Roger Kerr’s funeral

November 7th, 2011 at 10:00 am by David Farrar

I wasn’t surprised that Roger’s funeral service packed out Old St Pauls. There were several hundred mourners from the young to the old. I did reflect during the service that an untimely earthquake would have wiped out the entire VRWC, leaving Whale Oil as the sole survivor to continue on.

Stuff has a write up of the service.I’ll do my own comments shortly, but first want to point people to the tributes page on Roger’s blog. There’s a wonderful collection from friends and colleagues. Some of the more well known are Michael Porter, Richard Epstein, Tyler Cowan, Ralph Norris, Gil Simpson, Tenby Powell, and Jenny Gibbs.

The service was an emotional mixture of celebration and grief. There were six speakers. Bryce Wilkinson spoke of Roger’s professional achievements. Regardless of whether or not one agreed with Roger’s policies, what everyone stressed was his incredible intellect and an incredible work ethic, combined with a total lack of ego.

His older brother Alan Kerr spoke, and then David Leonard, an old school/uni friend. David told many great stories of Roger. My favourite was the well kept secret that his friends nicknamed him Fido at university. On the basis of Kerr=Cur. They even went to the trouble of registering Roger with the Council and getting name tags. However they had to kill Fido Kerr off some time later when they got a letter telling them he needed a rabies shot.

Then two of Roger’s sons spoke, plus one of Catherine’s sons. Incredibly warm and moving tributes, and also huge sadness about the short period of time he had with his granddaughter and how they hoped he would last until December for grandchild no 2. Alas it was not to be.

One comment during the speeches had the entire church laughing out loud. Amongst a long list of people being thanked for helping Roger and Catherine cope during his final days, they thanked the ACT Party for their wonderfully distracting neediness.

So it was a great series of tributes to Roger’s life, and his personal qualities. But it was also very sad. Almost every speaker spoke of the huge love between Roger and Catherine. One quote was Roger helped make the world better, but for Catherine he was her world. Another said that Roger’s time together with Catherine was the happiest of his entire life, and the same for her. Roger worked up until the day he died. It is sad he never got to enjoy a quiet retirement with his loved one. Mind you, I suspect even in a quiet retirement, he would have taken his famous green pen along.

Afterwards a few of us went to Dockside to do some memorial toasts. That was nice. On Friday I had a call from another Roger. I went to call him back and as I typed his name in, it came up with Roger Kerr’s name and number also as an option. I deleted him from the phone, reflecting with sadness how that is when it really sinks in – realising no more calls or talks. There’s something final about deleting someone from your contacts.

I thought I would end with a story, which sums Roger up for me. It was when I worked for National in Parliament in 2003. Don Brash was the Finance Spokesman then, and we had a Caucus Economic Committee meeting on privatisation. Roger and a colleague from the BRT were the invited guests.

A document was circulated showing the companies that remained in state ownership. There had been a perception that all of them bar a few power companies had been sold in the 80s and 90s. But this paper listed around 50 companies still owned by the state. As discussion started on the economics and politics of privatisation, one MP asked Roger which of the 50 state owned companies were suitable for privatisation, and which were not. I have always remembered and treasured Roger’s reply, which of course was “All of them”.

I don’t tell the story to trigger a debate about asset sales. This is not the thread for that. There is a legitimate variety of opinions on its pros and cons. I tell the story to illustrate how Roger would never use weasel words, or say something he didn’t believe in. To the end, he would always advocate for what he believed was right. We need more men and women of conviction.


Roger Kerr funeral

November 1st, 2011 at 9:07 am by David Farrar

A service to honour Roger’s life will be held on Thursday 3 November at 2.30 pm at Old St Paul’s in Wellington.

At Roger’s blog, they have links to some of the public tributes to Roger. Kudos to the Greens who said:

The Green Party today acknowledged the death of Roger Kerr, saying he was a principled man and respected opponent.

“Roger was a leading figure in the debate over the direction of the new Zealand economy. He played the issues not the person,” said Green Party Co-leader Metiria Turei.

“We disagreed with most of his views but he was prepared to debate them openly and frankly.

One particular party remained silent.

Also at Roger’s blog, is his final blog post, made on the day he died. he attacks the myth that NZ’s net external indebtedness is a savings story. Roger showed how it is mainly interest on the debt built up before 1990 that has caused continued indebtedness. He also pointed out that NZ had a balance of trade surplus overall from 1990 to 2004.

