time.
Strategic investors invest in a company because that company does something tightly connected to the investors’ business. Examples are Origin Energy controlling Contact Energy, or Infratil controlling Trustpower, or Asahi buying Charlies.
Strategic investors invest where they can get control, or at least very significant influence, and then they use that to have a say in the business plan of the company they’ve invested in. But even without the 10% cap it’s hard to see why strategic investors would be targeting the SOEs. The Government has clearly said they are committed to retaining at least 50% ownership – so no strategic investor can get control. And the Takeovers Code then restricts them to having no more than a 20% shareholding – which arguably doesn’t give an investor any meaningful influence when you’re facing another shareholder (the Govt) who has more than 50%.
Yes, strategic investors may be able to justify paying a higher price for a company than a financial investor can – if they think they can get synergies, or if they can make changes to the business plan which will lead to higher profits. So yes, you do see strategic investors making takeovers, and offering a high price to induce the financial investors to sell their shares. Asahi just did this with Charlies – a strategic investor bought out the financial investors.
But, as I outlined above, strategic investors are very very unlikely to chase the SOEs – because they can’t get control with the Government there at more than 50% shareholding.
So anyone who tells you that foreigners are going to somehow get control of the SOEs is all but guaranteed to be a complete muppet with only a passing knowledge of New Zealand law and of how big investment decisions are made.
Vote:September 1st, 2011 at 9:55 am
Worth noting too that NZX Limited has rule restricting shareholders to no more than a 10% shareholding.
And Telecom currently has effectively the same rule. No one shareholder in Telecom can have more than a 10% shareholding without the approval of the Minister of Finance.
So the 10% shareholding cap that’s being talked about for SOEs is not unique.
Vote:September 1st, 2011 at 9:58 am
OH GOD BUT WHAT ABOUT EVIL FOREIGNERS~! THEY WILL OWN US ALL
Vote:September 1st, 2011 at 10:00 am
DPF:
Kind of. The Govt will get the value financial investors are prepared to pay for the shares. It’s possible strategic investors would be prepared to pay a higher value if they were able to get control. But the Government has clearly said they won’t relinquish control, so the strategic investors were out of the game long before the 10% cap was mooted.
It’s not the 10% cap that means the Government won’t receive quite as much money as it would otherwise. It’s the Government’s commitment to retain control that cuts out the (higher-paying) strategic investors.
Vote:September 1st, 2011 at 10:20 am
i’m buying power companies.
Vote:September 1st, 2011 at 10:30 am
What about the crap line coming from the Labour party that NZers wil just buy the shares and sell them to evil foreigners?
What is stopping the foreigners investors buying the shares and selling them back to kiwis?
Vote:September 1st, 2011 at 10:33 am
virtualmark: Worth noting too that NZX Limited has rule restricting shareholders to no more than a 10% shareholding.
And Telecom currently has effectively the same rule. No one shareholder in Telecom can have more than a 10% shareholding without the approval of the Minister of Finance.
And had a look at the share price recently?
Vote:September 1st, 2011 at 10:35 am
The sale price is only one concern. The Government’s other concern is to provide an incentive for the Directors and Management to drive efficiency and imagination – something that was particularly lacking in the SOE’s during Labour’s reign. The issue is whether a 10% holding is sufficient to encourage a shareholder to be proactive. Possibly yes. While a 10% holding is not sufficient to appoint a director ‘as of right’, it is probably sufficient to allow the shareholder to ‘offer’ a suitably experienced director.
Vote:September 1st, 2011 at 10:55 am
Great to hear Tuku Morgan,yes the same “underpants man”, talk about the fact that iwi,especially Tainui, wish to invest LONG TERM in these SOE’s.These five companies will never replicate Google, however they will provide solid reliable returns for shareholders. Better than Hanover,SCF,Bridgecorp etc.
Vote:Remember, the company will still be 51% government owned. That in itself could be a weakness in that the board will be more conservative than a 100% full private ownership. However it’s good news for the ordinary punter.
This debate reveals the ignorance of many NZ investors. There needs to be more information of why companies list on the shartemarket rather than many people seeing the NZX as a casino. Investors are increasingly being turned off by derivatives trading,margin trading,crooked financiers etc which can earn huge profits but equally end in pain.
Newspapers do very little to help new investors while the Internet is a HUGE risk for beginners.
Follow Labour and the Greens to mediocrity.
