Hooton on asset sales

March 11th, 2013 at 9:00 am by David Farrar

writes in NBR:

What Mr Peters may recognise, but does not, is that, before Mr Key suggested the share issues, most voters had never heard of Mighty River Power, Meridian Energy, Genesis or Solid Energy, much less worried about their ownership structure.

Compared with disposable incomes, the local school competently teaching maths, grandma getting her hip replacement, the cops tracking down the local crims or even keeping Asian immigrants out, whether a Waikato River dam is owned 100% or 51% by the state simply doesn’t rate.

The actual policies of those who claim to oppose share issues prove it.

Through nine years of the Helen Clark regime, when a global economic boom fuelled massive fiscal surpluses, the government bought back not a single share in Contact Energy.

Nor did Phil Goff promise to buy back shares in Contact.  Nor does Mr Shearer promise to buy back shares in the companies Mr Key plans to list.

If it is OK for national symbols such as the Clyde Dam and the Wairakei geothermal network to be 100% privately owned – and majority foreign owned – how could it possibly matter that Waikato River dams will be only 51% government owned and perhaps 20% foreign owned?

Matthew gets it right on. The opposition is symbolic bluster.

While averse to nationalisation, Labour also argues that not a single share in any of the Crown’s $50 billion of commercial companies should ever be sold – in effect freezing more than $30,000 per New Zealand household in a portfolio that is a mere legacy of the tumult of the 1980s and 90s.

This is the perverse logic of Labour’s stance. They are basically arguing that the exact right number of power companies for the Government to own is three out of five. Not two, not four – exactly three.

The ideological opposition to the private sector means that we don’t have an intelligent conversation over what assets should be state owned and which should not. Instead we just have a die in the ditch defence of the status quo no matter how illogical it might be.

Arguments that the state must own 100% of “strategic assets” – a meaningless phrase, never defined – would suggest the government should nationalise all food production and distribution, something Labour is yet to propose.

In fact, an immovable asset producing a commodity involving no proprietary intellectual property would seem to be exactly the sort of thing where ownership is irrelevant.

Absolutely. There is a far stronger case for the Government to own Fonterra than a power company.

The are happy that their anti-asset-sale petition has won them tens of thousands of new email addresses to spam in election year.

And they used taxpayer money to collect them! I bet you everyone who signed that petition will get an e-mail from them if they gave an e-mail address.

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30 Responses to “Hooton on asset sales”

  1. Sir Cullen's Sidekick (900 comments) says:

    Here is what is going to happen. Labour and Greens will do extremely well in 2014 and John Key will have no partners. Winston First will be in the position of King Maker. So he will demand that Shearer buy back assets and keep Greens out of government if he wants his support. Power hungry Labour will have no option and the maniac greens will agree to this arrangement. Shearer will slap a buy back levy of 6% tax on everybody earning more than 100K in addition to his election promise of 39% tax on whoever earns more than 120K. Greens will sit outside the government as usual and support Shearer on confidence and supply issues. Kiwis will happily pay 11% extra tax. Long live MMP.

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  2. tvb (4,556 comments) says:

    The government will simply have to win the political argument. Labour’s stance is based on fear and an attempt to erase the ghosts of the 4the labour government. Labour is on decline. It’s vote is being cannibalised by their coalition partner the Greens. They do not have a damn clue what they stand for in the 21st cent. There is a place for them mainly as a protest vote and a small trade union party. Though Winston Peters claims a lot of the protest vote.

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  3. Manolo (14,173 comments) says:

    I do hope your prediction doesn’t come to pass, Sir Cullen’s.

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  4. scrubone (3,097 comments) says:

    The problem is that people think the government will sell the assets cheap and will lose control.

    The second is pretty odiously wrong and the first comes from people’s misunderstanding of how income streams drive up the price of an asset and how this didn’t apply to the sales of the 80s and 90s (since those assets were in bad shape).

    But what gets me is that while people yell and scream about how National is going to do the country badly by selling assets, there was almost no examination of how Labour cost the country hundreds of millions by purchasing assets. Actually when it comes to trans rail, they effectively sold a large, profitable trucking company for free!

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  5. scrubone (3,097 comments) says:

    Oh, and was I the only person who chuckled (while listening to Morning Report) at a Labour MP complaining that her power was going up – because she was with Contact?

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  6. hubbers (147 comments) says:

    You say they won’t buy them back but they bought the railways back at 3 times the book value even though the purchase would saddle the NZ taxpayers with cost for years to come.

    NZ’s left are ideologically committed to big state and state ownership of all sorts of businesses that make no sense for govt to run and regulate at the same time.

    If they ever get the chance they are exactly dumb enough to buy anything regardless of common sense.

