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Selling state assets: it’s a crappy commercial decision – The Voice of Business

31 August 2012 12 comments

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An under-reported recent story in the media revealed that 54% of small/medium sized businesses in New Zealand oppose the partial privatisation of state owned enterprises.

As  Mathew Gilligan, of chartered accountants Gilligan Rowe and Associates, demanded to know,

Why do we need to sell them when we can borrow at very low interest rates and continue to receive the dividend and interest in New Zealand rather than letting that potentially escape offshore in the future.”

See: Ibid

*Badaching!!!*

This is precisely one of the strong arguments used by opponants of asset sales. Leftist political parties; community groups;   other organisations; and even a certain well-known Prime Minister,  have made precisely this point since National announced it’s privatisation agenda.

The Green Party;

The four energy companies had an average return on investment of 18.5% per annum over the last five years, including both equity gain and dividends. This is more than four times higher than the Government’s cost of borrowing at 4%. Would you borrow money on your credit card at 18.5% to put in a savings account for 4%? Of course not. It doesn’t make sense. But giving up returns of 18.5% to save 4% is the same thing, and that’s what National is planning to do. In the long-run, selling highly profitable companies for a one-off gain would mean more government debt, not less.

See: Why Keep Our Assets?

Clayton Cosgrove, NZ Labour Party

I’m calling on him now to pull the plug on it. What we are now down to is the Government defending John Key’s pride and his political vanity in respect of these sales…

... John Key is well experienced at floating companies. He is the financial whiz kid and anyone with half a brain could have worked out that because China is slowing down, their appetite for natural resources is slowing down and commodity prices are decreasing, that Solid Energy would come under pressure.

See: Halt asset sales, say opposition MPs

Bryan Gould,  former UK Labour MP,  former Vice-Chancellor of Waikato University

The Government’s commitment to public asset sales, in other words, is driven by the need to raise the money to offset its failure to get the economy moving again. But there are also reasons for resisting the sale of our national assets to what will inevitably be overseas owners.

Those reasons relate to the degree of control we exercise over our own destiny. We have already sold a greater proportion of our assets to overseas owners than any other advanced country; every time we sell another important national asset to overseas owners, we lose a little more control over our own future. ”

See: Maori leaders have the right idea

Grey Power;

“ Grey Power calls on Government to slow down the asset sales process, and engage properly with household consumers to find practical solutions to power price rises, cold houses, and long-term energy sustainability…

… All householders, particularly those on fixed or low incomes, will be prejudiced by asset sales because privatisation will lock in today’s industry-friendly pricing. Last year prices rose only a little, but as soon as the asset sales bill was passed we saw the highest-ever price increase in a single quarter – a 5% price rise averaged nationwide…

… Today’s regulation actively promotes wealth transfers to big businesses at the expense of small consumers. Price rises are like a tax but worse, because much of the profit would go to the private sector instead of cutting the national deficit or funding healthy homes programmes. Government has removed. ”

See: Grey Power Statement on Asset Sales

Hone Harawira, Mana Party

“ Assets owned by the state on behalf of all New Zealanders should not be sold to pay off a debt that was created not by NZ citizens, but by bad governance and a devotion to economic values which lead to “the rich getting richer and the poor getting poorer.”

See: No to asset sales – Hone Harawira

NZ First

“ State asset sales will be disastrous for electricity consumers. At present the market is distorted with domestic consumers subsidising commercial and industrial users. Privatising power generating and retail companies will make this situation worse as investors seek to push up profits. New Zealand First firmly believes that any profits should stay at home to benefit the local economy.”

See: NZ First – No Asset Sales

Rod Oram, Financial Commentator

The harder John Key tries to sell voters on reducing Crown ownership of five state-owned enterprises (SOEs), the deeper the hole he digs for himself and National. Here are the main arguments. None stack up…

…   So, given the economics of SOE sales are so poor and the politics so unpalatable, judging by voter resistance expressed in the polls, it remains a mystery why Key is exercising such bad economic and political judgement.”