Roger Kerr RIP

October 29th, 2011 at 11:56 am by David Farrar

I was greatly saddened to receive the news that morning that Roger Kerr had died, inevitably losing his battle against cancer. My thoughts go out to Catherine, Nick and the rest of his family.

I first met Roger around 20 years ago, when we invited him to speak to a Young Nats conference. He always accepted our invitations, and through his leadership the Roundtable always took a keen interest in getting young people interested in public policy.

I’ve had a lot to do with Roger and the Roundtable over the years, and regarded him as a friend. He was a nice guy whom I never knew to get abusive or nasty about anyone – even those who demonised him. For him, it was all about policy, not personalities. And his intellect was astonishing. He could debate any issue to great detail, and was a walking library of references.

Roger had a great love of New Zealand. I have no doubt he could have earnt much more money if he had not devoted the last 25 years to establishing and growing the Business Roundtable. While of course his views were controversial and often unpopular, Roger was only motivated by a genuine desire and belief that they would make New Zealand a better place. Please note that this thread is not for people to debate whether or not they agree with those views.

An issue which I knew Roger had strong views on was the decision to abolish the youth minimum wage in 2008, as it priced young people out of the jobs market. He wrote on it often, as did Eric Crampton, myself and others. I’m not sure if he was aware of it, but am glad he was still alive on Friday when National announced their policy to partially reverse the changes made in 2008. One final victory for Roger. Of course Roger would have pointed out that in typical fashion National did a compromise, rather than a full reversal.

I will miss Roger very much. Farewell.

UPDATE: Richard Harman has put this out:

On April 16 Sean Plunket did a long interview with Roger Kerr. Roger knew then he was dying. Bue he faced Sean the same way he confrtonted his disease, with boldness and good humour. The interview was intended to be something he could leave behind which would set out his own life story and his core beliefs and hopes. I am sending it out again, as a tribute to a man who believed passionately in debate and who was  never afraid  to stand up in the media to argue his case.His death is a great loss to us in the media and to anybody who believes in the importance of a well reasoned discussion on public policy. 

The PM has also said:

“Roger made a significant contribution to New Zealand business, public policy and the wider economy over several decades,” says Mr Key.

“He was a man of integrity and energy, who was not afraid to debate important issues passionately and often controversially.  But he did it calmly and focused on the issues at hand, rather than making the debates personal.

Guest Post on Roger’s blog

September 9th, 2011 at 3:18 pm by David Farrar

I’ve done a brief guest post on Roger Kerr’s blog on the youth minimum wage.

It is inexplicable that National has continued with what can only be called the failed experiment of applying the adult minimum wage to unskilled inexperienced 16 year olds who want to gain some work experience.

Interview with Roger Kerr

July 24th, 2011 at 10:00 am by David Farrar

Karyn Scherer at NZ Herald interviews Roger Kerr. Some extracts:

Roger Kerr doesn’t even wince when I ask whether it feels as though everyone is already writing his obituary.

“It doesn’t bother me in the slightest,” he chirps. “If I’m of sufficient interest then great. It’s an opportunity to tell the story the way I see it.”

After 25 years of banging the Business Roundtable drum, Kerr doesn’t need to be asked twice if he’d like the opportunity to bang it a little more. And although he predictably rails against personality cults, who wouldn’t enjoy the sort of attention he’s been getting of late?

A recent Herald editorial described the gong he received in the latest Queen’s Birthday honours as “perhaps the most deserved” on this year’s list, and suggested he’d had a greater influence on New Zealand’s economic direction over the past few decades “than anybody outside the state service, or possibly within it”.

There have been compliments from less obvious quarters, too, including several Labour MPs, as well as others “who might have seen me as a tribal enemy or something”. Such tributes, he beams, “mean more to me than the award itself”.

Whether the 66-year-old might have got the same reaction had he not discovered eight months ago that he might not have much longer to live is a moot point. Regardless of whether you agree with the Roundtable’s message, few dispute that Kerr has mostly been an unusually personable messenger.

That’s just the first few paragraphs. The full interview is quite lengthy, but in my opinion very good.

Perigo and Kerr

July 7th, 2011 at 12:00 pm by David Farrar

This is on tonight. I’ve set the My Sky.

Lessons from Texas

May 16th, 2011 at 8:24 am by David Farrar

Roger Kerr blogs:

I have spent much of this week in Houston, Texas. Texas is the go-ahead large state in the United States today, and Houston is the oil and gas capital, America’s second largest port and home to a huge medical complex.