September 1st, 2011 at 11:07 am
Fascinating hearing John Key on RNZ this morning talking about how there are “heaps of ‘Mum and Dad Investors’ ™ with spare cash floating around just waiting to spend it on long-term, low yielding power companies etc”. And here I was thinking we were in the middle of a recession and debt crisis. It must be nice to be John Key.
Vote:September 1st, 2011 at 11:24 am
The share market should do better now that the “Invested in property its as safe as houses” myth has been destroyed. kiwi saver will also help change perceptions long term. Of course MSM does not help when they focus on short term fluctuations in sensationalist story’s
We should sell the crap SOE’s to Infratil ,or similar and the returns could be exploratory to the new Zealand economy. Infratil has generated a 18% per anual return since inception!
Infratill is owned by
Vote:NZ retail shares 41 %
NZ instatutions24%
utilico Bermuda19%
other 16%
September 1st, 2011 at 11:41 am
These IPO’s will no doubt be oversubscribed because power companies are considered safe investments. Because of that interest from pension funds will be huge, particularly offshore, therefore competition for the shares will be intense.
Vote:Once the shares enter the marketplace, trading will be fierce, and the initial share price will rocket. Consequently institutional investors will sell down to realise gains.
“Mum and Dad” investors won’t have the skills to compete, and regardless of what John Key says, the mum and dad investors in the retail market won’t have a show, the demand will outstrip the offer.
September 1st, 2011 at 11:45 am
So I’ll be trying to get a slice of some of these SOE’s when the time comes but I have a few problems with this.
1. The government is divesting itself of significant revenue generating assets at a time when it has record deficits – that is like burning the floorboards to keep warm. Short term thinking.
2. Previous experience shows that even with the best intentions of Government kiwis will sell these shares to overseas owners. The issue isn’t that the owners are foreign per se it is that there will then be a significant flow of profits offshore which will help dig us deeper into the hole we are in.
3. The idea of kiwi mums and dads picking up shares en masse is a bit of a myth. Only a select few will have the money to do so and trust the NZ share enough to actually want to.
4. Kiwi mums and dads already own and benefit from these companies.
5. There is a bit of rhetoric that private ownership will result in people with more business nous being appointed to boards and the SOEs will be run better because the private sector is inherantly better. This ignores the fact governments can already appoint whoever they like to SOE boards and can and do bring in people from the private sector(as well as the odd political crony). It also ignores the fact that SOEs are generally well run while the private sector in NZ seems to be dominated by short term thinkers who run their companies into the ground (they haven’t exactly covered themselves in glory these last few years).
I expect the policy will still be popular as the government will be able to convince people that they will benefit even though they actually won’t. However, the government has to be congratulated for seeking a mandate from the public rather than just doing the dirty on voters like previous governments did.
There is an ideological question of whether governments _should_ own these sort of assets but thats largely irrelevent to the general public – with ACT sitting on 1% these days its fringe loony stuff. Most people think the government has a role in owning these sort of things and the difference between right and left is one of degree only.
Vote:September 1st, 2011 at 11:53 am
I disagree with Kevin. The government has been selling it to small investors in particular and I agree with that.
Vote:The terms of sale, the IPO and incentives will favour the small investor. In relation to the total offering, mum and dad investors will hold only a small percentage of the shares.The price for small investors will probably be less than the price for retail investors.
Once on the market, the price and market takes over. However there probably will be a reward for holding the shares for a certain length of time.
What I like about it is that Super funds(Including our NZ one) Kiwi saver providers,Iwi,Trusts etc will have something to buy into for the long term.
Kevin you say that mum and dad inestors won’t have the skills to compete. For mums and dads all it will mean is ring their financial adviser and telling them how many shares they wish to buy,writing the cheque out and its all done.No great skills involved in that.
September 1st, 2011 at 12:17 pm
innocent bystander
An appetizer of economic ignorance washed down by a cocktail of leftist spin.
1 – The government is saying that its high debts are a dead weight on the economy and to have high debt whilst owning an asset even an income generating one, reduces the return. It’s like a highly geared rental property – its real return is almost eaten up by the debt. Whilst the net debt holding cost is below the dividend stream the net return to the tax payer is meagre. The sale of many SOEs showed that the entity became more profitable after the sale because even stronger private sector discipline was imposed by proper experienced directors than the political hacks that infest the boards of SOEs. This is true even with partial privatisations.