See: SOE sales an election punt

Dr Brian Edwards, Broadcaster, Media Specialist

Well perhaps I can use myself as an example. I’m against the sale of state assets. I think selling them can’t be justified on economic grounds; and I share the nationalistic sentiments of so many Kiwis that they’re ours and we should keep ownership and control of them here.”

See: Why Labour is both right and wrong about asset sales.

Chief Ombudsman Beverley Wakem

They will carry on the same operations as they do presently which have significant scope to impact on individuals and communities and the environment. It’s not just about commercial interests, the impact of these companies goes much wider than that and all of those interests ought to be protected…

However state-owned enterprises are different from private enterprises by necessary definition of their ownership and purpose – that is to make profits for the Government and to expand and promote the interests of the public.”

See: Ombudsman warns on power selldown

CTU President, Helen Kelly

The Government does not have the mandate to sell our strategic assets and it is time the public had their say.”

See: Grey Power, CTU: Campaign for Referendum on Asset Sales

Waitangi Tribunal

In the national interest and the interests of the Crown-Maori relationship, we recommend that the sale be delayed while the Treaty partners negotiate a solution to this dilemma.”

See: Waitangi Tribunal: Asset sales must halt

John Key, Prime Minister;

Now they’re highly profitable companies, the Crown’s dividend stream from Mighty River and Genesis are large so on both motivations we don’t have a debt problem and they’re acting highly effectively as companies. There is no motivation to sell assets; actually we’re about creating assets not selling assets...

Nor am I hell bent on selling assets, actually in the world of making the boat go faster, actually, I don’t think selling assets actually makes the boat go faster.”

See: TV3 –  Key promised no job cuts, asset sales in 2008 speech

With business opposed to asset sales as well as a myriad of political, sector groups, and prominent citizens, this country is fairly well united with a single opposing voice; people reject privatisation, whether in part or in full. Especially when those assets are highly profitable and benefit the entire country as a whole.

The MYOB Business poll simply adds an extra dimension to the clamour to half asset sales. These are New Zealand’s businesspeople speaking out – not leftists or “intellectuals” or community groups – but hard-nosed businessmen and businesswomen who understand black and red ink at the bottom line.

When MYOB managing director, Julian Smith, says,

Businesses do not buy the return on investment argument that the Government is running. They can’t really see how it is going to practically improve the economy or help the country.”

– then National would be foolish to ignore that opinion.

Certainly SOE Minister, Tony Ryall’s gormless comment,

What it reflects is a wider understanding that what the Government is doing with the partial asset sales is about controlling debt.”

– is nothing more than mindless drivel.

How can Ryall claim that 54% opposition to asset sales demonstrates “a wider understanding that what the Government is doing with the partial asset sales is about controlling debt” ? Has the man actually read the poll figures before blurting out that non-sequitur spin?

With the majority of businesspeople now firmly in the anti-asset-sales camp, National has few allies left. ACT’s John Banks  and Peter Dunne are it. One is a chronic amnesiac – the other a political prostitute. Not exactly a Broad Front, by anyone’s definition.

Time to call it a day, Dear Leader. When your own business allies reject your agenda, you know you’ve totally lost the battle.

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Postscript: Another  lesson in National Party double-standards…

According to Dear Leader, the Greens’ $75,000 spending of taxpayers’ money to stop asset sales, and thereby protect taxpayers’ assets, was a heinous crime…

In two interviews about asset sales this morning, Key attacked the Greens for using $75,000 of its taxpayer-funded leaders’ budget to hire staff to collect signatures towards a citizens initiated referendum on the issue.

“These are the people that said they don’t have enough money to pay for (deaf MP) Mojo Mathers’ technology in Parliament but have enough money for a citizens initiated referendum,” he told Newstalk.

“This is a politically-motivated referendum.”