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  7. lazza (401 comments) says:

    Good topic debate. Yes! … lets shoot these sacred cows, scotch the myths mindful of …

    1. Public interest in the float … pretty positive eh? … tell that! to Labour/Greens
    2. The assets do not! (as some claim) disappear from the public purse, value is exchanged cash for part ownership.
    3. The assets are not (as some claim) being sold to their owners, their owner! is the entity … “The Crown”, no private (vendor) property interest is involved
    4. The Crown must always retain (not be locked-into) the right to switch/manage their portfolio of investment revenue-raising public assets.
    5. Funds become available to reduce future Government debt … a totally sane objective … whether share sales proceeds are applied direct to debt reduction … or as is the case here … in funding (no-low-less debt needed) other public expenditures.

    Footnote: The fly in the ointment of the mixed ownership model is the regulatory role of Government conflicted with that of Government part ownership. Where will power charges now in future reside?. Best then to “sell the lot”?

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  8. BeaB (2,164 comments) says:

    Even Brian Edwards says he thinks Labour’s anti-asset sales stance was mistaken and misguided.

    It leaves Shearer in a hole – does he withdraw from his Kiwisaver fund if it invests in Mighty River? Does he promise to buy it back? What will he do with the cash or the assets bought with the cash? Can he ethically allow children to attend a school built with the proceeds?

    More significantly, when even experienced Phil Goff stumbled over the money, does Shearer stand a chance trying to explain the economics when he is in a debate with John Key?

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  9. Cunningham (846 comments) says:

    BeaB (1,521) Says:

    March 11th, 2013 at 9:46 am

    “More significantly, when even experienced Phil Goff stumbled over the money, does Shearer stand a chance trying to explain the economics when he is in a debate with John Key?”

    That is what Labour should be most worried about!

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  10. wat dabney (3,849 comments) says:

    The ideological opposition to the private sector…

    It’s not even that. They don’t actually care. They just want to get back in to power so they can plunder the workers again and tell everyone what to do. This is all about cynically manufacturing a controversy – based entirely on ugly nationalism and economic fallacies – and Shearer will happily throw the lower-paid under a bus if it will deliver him and his handlers a victory at election time. Remember, these repulsive specimens would sooner reign in Hell than serve in Heaven.

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  11. Pete George (23,830 comments) says:

    Cunningham – that has already been talked about and is a big worry of some on the left, they fear that Shearer will get annihilated in the debates.

    But Labour’s caucus seems to be oblivious to this. Or maybe they think Shearer can be trained to speak his lines so he sounds natural – something Goff was unable to do convincingly.

    Shearer is currently a less polished and far less experienced version of Goff, but his body language keeps betraying his verbal language as did Goff’s.

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  12. Cunningham (846 comments) says:

    Pete George (16,599)

    “But Labour’s caucus seems to be oblivious to this. Or maybe they think Shearer can be trained to speak his lines so he sounds natural”

    This can be done but it’s the pressure of a live debate and the answers he has to come up with on the fly. That cannot be trained and he is aweful when it comes to thinking on his feet. Phil Goff was pretty good but even he got made to look like stupid in the live debates. How can they possibly think Shearer will be able to rattle off numbers in a live televised debate?

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  13. Chuck Bird (4,910 comments) says:

    “Shearer is currently a less polished and far less experienced version of Goff”

    He also a less polished speaker than Colon Craig.

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  14. Paulus (2,711 comments) says:

    Kiwisaver Fund Managers will be collectively the largest holders of partial SOE sales.
    These sales are long term investments with sound dividends, and as Kiwisaver is the same, they will meld ideally.

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  15. Tom Jackson (2,553 comments) says:

    The ideological opposition to the private sector…

    It’s not ideological. If it were ideological, then they’d be opposed to privately provided cars or cups of coffee, but they aren’t. The main reason that there’s no point in having private power is the same reason that it would be hopeless to have private management of most of our road building. It’s not like making plastic toys, where it’s easy to get rid of overstocks or to make more at the drop of a hat. The price system doesn’t provide enough information in the case of things like power and roads to give the private sector any real advantage over the public sector, and we simply can’t afford for them to get it wrong. If Toyota loses millions over a duff car, that’s their problem – users can buy another car. If a power company messes up supply, that’s everyone’s problem because it’s really difficult to get more online quickly. State ownership of things like that is a practical matter (and it doesn’t have to be forever).

    All we do by privatising power companies is pay unearned rent to the people who own them, people who will have more interest in running the systems down to extract short term profit than they will in investing in the long term. The losers will be everyone else, including businesses that rely on reasonably priced and effective power.

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  16. Tom Jackson (2,553 comments) says:

    To add to what I said, an efficient free market in power is perfectly possible, and very desirable, but not achievable quite yet.

    If a government really wanted to have the benefits of a free market in power, it would try to encourage technologies that allow the addition of capacity in low cost quick to install units so that we don’t have to build massive projects like power stations. The obvious candidate is solar. I don’t think any reasonable person could think it bad to have people installing solar panels on their roofs and selling back the excess to the national grid. If a lot of our power was generated that way, the price signals would function very well, as it would be up to individual home owners to decide whether it was worth installing solar, or to buy power from those who had solar.