2 – Yes Kiwis sold shares in Telecom and Air NZ to overseas investors but never in amounts that made either company even remotely close to being foreign owned. But so what – should NZ investors be allowed to buy shares in Apple or BHP or should they be shut out by zenophobic foreign investor restrictions imposed by US and Australian lawmakers. If we say to foreigners naff off you can’t buy our shares then we can’t whine because another country’s politicians step in and block a legitimate and wise offshore dairy company acquisition by Fonterra – its a slippery slope all the way to a damaging trade war – a war we’d lose because we are the minnow. The Smoot Hawley Act of 1931 tried to limit imports to the US and it sparked such a bitter global trade war that helped turn the 1929 stock market crash recession into the Great Depression. This fear is nothing more than pure political demagogery. If you look at the world’s most prosperous and consistently high GDP growth nations you will see that restrictions on foreign ownership of local assets are minimal. Corrupt struggling 3rd world countries are characterized by excessive and draconian foreign ownership restrictions.
3 – There are enough in fact plenty who will invest. Exhibit A – the 1990 Air NZ float done in the midst of a more nasty recession post 1987 crash and with unemployment over 10% and still a huge number and Ma and Pa investors dived in. The power company SOEs are a more attractive proposition than Air NZ whose fortunes are much more subject to the whims of international consumer spending and volatile exchange rates than the steady almost recession proof cash cows that the power companies are.
4 – Direct dividend receiving share ownership is not the same thing as having the Consolidated Fund receive the dividend and the government deciding how best to spend the profit. This goes to the heart of the notion of a property/share owning society. That such a much higher percentage of Americans directly own shares in publicly listed companies is one of the many reasons why, notwithstanding the current recession, Americans enjoy a higher standard of living compared to NZers.
5 – “The odd political crony” – what planet are you on? Go through the list of directors of the largest 10 SOEs and give us the names of the real experienced private sector directors with long track records of directing highly profitable private sector companies. The ratio of political appointees to hardened professionals is about 5:1. You sell the 49% and those odds are evened up to more like 50/50 maybe better.
You are correct in stating that it was smart politics for Key to seek a mandate for this policy. But if this policy is so unpopular and voters are as wedded to the state owning strategic assets as you claim then Labour should win. The reality of current polling is that Labour and Green scaremongering on this subject is being met with long loud yawns from Joe Public.
Vote:September 1st, 2011 at 1:01 pm
Kiwi in America – Brilliant debunking of Labour smoke and wind.
I’ll be buying shares as soon as I am able
Vote:September 1st, 2011 at 1:09 pm
Wreck1080
I am buying power co’s too – coming out of bank term deposits, which I went to out of sharemarket panic.
Vote:September 1st, 2011 at 1:17 pm
Best advice of all…buy lots of shares. That way you may be able to pay your increased power bill from the dividends unlike the 90% of Kiwi households who will just freeze quietly to death.
Vote:September 1st, 2011 at 1:21 pm
Kiwi in america, NZ has a problem with private not public debt. In terms of the latter we are much better off than many other developed economies. Our private debt problem needs to be addressed but asset sales are not the solution to it. In fact they could make it worse. Asset sales are a short term solution designed to give a temporary lift to the Government’s books and give institutions and the business elite something to invest in. They will not address the country’s underlying problems.
As for your weird tangent about fear and demagoguery over foreign ownership, that wasn’t the point I was making and I thought I made that pretty clear. I guess its always easier to argue when you’re making up both sides of the debate though. As an export reliant economy we have to be very very careful about opposing foreign ownership and encouraging protectionism lest it come back to bite us on the bum. However there is good foreign investment and bad foreign investment. Bad investment buys up existing firms and ships the profits overseas potentially making us worse off. Good investment attracts money that would not have spent here otherwise, grows the economy and creates jobs. A good government finds ways to favour good investment over bad to benefit NZers.
Power companies are attractive assets for investors. Air NZ crashed and burned so probably isn’t a good example of successful share float. In any case we are a poorer country now than we were back then and individuals are carrying a shit load of debt. We are poorer in real terms and wealth is more concentrated meaning the number of people who could benefit from the sharefloat is probably less.
America is a wealther country than NZ but it is highly debatable whether it has a higher standard of living or whether it has anything much to do with the number of people who own shares. Given its high debt, dysfunctional political system, high rate of poverty and lack of basic public services for many people there isn’t too much of the American model that I would be keen to adopt here.
Regarding the appointments to boards the point is that government can appoint whoever it wants and does not need to sell 49% to bring in private sector expertise at all. Governments just chose not to in many cases.