See: Key ‘desperate’ over asset sales: Greens

Meanwhile, National’s spending of $100 million of taxpayers’ money to flog off our state assets seems perfectly acceptable to Dear Leader and his cronies…

Treasury has announced it’s appointing a panel of firms to sell 49 per cent of the shares in Mighty River Power, Meridian Energy, Genesis Energy and Solid Energy.

It expects as many as 250,000 investor applications and fees charged by brokers will run to about $100 million.”

See: Taxpayers to foot $100 millon asset sale bill

$75,000 to save our state assets vs $100 million to flog them of, against public opinion.

Gee, that’s a ‘toughie‘.

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Additional

Asset sales will leave Govt worse off

Asset sales plan frustrates business owners

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Guest Author: Stop me if you’ve already heard this one

– Rob, The Standard blog

21 May 2011

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Time for a bit of in depth analysis of some of the key phrases in Bill English’s budget speech:

This Budget restricts the increase in public debt to manageable levels. Treasury’s December forecasts showed a dramatic and indefinite rise in debt levels. This is unacceptable to this Government because we do not want to saddle future generations with the cost of short term policies.

We will initiate a programme to lift productivity, improve competitiveness and sharpen New Zealand’s future economic performance.

We will consolidate the Government’s fiscal position, keep debt under control and ensure that Crown finances are properly managed.

This Government came into office with a plan to lift New Zealand’s economic performance.

I move on to our plan to balance the Government’s books. … This Budget will begin to restore the Crown balance sheet to its previous health.

The measures I have outlined will form key elements of our strategy to ensure that New Zealand emerges from the downturn stronger than it entered it.

The Government is determined that future taxpayers will not be burdened with higher debt which is unmatched by increases in productive assets.

To achieve this, the Government has made some difficult decisions.

The measures outlined this afternoon, the expenditure restraint shown by this Government, deferment of the tax cuts and deferment of Super Fund contributions, will keep the increase in public debt within acceptable levels. …

[This Budget] marks a turning point for New Zealand. Ten years of economic growth and expansive appetites for debt and Government spending have ended. Today we have outlined the challenge to rebalance the economy from debt and consumption to investment and exports.

The Budget will improve New Zealand’s international competitiveness.

It will get our debt under control and turning down.

It starts to create a government sector that provides better services and delivers better value for taxpayers.

It will help create new and sustainable jobs.

It will begin to build a platform for a much more ambitious New Zealand.

Mr Speaker, I commend this Budget to the House.

Ooops – Dammit! Sorry, my mistake. Wrong speech. That’s the budget speech from 2009. This is the one I meant:

The worst of the global crisis has for now passed and the economy has begun to grow again. In fact, New Zealand has weathered the economic storm better than many other developed economies.

Government policy struck the right balance between blunting the sharp edges of recession and maintaining control of public finances.

The Government is committed to policies that will reduce our vulnerabilities by tilting our economy away from debt and consumption toward savings, investment and exports.

These policies underpin the updated Treasury forecasts showing steady growth of around 3 per cent over each of the next four years.

The forecasts also show that this growth will raise real incomes of the average household by about $7,000 over the next four years, and create 170,000 jobs.

I now turn to the Government’s fourth objective, that of maintaining firm control of the government’s finances, so we can return the budget to surplus and reduce our rising debt.

The fiscal outlook has improved from last year, due to the economy returning to growth and the positive impact of Budget 2009 decisions.

The projected operating deficit for the next financial year is $8.6 billion or 4.2 per cent of GDP.

It is projected to improve steadily in each subsequent year, and to reach surplus in 2015/16, three years ahead of last year’s projection.

As a result of this improved outlook the debt projections have also become more favourable

We now have our debt under control and unemployment is beginning to fall.

We will emerge as one of the countries that other nations aspire to be more like.

There are risks to the recovery. A mountain of debt hangs over a number of our export destinations, and will also influence the markets that lend to New Zealand.