With it’s business-friendly environment, Texas is attracting firms and people from other states, notably over-taxed and over-regulated California, in large numbers. It has no state income tax. The state legislature only meets for 8 weeks every two years – and without air-conditioning so that politicians do not get too attracted to the place.

Heh. Amusing but not the part I suggest we emulate.

Houston is famous for having no zoning (land regulation). Yet it looks pretty much like many other US cities. Without controls you do not find an oil refinery next to prime residential real estate and the expected collection of businesses cluster around the port. But there are many neighborhood associations that set their own rules about things like how close to a boundary you can build or what colour you can paint your house.

The absence of land supply restrictions makes housing (and much else in Houston) incredibly cheap. You can get a very nice two-garage, four-bedroom house for as little as US $200,000. Some 500,000 ‘refugees’ from New Orleans moved to Houston after Hurricane Katrina without putting any significant pressure on house prices or the land market.

If ever the government gets around to a fundamental review of our dysfunctional Resource Management Act, there would be many lessons to be learned from Houston.

What I find most interesting is that the absence of zoning hasn’t resulted in the city being vastly different to other cities – just cheaper.

Think how much time and money would be saved, and lawyers dispensed with, if there was no district plan for a city!

Roger to Deborah

November 5th, 2010 at 4:49 am by David Farrar

Roger Kerr blogs:

Deborah Hill Cone is one of my favourite journalists.

Her cosmopolitan reading habits are unique in the New Zealand media, and she’s generally no slouch in business and economic commentary either.

But she must have got out on the wrong side of the bed the day she wrote ‘Dream of success keeps slipping away’ (New Zealand Herald, October 22, 2010).

She wrote that New Zealand is losing its place in the international league tables and that nothing we have done has made a jot of difference.

A reading of yesterday’s 2025 Taskforce report will cheer her up.  It confirms – see the graph on p4 – that New Zealand kept pace with the average per capita growth rate of the OECD as a whole following the earlier economic reforms, only falling away in the last years of the 1999-2008 Labour government.  In other words, the long-term decline relative to the OECD was arrested (although Australia did a bit better).  OECD projections suggest that New Zealand will outperform the OECD average to 2025.

Polices do make a difference. I have not had time to go through the 2025 taskforce policies in depth but may get time next week to do so.

Graeme Hunt RIP

September 23rd, 2010 at 7:06 pm by David Farrar

Roger Kerr blogs:

It was with deep sadness that I learned of the sudden death of Graeme Hunt today. Graeme was a widely-respected author, historian and journalist, and a tireless campaigner for electoral reform in New Zealand.

He was also standing as an independent candidate for the Albany ward of the new Auckland Council and was reportedly leading in the polls.

Graeme was passionate about New Zealand history and one of our foremost business historians. He was a walking encyclopaedia who, while chatting, could go into extraordinary detail about a huge variety of topics including long-forgotten people, places, organisations and issues. …

Graeme was an award-winning journalist and former editor-at-large of the National Business Review. The NBR reported his death this morning.

I’ve lost a good friend and a much respected colleague, and New Zealand has lost one of its most talented and public-spirited journalists.

My sincere condolences go to his wife Saluma and his son Robert and daughter Ellen.

As do my condolences.

Prosperity creates spending, not vice-versa

September 17th, 2010 at 7:20 am by David Farrar

Roger Kerr blogs:

Roberts uses a neat analogy to describe US stimulus package policy later in his post:

Think of having a lot of wet wood and trying to get it going by lighting newspaper as kindling. There’s a fire for a while, while the newspaper is burning. But once the newspaper is consumed, the wood hasn’t caught. Even burning a lot more newspaper (bigger stimulus package) isn’t going to get the wood dry enough to catch fire.

The same applies to government spending in New Zealand. The role of the government should be to provide a framework that allows the economy to prosper. Cutting government spending is a sure way to heat up a damp economy.

Cutting government spending will generate higher growth. Growth generates prosperity. Prosperity creates spending: a roaring fire using dry wood without wasting stacks of paper getting it going.

It is worth remembering that the US had a giant fiscal stimulus and their unemployment rate is 9.6%. They spent $800 billion on fiscal stimulus and claimed it would yield $1.50 in growth for every $1 spent.

Welcome to the blogosphere Roger

August 19th, 2010 at 1:56 pm by David Farrar

Pleased to welcome Roger Kerr to the blogosphere. Am looking forward to his contributions.

Roger has just blogged on the death of Tony Judt, described as a fearless Anglo-Jewish intellectual and academic historian who was one of the most brilliant and genuinely original thinkers of our times.