The policy is unpopular that’s why the government is working so hard to sugar coat it. However, people make their choice based on the whole package of policies (and personalities) and on balance National is well ahead. Also betrayal of trust was a huge part of earlier debates over asset sales and that is absent from the current debate so it is difficult for the opposition to generate the same level of public interest.
Of course it doesn’t help that Labour are a crap opposition that no one is interested in listening to and who can’t take advantage even when National hands them a big stick to beat them with…apparently they are too busy being the story this week and engaging in public leadership speculation to try and do anything remotely useful.
Vote:September 1st, 2011 at 1:40 pm
@ innocent bystander I’m guessing from your comments you’ve never actually been to the US?
Vote:September 1st, 2011 at 1:52 pm
The policy is unpopular that’s why the government is working so hard to sugar coat it. However, people make their choice based on the whole package of policies (and personalities) and on balance National is well ahead.
Bystander, this isn’t true:
http://horizonpoll.co.nz/page/141/less-than-1-
This is what the news media don’t want joe voter to know. Selling the Soe’s might cost Key the election.
Vote:September 1st, 2011 at 2:10 pm
innocent
With an $18 billion deficit – we have a major problem with public debt. To say we’re not as bad off as other economies (whilst true) is not a good reason to oppose attempts to reduce the debt. The government is not touting the partial asset sales as the complete answer to the country’s ills – the rebalancing of investment priorities from residential property to more productive assets is but one of their initiatives. The lower the level of a country’s public debt, the less burden it places on capital formation by not being such an active player in debt markets and the higher the percentage of GDP that can be devoted to private sector wealth creation.
Good investment – bad investment. Who makes that decision? You mean like backing the super yachts factory in Whenuapai so beloved by Jim Anderton or all the failed or failing green energy businesses here in the US AFTER being showered with billions in stimulus money by the Obama Administration. Which Wellington manderins make these decisions? No public bureaucrat can replace the collective wisdom of individual market entreprenuers.
Air NZ’s later failure (caused by its disasterous acquisition of Ansett Australia) in no way negates the success of the share float. You claimed there will be limited small investor interest in the power company sell downs, history shows us the opposite is true.
The average American has much more disposable income than NZers because they earn more and pay far lower prices for almost all goods and services. Your dismissal of the US political system as “dysfunctional” is more a function of your ignorance of it. It is highly complex due to the Federal/State model and differing electoral laws state by state. As a kiwi voter for the last 11 General Elections and a voter in the US since the mid 80s when I lived here for 3 years, I can tell you categorically that I enjoy the greater power voters have here. We get to vote for so many more things – city council/mayor, county offices, judges (we can remove bad judges), state House/Senate/Governor and President/FederalHouse and Senate, dozens of BINDING referenda every 2 years, recalls to remove bad politicians and many taxes cant be raised without OUR say so. If a Governor vetos a good law, the citizens can override this by getting an initiative on the ballot, pass it and it MUST become law. NZ doesn’t even come close to this power. “Lack of basic services for many people” – what utter rubbish. Aside from a handful of ghetto suburbs in a few cities and pockets of rural poverty, the vast majority of Americans have access to far better roads, hospitals and other essentials than in NZ.
The difference between a full SOE and a 51% owned SOE is that the goverment gets to choose the whole board and, as you acknowledge, they more often than not appoint hacks even though they can choose whoever they want. If private investors own 49% thats at least half of the directors that will NEVER be useless hacks.
Scaremongering from the left is the main reason why the asset sales don’t enjoy majority support in public opinion polls. If armed with the full facts and history rather than innudated with the usual class warfare rhetoric of the left, I’d venture that a majority would support these modest partial sell downs.
Vote:September 1st, 2011 at 2:37 pm
@Jackp
I’m sure the horizon poll is terrific news if you’re a labour supporter but its not really a proper poll, you might as well start seeing hope for labour at bottom of your morning cup of tea. I guess you could pretend the polls are some giant media conspiracy and then Labour wouldn’t have to change or admit responsibility for its own misfortunes…we’ll see how well that works out for them in November.
@Kiwigreg
Vote:What I was getting at is how do you measure “standard of living” and who’s “standard of living” do you measure in making that judgement? Its not as simple as comparing something like GDP per capita. And the US system is dysfunctional – I can’t remember NZ’s government almost coming to a complete halt because the two main parties can’t sort their shit out, any time recently – In a pinch I suppose you could go back to 1984 and the less than smooth handover to the incoming government but that didn’t involve playing chicken with the global economy to quite the same extent.