We cannot take for granted the contribution that the Australian and Chinese economies have made to our growth.

However, we are on track to a position most developed economies will envy.

This includes more new jobs, falling unemployment, rising family incomes,
quality public services and sound public finances.

Mr Speaker, This Budget continues to build a platform for a much more ambitious New Zealand.

Mr Speaker, I commend this Budget to the House.

Oh My. I really don’t know what’s wrong with me today. That’s the wrong speech again! That was the 2010 speech. This is the 2011 speech. Really this time:

Today I introduce a Budget that will further strengthen the long-term performance of the economy.

It supports economic forecasts that show growth returning to its highest in over five years and 170,000 net new jobs being created by 2015.

Our main task remains to return New Zealand to sustained prosperity. The economy has been underperforming since before the global financial crisis. Indeed, per capita GDP has not grown since 2004.

The OECD, the Savings Working Group and others have pointed out that we need to make the economy more competitive and lift national savings.

Currently, most businesses and households have successfully lifted their own savings. While that has hurt retailers for now, in the long term it is a good thing.

The main sector not saving is the Government.

The deficit in 2010/11 will be large, at $16.7 billion or 8.4 per cent of GDP. This includes a range of one-off costs, including the earthquakes.

The measures announced in this Budget will put both the Government’s finances and the economy on a much sounder footing despite a series of adverse events and a slower economic recovery.

The projected operating deficit will fall dramatically over the next three years. It will be in significant surplus from 2014/15.

This is a year sooner than the position forecast last year.

Budget 2011 shows how, from the depths of the global financial crisis when a decade of red ink was in prospect, and despite the devastating Canterbury earthquakes and other setbacks, the Government has laid the basis for future prosperity.

It is within sight of budget surpluses and falling public debt.

It has funded reconstruction of Christchurch, our second largest city.

It has in prospect the strongest growth for a decade.

It has materially improved the tax system.

It has placed KiwiSaver onto a sounder, more sustainable footing, and instilled a culture built on savings rather than debt.

And it will provide future New Zealanders with real choices about further lowering taxes, adding quality public services, or both.

We set a path for responsible government spending from the start of our term, and we maintain that path in this Budget.

This Budget continues to build a platform for a much stronger, more ambitious New Zealand.

Mr Speaker, I commend this Budget to the House.

Sounds awfully familiar doesn’t it. Right down to the recycled prediction of 170,000 new jobs. Why are the promises and predictions of 2011 any more realistic or believable than the failed promises and predictions of 2010 and 2009? How can anyone listen to Bill English, John Key and the Nats making these abundantly meaningless claims time after time without laughing? Know what they say eh. Fool me once, shame on you. Fool me twice…

 

 

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Acknowledgement

Reprinted with kind permission by Lprent, The Standard

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“Dopey is as dopey does”, according to Dear Leader

31 August 2012 20 comments

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For a man who was raised in a state house; in a single-parent family; and who had all the benefits of a free tertiary education, John Key’s attitude towards those at the bottom of the socio-economic scale leaves a lot to be desired.

Let’s re-cap,

  • John Key’s father died, leaving his mother a solo-mum, to raise children by herself,
  • She would have received the DPB or widow’s benefit (and quite rightly so)
  • She would most likely have been eligible for the Family Benefit, paid to families with children until Ruth Richardson scrapped it in her  1991 “Mother of all Budgets”
  • John Key’s family  enjoyed a state house, with low-rent and security of tenure
  • And lastly, John Key was given a free, tax-payer funded University education (no student fees or debt)

When the Children’s Commissioner’s Expert Advisory Group (EAG) report was released, it’s recommendations included,

First, the group will call for a Warrant of Fitness for landlords. Given John Key has this weekend stressing the success of the Green-inspired home insulation scheme, but the disappointing uptake from landlords, it’s a timely bit of advice.

A WOF on rental homes would ensure poor kids don’t grow up in leaky, cold and unhealthy homes. Really, a safe, warm house should be a basic requirement if you’re going to charge rent. Who can argue with that?

Second, it’ll call for meals to be provided more widely in schools. Some, such as Deborah Morris-Travers from Every Child Counts says that’s a no-brainer. Children need food if they’re to learn and deal with the social demands of school. Some are less keen, however, arguing it takes the onus off parents and puts more pressure on teachers to feed as well as teach our children.

But another study shows this could just be the thin end of the school wedge. Every Child Counts’ Netherlands study this week talked about schools becoming a community hub, with not only meals but before and after school care, nurses, social workers and clubs.

It’s a bold prescription, but one that works overseas by helping working parents and keeping families connected to their schools.

Third, the EAG is expected to call for some form of long-term and universal state assistance for kids – maybe a Universal Child Benefit, or some money every week for every child born. Until 1991 we had such a thing – a Family Benefit. That went in the Bolger/Richardson years.

See: Tim Watkin: It’s time to talk about child poverty again

These three options could put a serious dent into child poverty. A Universal Child Benefit – along the lines of  the old Family Benefit – could add an extra $150  and  extra food on the tables of low-income families.

John Key’s response? In Parliament, responding to a point made by Greens co-leader, Metiria Turei [error correction], he bellowed with great gusto,

We are in an unequal society in New Zealand in her view because the rich are getting richer. And now she is on her feet telling me ‘give the rich families even more for their kids’. What a dopey idea that is.”

See: Key dismisses payment for all parents as ‘dopey’

What a mean-spirited, shallow-thinking man we have as a leader of our nation.

without a  doubt, John Key has a constituency of many other selfish, mean-spirited, short-sighted people in this country. There are a fair number of ill-educated and self-centered who think that the only solution to poverty is to do nothing, and let the poor struggle on. These people have no compassion.

That is the kind of  shallow-thinking that will eventually  doom a society to growing income-disparity; increasing gap between the Haves and Have Nots; and eventual social dislocation and violence.

Such people who think that the poor are poor because they deserve it are a far greater menace to the fabric of our social cohesion, than all the patched gang-members in our community.

For John Key to dismiss a proposed  Universal Child Benefit as “dopey” shows us only one thing; he has forgotten his roots. He has forgotten where he came from. He has forgotten not just the sacrifices of his family – but the strong community support that he benefitted from, and gave him the opportunity to make himself rich.

John Key is where he is because other taxpayers contributed to his housing, education, healthcare, and well-being.

He did not do it by himself.

This blogger does not begrudge Dear Leader’s bulging bank account of $50 million.

What I find reprehensible  is that he would deny other families the chance to access similar support to give their children a decent start in life.

Paula Bennett did the same with the Training Incentive Allowance. Bennett used the TIA to gain a free tertiary education for herself – and then cut the Allowance in 2009. Other solo-mothers can no longer use the same TIA to put themselves through University, and get of the DPB.

See: Bennett rejects ‘hypocrite’ claims

This blogger wonders at the like of John Key and Paula Bennett,  and  how they can deny others the same state-funded assistance that they themselves benefitted from.

What kind of human beings are these people?

How can they forget the assistance that they received when in need?

And what possible satisfaction  do they get when they deny state assistance to their fellow New Zealanders? Especially the same assistance that Key and Bennett personally benefitted from?

The greatest poverty that a society can endure is not monetary. It is a paucity of leadership. It is a lack of hope. And it is a disconnect in social compassion.

When we allow cruelty over compassion, then we are in deep trouble.

It is said that when facing a problem, the three challenges are,

  1. Identify the problem,
  2. Come up with solutions,
  3. Have the Will to implement those solution.

We know the problem.

We have the solutions.

Our leaders are still looking for #3.

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Previous related blogposts

Once upon a time there was a solo-mum

Hypocrisy – thy name be National

Hon. Paula Bennett, Minister of Hypocrisy

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