    Why on earth the free marketers don’t pursue that avenue is beyond me. Selling centralized assets like power stations is a pretty barmy way of getting a decent electricity market.

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  17. wat dabney (3,849 comments) says:

    Selling centralized assets like power stations is a pretty barmy way of getting a decent electricity market.

    It’s actually an essential prerequisite.

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  18. Tom Jackson (2,553 comments) says:

    It’s actually an essential prerequisite.

    Only if you’re an economic illiterate.

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  19. Richard29 (377 comments) says:

    @Paulus
    “Kiwisaver Fund Managers will be collectively the largest holders of partial SOE sales.”

    Unlikely – The combined funds under management for Kiwisaver is somewhere around 12-13Bn. ACC and NZ Super fund each have over 20Bn in funds under management.

    So – even after the government’s 50% the Kiwisaver funds probably be the third biggest institutional NZ investor with the two largest government controlled.

    It’s easy to see why Key can claim with some confidence that the companies will remain over 80% NZ ownership and why opposition MPs predicting a foreign takeover are likely to end up with egg on their faces.

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  20. wat dabney (3,849 comments) says:

    Perhaps the state should have a monopoly on selling food as well Tom: “the price signals would function very well, as it would be up to individual home owners to decide whether it was worth” growing their own potatoes and fancy lettuce.

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  21. Komata (1,220 comments) says:

    WD

    Re: ‘….It would be up to individual home owners to decide whether it was worth” growing their own potatoes and fancy lettuce’.

    Wasn’t one of the political parties going to introduce a system whereby anyone who either grew their own produce and/or gave it away were going to be liable for prosecution for some ‘invented’ reason. Unfortunately I can’t recall which party was advocating this, but it seems to have died a natural death (or perhaps its only been ‘put on hold’ as such things tend to be).

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  22. ross69 (3,652 comments) says:

    how could it possibly matter that Waikato River dams will be only 51% government owned and perhaps 20% foreign owned?

    If Hooten doesn’t know the answer, then clearly he is economically illiterate.

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  23. scrubone (3,097 comments) says:

    If Hooten doesn’t know the answer, then clearly he is economically illiterate.

    Perhaps you could explain your wisdom to the rest of us. Try to avoid conspiracy theories.

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  24. scrubone (3,097 comments) says:

    2. The assets do not! (as some claim) disappear from the public purse, value is exchanged cash for part ownership.

    A point I often make myself. It’s weird how many people honestly seem to think that a sale by the government doesn’t involve the exchange of money for said assets being sold.

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  25. The Scorned (719 comments) says:

    Chuck Bird: “He also a less polished speaker than Colon Craig.

    Chuck …buddy….your obsession with Homos and anal sex is manifesting itself in other topics…..lol :-D

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  26. ross69 (3,652 comments) says:

    Perhaps you could explain your wisdom to the rest of us.

    I’ve explained it before. It makes no economic sense to sell assets that are paying their way. Treasury has forecast that by 2016 NZ will be more indebted than prior to the asset sales. Of course, by that stage we won’t be getting the income streams from the assets.

    http://keepourassets.org.nz/learn-the-facts/economy/

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  27. Batman (103 comments) says:

    A fun fact for you all!

    Right now, as I type this and as you read it, Labour and the Greens are using (I think) taxpayer funded interns to transcribe all of those signatures into databases at their parliament offices.

    so they will most likely be emailing everyone come election time!!

    they are also continuing to use our bloody cash for the absolute joke which is the political party initiated referenda (PPIR)

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  28. Black with a Vengeance (1,868 comments) says:

    Oooh how scary…

    An email from Labour and the Greens come election time.

    I shouldn’t have to say this to Batman, but…

    Man up and grow a pair!!!

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  29. wat dabney (3,849 comments) says:

    I’ve explained it before. It makes no economic sense to sell assets that are paying their way.

    According to this argument any such monopoly run and abused by the state as a highly-regressive stealth tax-gathering mechanism is an “asset.”
    It might be an asset to politicians who want to take our money and spend it in order to buy votes and reward their associates, but it certainly isn’t an asset for the rest of us.

    If the state had an equivalent monopoly on selling food and abused it to over-charge everyone, would you really call that an asset? Really?

    I believe you would.

    I’ll tell you the difference between Fagin on the one hand and David Shearer and Russel Norman on the other: Fagin’s criminal gang targeted the rich, whereas the effects of Shearer’s and Norman’s pick-pocketing scheme fall most harshly on the poor.

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  30. scrubone (3,097 comments) says:

    It makes no economic sense to sell assets that are paying their way.

    Actually it makes perfect sense because those are the ones you’ll get the best price for as per my comment above. Assets (companies) that are making a loss cannot be valued on income streams.

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