September 1st, 2011 at 2:56 pm
Even if they didn’t hold 51% of the shares the Government could still nullify a foreign take-over of a strategic asset as CULLEN did when he banned the takeover of Auckland Airport at about $3-60c a share enabling mum and dad investors to retain their shares and their local body dominated board at around $2 a share.
Vote:September 1st, 2011 at 3:38 pm
I support the rebalancing of investment priorities from residential property to more productive assets – I wish they would go further but Key is very conservative (it also doesn’t help that most MPs own investment properties). We should also have a capital gains tax on properties other than the family home just like many other developed countries have. Labour can afford to pee on that particular political electric fence from the safety of the opposition benches knowing that they won’t have to implement it but I expect its an idea whose time will come.
Regarding picking winners, that is little different from what the Government is doing now with its public-private partnership over the national convention centre or with its funding for R&D. Yes it can go badly, especially if it is based on political considerations, but it is what is needed. Government should not just take its hands off the steering wheel especially in a small vulnerable economy. It needs to be actively involved in attracting investment and in giving NZ entrepeneurs a leg up to become successful.
Americans pay a far lower price for goods and services because of greater competition and the economies of scale that come from living in a bigger country. They earn more because America is a richer country plain and simple – there are a whole lot of reasons why America is a richer country and share ownership may or may not be one of them. There are also other countries that are richer than us that have high taxation and high levels of public ownership so I’m skeptical that you can just cherry pick the US and say that that is the best model.
As for the political system. Electing judges and having binding referenda are dreadful ideas that we shouldn’t go anywhere near. The latter led to all sorts of budgetary problems in California in the recent past. The former simply leads to politicisation of the judiciary. Judges end up under pressure to make decisions based on what will get them re-elected rather than legal grounds. It reduces your chance of getting consistency and fairness. They still have appointed judges at the higher levels, possibly for that very reason.
I am happy with our own version of representative democracy thanks…politicians should follow public opinion but sometimes they have to lead it. If they get it wrong they take the consequences every three years (although it should be four).
Regarding SOE boards, you missed my point. The model does not need to change to get the outcome that they say they want. It is simply a matter of political will. They could appoint people with a business background anytime they wanted to.
If the majority support asset sales then they are fools because the proposal will only benefit a minority. They are effectively voting against their own best interests. I don’t know if that is class war (your words not mine) or common sense.
Vote:September 1st, 2011 at 4:41 pm
virtualmark (1,160) Says:
September 1st, 2011 at 9:55 am
Worth noting too that NZX Limited has rule restricting shareholders to no more than a 10% shareholding.
And Telecom currently has effectively the same rule. No one shareholder in Telecom can have more than a 10% shareholding without the approval of the Minister of Finance.
So the 10% shareholding cap that’s being talked about for SOEs is not unique.
Interesting Question for you.
Waht happens tothe Telecom share cap when it separates and is no longer Telecom?
Anybody know.
Vote:Not that it made any difference before, they all bought and sold whatever they liked.
September 1st, 2011 at 5:00 pm
Are those “10% caps” for Telecom and NZX actual facts. I haven’t been able to confirm them. Telecom certainly has a “kiwi share” (which will stay with the lines business as I udnerstand it). There are OIC approvals required for 25% or more shareholdings and there are mandatory disclosure rules (at 5%) and takeover rules (at 20%).
Vote:September 1st, 2011 at 5:20 pm
innocent bystander
You haven’t answered the question – which manderins in Wellington get to choose the winners and what makes them more qualified to choose? A PPP isn’t picking winners – the private sector participant must meet the requirements of a public tender.
I didn’t cherry pick the US – I just rebutted your comment that it was highly debatable that America had a higher standard of living than NZ, something you now admit is true. I never denied that other high tax countries have a high standard of living – Sweden and Denmark have high taxes and extensive government spending whereas Switzerland is low tax with a very low percentage of GDP devoted to government spending and yet it too has a high standard of living.
From the outside the greater politicization of the American judiciary seems a lesser system but the partisan tension between rivaling appointees evens itself out remarkably well plus voters here are pretty aware that with their voting choices (especially for the Senate) means the winning party gets to appoint the judges. If you think that the NZ referendum system where 92% can vote for tougher penalties for violent crime and 85% be against criminalizing smacking and the government (of both stripes) can say we know best get stuffed is a superior system then good for you. The NZ political system as Westminster systems go is not bad but it doesn’t hold a candle to the power American voters have to change their government more to the liking of the people. Once you’ve had that power you really don’t want to go back to something where its trust me we know best.