Judt caused great controversy, with this call in 2003:

Judt rocked the Jewish world in 2003 with an article in The New York Review of Books, Israel: the Alternative.

It described the Jewish state as “an anachronism” and argued that Zionism’s ethno-religious exclusivity be replaced by an inclusive liberal democracy. In effect, it called for a one-state solution to the Israel-Palestinian impasse, as he did again in a New York Times column only last month.

The so called one state solution, is ironically backed by elements of the Likud party.

The Business Roundtable has also just relaunched a refreshed website. Much more user-friendly.

Kerr on Capital Gains Tax

October 8th, 2009 at 10:15 am by David Farrar

Roger Kerr writes:

A gains tax on housing would not reduce inflation. Inflation is an ongoing increase in the general level of prices, not a one-off change in some prices.

The introduction of the Goods and Services tax resulted in a one-off increase in the consumer price index – it did not lead to ongoing inflation.

Similarly, a capital gains tax might reduce property prices initially but it would not affect longer-term inflation.

True, and any increase in GST would be a one off bump.

Moreover, if such a tax on housing were applied only to realised gains as is likely, house prices could even rise. This is because of the lock-in effect, with owners holding on to homes to defer the tax on gains. Anything that reduces supply is likely to lead to an increase, not a decrease, in price.

One could do it on unrealised gains, but that would be pretty draconian.

Evidence confirms what theory suggests: the inflation performance of countries with a capital gains tax doesn’t differ systematically from countries that don’t.

Australia, the US and Britain, which tax capital gains, have all had large and volatile house price movements this decade.

I always like a look at empirical evidence.

A second mistaken assumption is that investment in rental housing enjoys tax privileges.

As the deputy commissioner of Inland Revenue, Robin Oliver, told a select committee in 2007: “Rules about expenses for deducting costs such as interest, upkeep and maintenance, as well as paying tax on income, are the same for investments in shares or anything else. In fact under the housing case … there are tighter rules regarding what is a capital gain.”

People are misled into thinking that rental housing is tax-preferred since highly geared rental property may record tax losses. This is because the full economic income (including the change in the market value of the assets) earned on rental property is not taxed.

However, this is a quite general feature of the taxation of real assets, including plant and equipment and farms.

A real issue though is whether it is sensible to allow property owners to claim 3% depreciation on their property annually, when the empirical evidence is that almost no residential property depreciates in value – in fact it appreciates.

Kerr on the shrinking sharemarket

May 25th, 2009 at 11:43 am by David Farrar

Roger Kerr writes:

Remember the claims about New Zealand’s “Wild West” sharemarket when the Labour Government came to office in 1999? It was languishing, so the story went, because of insufficient regulation.

New Zealanders lacked the confidence to invest in publicly listed companies. The story was always nonsense. …

Undeterred, the Labour-led Government brought in new, poor-quality regulation on takeovers, insider trading, information disclosure and much more. It was urged on by the Securities Commission, the NZX and others. The collapse of Enron and WorldCom gave a new impetus to regulation. In the United States, a key response was the Sarbanes-Oxley legislation.

This seems to be universally recognised as an over-reaction that damaged the New York market. Many of the proposals for new regulation in New Zealand were resisted by the business community and informed commentators. …

So did Labour’s policies of more regulation work?

In 1999, the total value of listed companies in New Zealand stood at around $55 billion. By 2008 it had shrunk in real terms (deflated by the CPI) to $31 billion.

As a percentage of GDP, it shrank from 51 per cent in 1999 to 22 per cent in 2008.

And the aim was to increase confidence in investing. But wait, did all countries have a decrease like this?

Although Australia’s market capitalisation has also fallen relative to GDP (from 105 per cent in 1999 to 82 per cent last year) with the recent decline in world sharemarkets (which of course also affected New Zealand), it has grown by 10 per cent in real terms since 1999. That compares with the 44 per cent decline of our market.

Guess not.

Kerr on Jobs Summit

March 11th, 2009 at 11:00 am by David Farrar

Roger Kerr writes about the jobs summit:

In the lead-up to the Summit there were some predictable outbursts.

Veteran anti-globalisation campaigner Jane Kelsey hyperventilated. She saw the Summit as “a Trojan horse for the business sector” and likened it to the 1984 economic summit which was apparently “a carefully orchestrated piece of pageantry chaired by Ron Trotter” (actually David Lange – academics should get their facts right).

Professor Kelsey should calm down and watch Slumdog Millionaire. It is a rags to riches story of entrepreneurship in the new India, the product of sweeping moves to cut taxes, liberalise trade and deregulate business.

India needs to go further to lift up more of its poor, and it is unlikely to abandon globalisation any time soon.

Developing countries are arguably the biggest winners from globalisation – it allows them to sell their goods and services for a fair price.

And interestingly, even though the election only four months ago was largely about economic directions, no one argued that the government was heading in the wrong direction with its economic policies.

Opinion polls also suggest a majority of the public supports its return to more conventional and less interventionist economic policies.

There were no calls for more fiscal stimulus. Participants seemingly understood that the existing stimulus is large and that any further boost could put our credit rating at risk. This would raise the cost of borrowing for all New Zealand firms and households.

That’s an interesting observation. I certainly agree that the level of fiscal stimulus is about as large as we can manage, without dooming future generations to huge interest costs on public debt.

Politically, the Summit can be seen as an extension of the government’s moves to have a relationship with the Maori Party and a dialogue with the Greens, and many other inclusive initiatives.

This is a far cry from the tribal ‘We won, you lost. Eat that!’ style of government of recent years and augurs well for a better consensus on national directions.

Very different.

Kerr on Fiscal Stimulus

February 16th, 2009 at 5:59 am by David Farrar

Roger Kerr makes some excellent points in his NZ Herald op ed:

The Government is being urged to increase its spending to “stimulate” economic activity.

What seems to be overlooked is that the huge rises in core Crown spending in recent years – some $25 billion since 2000 – saw New Zealand “lead the world” into recession.

A very timely point. And that going into recession a year before most other countries has greatly affected our options.

Hundreds of economists in the United States are saying the Obama Administration’s so-called “stimulus” package is reckless.

The imperative now is to switch resources into the internationally trading sector so as to increase exports and cut imports. By marking down our exchange rate, the rest of the world is telling us that is what we have to do.

It looks likely to drive the US Budget deficit to about 12 per cent of gross domestic product, create huge public debt, and necessitate big tax increases or spending cuts down the track.

And NZ is already facing a decade of deficits. And if these deficits remain, tax increases are also inevitable in NZ.

For a small, open economy like New Zealand further increases in Government spending would worsen the balance of payments rather than do much to increase output, even in the short term. Longer term they would raise future tax and debt burdens and risk a resurgence of stagflation.

High levels of Government spending, already projected to be 45 per cent of GDP on the OECD’s measure (which includes local government), contributed to the balance of payments problem by driving up domestic costs, making exporting and competing with imports less profitable, and dragging resources (of capital and labour) away from those activities.

The imperative now is to switch resources into the internationally trading sector so as to increase exports and cut imports. By marking down our exchange rate, the rest of the world is telling us that is what we have to do.


Australia’s overall Government spending ratio is projected by the OECD to be 35 per cent in the coming year, compared with New Zealand’s 45 per cent ratio.

The Government needs to reduce the Government spending share of the economy over time to below Australia’s level – and more like the ratios in Hong Kong and Singapore which are below 20 per cent – to match Australia’s performance.

The Governments of those countries are able to ensure the provision of high-quality public goods and maintain strong social spending programmes with Government spending at far lower levels than NZ.

The benefits include lower taxes and levels of wages and other incomes that are now much higher than ours.

This is key. Reducing Government spending as a percentage of GDP does not mean you are spending less money. If you get higher GDP growth, then you can still maintain social spending. The trick is to have spending increase at a slower rate than GDP growth.

Beyond those exercises, the Business Roundtable strongly supports the proposed Taxpayer Rights Bill which would cap increases in spending at the rate of inflation plus population growth, unless taxpayers agree to higher increases in a referendum.

That’s a great idea. The same should apply to local Government!

Kerr comments on big money in politics

November 5th, 2008 at 2:36 pm by David Farrar

Roger Kerr commented on yesterday’s blog post about big money on politics. I think this is Roger’s first comment on a blog post!

Roger made a few observations:

(i) Representative business organisations today typically take a national interest perspective, not a narrow, self-interested business perspective as in Fortress New Zealand days. The rationale is that what’s good for New Zealand is good for business in the long run, not the other way round. (Of course whether their advocacy conforms with that perspective should always be open to challenge.)

Thankfully it has been a long-time since business groups have demanded special favours for this sector, or that sector.

(ii) Consistent with (i), they routinely both support and criticise policy positions taken by all political parties.

Indeed, and groups like Business NZ have worked closely with the Labour Government on many issues – some might even say too closely!

(iii) It’s hard to fathom why some unions (eg EPMU) are so overtly partisan. Can this really be in the interests of their members? Governments change, as they should in a healthy democracy. How can they expect a sympathetic hearing for their members’ interests when they have publicly campaigned against a party that ends up in government?

Well the EPMU is a member of the Labour Party and hence can only be partisan. It does raise the question of how should a National-led Government deal with unions who have said their job is to get National kicked out of office regardless of what their policies are.

And as amusing as I find the CTU ads, I do wonder about the wisdom of being quite so partisan, that their influence with a new Government could be greatly reduced.

(iv) Unions in other countries seem less partisan and more willing to criticise the policies of ‘their’ parties, eg US unions in manufacturing industries on climate change issues.

Yes, some of the Australian unions also have been critical of ALP policies.

(v) Donations by corporates now seem to be very small, and are often split between parties.

So far the largest reported donation to National is $30,000. And I agree they are split between parties.

(vi) It would appear that the largest reported donation to a political party in recent years from a business source was that by Mr Owen Glenn to the Labour Party.

$500,000 to Labour plus $100,000 interest free loan plus $100,000 to Winston’s legal fees.

(vii) The most blatant case of business cash-for-favours in recent years would appear to be from racing industry sources to New Zealand First, whose leader Winston Peters has railed against ‘big business’ influence on politics.

I’m not sure ironic covers this situation adequately. I’m not even sure gross hypocrisy covers it.

Kerr on Privatisation

May 8th, 2008 at 9:55 am by David Farrar

Roger Kerr writes in the NZ Herald:

With the National Party’s decision not to move any state-owned enterprises to the private sector in its first term if elected this year, we appear to have a new political consensus between the major parties in New Zealand: privatisation is bad.

I wouldn’t say that “privatisation is bad” is the consensus, more that “privatisation is very unpopular”.

Indeed New Zealand has done even more to stand out from the crowd: it has gone in the opposite direction with the buy-back of Air New Zealand and now the railways and ferries, the establishment of Kiwibank, the renationalisation of ACC, and the Auckland Regional Council’s reversal of the part-privatisation of Ports of Auckland.

Yep, the state grows and grows.

The position across the Tasman is also instructive. All governments at federal and state level are Labor, and none is opposed to privatisation. Currently the New South Wales government is battling with trade unions to privatise its electricity generators. Victoria did so in the mid-1990s, and in the five years to 2007 electricity prices in Melbourne have risen by less than one-third as much as in Sydney.

Labor in Australia is far more moderate than the counterpart in New Zealand. National has been scared off privatisation because they know a rational debate is so difficult to manage from opposition. I certainly hope that if National wins, they will govern in such a way in their first term to gain the trust of the public, so that if they then propose some modest asset sales in a second term, the debate can focus on the merits of the actual asset being in state vs private ownership, rather than an ideological holy war that all privatisation is bad and all nationalisation is good.

The worldwide moves in the past 25 years to shift state enterprises into the private sector have been driven by the evidence of major economic gains in the form of improved efficiency and profitability, lower prices and better services, and more investment and output.

Indeed. While there are some individual examples which didn’t achieve the above, the evidence if you look at the whole OECD is over whelming. And if we really want to close the gap with Australia, it will be hard to do so with the state running such a major segment of our economy.

This does not mean all private businesses are success stories and all state-owned enterprises underperform. Rather, the point is that, on average and over time, the private sector is better than politicians at running commercial businesses, and governments should not bet against the odds with taxpayers’ money.

Also owning an asset can make a Government reluctant to regulate monopoly aspects of it, because they own it. They try to do hidden regulation, where they drop hints to Directors, or appoint the right Directors, instead of having an open and transparent regulatory process.

Out of some 30 privatisations, criticism focuses mainly on just two alleged “failures”, Air New Zealand and Tranz Rail. Even if true, these criticisms would not weaken the general argument that most privatisations have been successful, but arguably the Government did not need to get involved in either case.

The Air NZ bail out only became necessary because the Government refused to allow Singapore Airlines to invest in the company.

The political aversion to privatisation is costing New Zealand potential gains in living standards. A Business Roundtable study ( estimated New Zealand could gain about 1 per cent of gross domestic product a year by privatising SOEs (leaving aside local government-owned businesses).

Unless wages and other incomes in New Zealand are to drift further behind those of Australia and other countries, this is an economic reform that will have to come back on the political agenda sooner or later.

1% of GDP might not sound a lot, but over a decade or so it is massive, and long-term is the difference between having living standards of Australia or of Slovakia.