Labour’s challenge

Labour have a challenge in whipping up opposition to National’s likely policy to allow people to invest in four power company SOEs, while retaining majority crown ownership and control.

When Phil Goff attacks John Key for a policy of minority stakes being allowed, John Key will no doubt point out that Phil Goff enthusiastically sold off 100% of NZ Steel, Petrocorp, DFC, Postbank, Rural Bank, State Insurance, THC, Maui Gas and oh yeah Telecom.

And worse Phil Goff sold them with no mandate, while John Key is doing the opposite – going to the voters saying this is what we will do (and only do) if re-elected.

I have no doubt National will lose some popularity if it confirms a policy of allowing minority private investment in those SOEs. But I beleive it will be relatively modest compared to what it might be if Labour wasn’t led by someone who was an enthusiatic champion of asset sales in the past.

Also of note, the Herald editorial welcomes the policy, and the fact the PM is risking taking on a sacred cow:

Courage in politics is seldom recognised when it is successful. It takes courage to challenge a sacred cow, but a well-aimed challenge can render the cow sacred no longer. John Key’s announcement of public asset sales yesterday should be recognised as a decision both courageous and well directed.

Importantly, Key has built up trust by keeping to the no SOE sales in the first term policy, so that voters can be reassured that any policy for the second term will also be adhered to and not exceeded.

The Prime Minister has made a very good case for the decision to partly privatise the state’s three power companies and its coal company and reduce its stake in Air New Zealand. He says the sales are primarily to finance the construction of other public assets that will be needed over the next five years.

Yes, the state is not reducing its total number of assets – in fact it is growing them.

The partial floats of Meridian, Genesis, Mighty River Power and Solid Energy, will bring some much-needed new life to the stockmarket and begin to provide an alternative to property investment for superannuation funds and personal savers.

This privatisation programme will favour local share buyers over foreigners, much like the sale of power companies in the 1990s. Unlike then, the Government plans to retain a majority holding. Mr Key believes this makes for the “best of both worlds”. The company is subjected to the discipline, reporting requirements and oversight of the sharemarket and the bulk of its dividends go to the public purse.

It is a bold plan and a sensible one. Public asset sales alone will not sustain the sharemarket or breed a new investment culture in the population. But they are a start.

If we want people to borrow less, and save more, we need to have companies they can invest in.