I haven’t missed your point at all about SOE boards – there is a noticeable difference in the quality of corporate governance between a 100% SOE board and a private sector board – its one of the reasons why privatized firms mostly do so much better. You and I both know that even with a National Government that usually sports more business nous than Labour the temptaton to reward cronies and retired MPs is too great. Both parties have made a few good appointments but shareholders seeking maximum profit are driven to find directors with the very best profit generating skills whereas SOE board member criteria are never as focussed. The fact that governments can pick the same people that shareholders might choose is entirely different from the real world reality which is that they don’t hence why partial privatizations work.
The notion that the voters are fools – yes another not so endearing feature of the haughty intellectual arrogance of the left. All their policy provisions are common sense …to them …and the plebs just need to know whats good for them huh.
Vote:September 1st, 2011 at 6:00 pm
Kiwi in america, You and I both know that markets are good tools for allocating resources and likely to be better than beaurocrats at doing it. Any economics text will tell you that. The problem is that the market is an international one with no special place in its heart for NZ. Left to its own devices the market will allocate our manufacturing to china, our skilled workers to Australia and much of the country’s wealth overseas in profits and interest payments. If we want New Zealand to be successful we need to do more than hope and pray that the market will deliver.
Intervention can be anything from setting policies that guide investment in a particular direction and letting the market do the rest,offering tax breaks and incentives, actively seeking investment through public-private partnerships or directly picking winners. I am happy with any of these approaches. The risk that mandarins or politicians may make _some_ bad decisions is actually a risk that is worth taking given the consequences of doing nothing.
I am happy for governments to ignore referenda (especially ones that are contradictory or impossible to implement) and for them to wear the consequences. Sometimes politicians have to lead and not follow public opinion and if the public don’t like it they can always elect someone else…there are plenty of small parties out there trolling for the grumpy vote although somehow I doubt they’ll get anywhere because on balance the public are worried about other issues.
It doesn’t say much for the quallity of decision making when the government has to semi-privatise SOE’s to limit their own temptation to appoint cronies (well thats what you appear to be suggesting anyway). I haven’t seen a lot of evidence to suggest that aspect will result in improvements to governance to be honest. SOE’s seem to be well run and a number are highly profitable. Governance certainly doesn’t seem noticably worse than that of their private counterparts.
I didn’t say that voters _are_ fools, I said they are fools if they vote against their own interests…the policy at the moment appears unpopular (although not as unpopular as Labour) and that is why the government is having to soften it and do the hard sell. People will still weigh up all of the issues (and personalities) on offer and will probably not vote on the basis of one policy.
Vote:September 1st, 2011 at 8:06 pm
Initial sales restricted to New Zealanders.
Vote:I say extend that. Ownership only to be for New Zealanders and New Zealand entities. ie Iwi and Kiwisaver funds.
September 1st, 2011 at 8:07 pm
Talking about cherry picking, why doesn’t the government cherry pick an underperforming SOE and flick it off so the private sector can show us how good it is?
Oh, that’s right, already done with NZ Rail…that worked!
Read: sacked the staff and rehired them, often through intermediaries, at stripped down pay and conditions, and jacked up the prices.
And then we send 14 billion dollars offshore every year for the privilege of being raped and pillaged.
It’s got to be good for us!
Vote:September 1st, 2011 at 11:14 pm
We can only grow the economy if we invest new capital – trading public sector share for private sector share does not grow the economy.
It would have been preferable to finance new SOE investment by share issues (reducing SOE
Vote:September 1st, 2011 at 11:18 pm
We can only grow the economy if we invest new capital – trading public sector share for private sector share does not grow the economy.
It would have been preferable to finance new SOE investment by share issues to the public (reducing SOE debt and improving dividend flow to government).
Anyone looking through the share ownership of Contact and Fletcher Building can see how much ownership is held by Kiwi Saver Funds and NZ Super Fund – the more these sorts of assets are floated onto the market the less they can build up a presence in any asset. Most of the ownership will end up with Oz Funds as they have the money to disperse and are looking to expand into quality blue chip stocks such as these.
It’s also obvious that the shares will be sold at present and not future value and those locals buying will clip the ticket for an untaxed CG before they end up owned by foreigners.
Essentially those receiving the top rate tax cuts are being handed this ticket for free to make the tax free gain.
Vote: