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How to sabotage the asset sales…

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Something I blogged on 25 June 2012, and now more appropriate than ever…

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On last weekends’ (23/24 June 2012) “The Nation“,  the issue of asset sales was discussed with   NZ First leader, Winston Peters; Green Party MP, Gareth Hughes; and Labour MP, Clayton Cosgrove,

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Source

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Whilst all three parties are staunchly opposed to state asset sales, NZ First leader, Winston Peters went one step further,  promising that his Party would buy back the assets.

Gareth Hughes and Clayton Cosgrove were luke-warm on the idea, quite rightly stating that there were simply too many variables involved in committing to a buy-back two and a half years out from the next election. (And Peters never followed through on his election pledge in 1996 to buy back NZ Forestry – “to hand back the envelope”, as he put it –  after National had privatised it.) There was simply no way of knowing what state National would leave the economy.

Considering National’s tragically incompetant economic mismanagement thus far, the outlook for New Zealand is not good. We can look forward to more of the usual,

  • More migration to Australia
  • More low growth
  • More high unemployment
  • More deficits
  • More skewed taxation/investment policies
  • Still more deficits
  • More cuts to state services
  • And did I mention more deficits?

By 2014, National will have frittered away most (if not all) of the proceeds from the sale of Meridian, Genesis, Mighty River Power, Solid Energy, and Air New Zealand.

In such an environment, it is difficult to sound plausible when promising to buy back multi-billion dollar corporations.

Not to be thwarted, Peters replied to a question by Rachel Smalley, stating adamantly,

The market needs to know that Winston Peters and a future government is going to take back  those assets. By that I mean pay no greater price than their first offering price. This is, if they transfer to seven or eight people, it doesn’t matter, we’ll pay the first price or less.

Bold words.

It remains to be seen if Peters will carry out that threat – especially if a number of his shareholders are retired Kiwi superannuitants?

When further questioned by Rachel Smalley, Peters offered specific  ideas how a buy-back might be funded,

Why can’t we borrow from the super fund, for example? And pay that back over time?  And why can’t we borrow from Kiwisaver  for example, and pay that back over time…”

The answer is that governments are sovereign and can make whatever laws they deem fit. That includes buying back assets at market value; at original sale price; or simple expropriation without  compensation. (The latter would probably be unacceptable to 99% of New Zealanders and would play havoc with our economy.)

Peters is correct; funding per se is not an issue. In fact, money could be borrowed from any number of sources, including overseas lenders. The gains from all five SOEs – especially the power companies – would outweigh the cost of any borrowings.

Eg,

  1. Cost of borrowing from overseas: 2% interest
  2. Returns from SOEs: 17%
  3. Profit to NZ: 15%

We make on the deal.

The question is, can an incoming Labour-Green-NZ First-Mana government accomplish such a plan?

Should such a  radical policy be presented to the public at an election, the National Party would go into Warp Drive with a mass  panic-attack.

But it’s not National that would be panicked.

It would be National going hard-out to panic the public.

National’s scare-campaign would promise the voters economic collapse;  investors deserting the country; a crashed share-market; cows drying up; a plague of locusts; the Waikato River turning to blood; hordes of zombie-dead rising up…

And as we all know, most low-information voters are highly susceptible to such fear-campaigns. The result would be predictable:

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But let’s try that again…

A more plausible scenario would have the leadership of Labour, NZ First, the Greens, and Mana, meeting at a secluded retreat for a high-level,  cross-party strategy conference.

At the conclusion of said conference, the Leaders emerge, with an “understanding”, of recognising each others’ differing policies,

  1. Winston Peters presents a plan to the public, promoting NZF policy to buy-back  the five SOEs. As per his  original proposals, all shares will be repurchased at original offer-price.
  2. The  Mana Party  buy-in  to NZ First’s plan and pledge their support.
  3. Labour and the Greens release the joint-Party declaration stating that  whilst they do not pledge support to NZ First/Mana’s proposal – neither do they discount it. At this point, say Labour and the Greens, all options are on the table.

That scenario creates considerable  uncertainty and anxiety  in the minds of potential share-purchasers. Whilst they know that they will be recompensed in any buy-back scheme – they are effectively stymied in on-selling the shares for gain. Because no new investor  in their right mind would want to buy  shares that (a) probably no one else will want to buy and (b) once the buy-back begins, they would lose out.

Eg; Peter buys 1,000 shares at original offer price of $2 per share. Cost to Peter: $2,000.

Peter then on-sells shares to Paul at $2.50 per share.  Cost to Paul: $2,500. Profit to Peter: $500.

Paul then cannot on-sell his shares – no one else is buying. Once elected, a new centre-left government implements a buy back of shares at original offer-price @ $2 per share. Price paid to Paul: $2,000. Loss to Paul: $500.

Such a strategy is high-stakes politics at it’s riskiest.   Even if Labour and the Greens do not commit to a specific buy-back plan, and “left their options open” –  would the public wear it?

The certainty in any such grand strategy is that the asset sale would be effectively sabotaged. No individual or corporate buyer would want to become involved in this kind of uncertainty.

Of less certainty is how the public would perceive  a situation (even if Labour and the Greens remained staunchly adamant that they were not committed to any buy-back plan) of political Parties engaging in such a deliberate  scheme of de-stabilisation of a current government’s policies.

The asset sales programme would most likely fail, for sure.

But at what cost? Labour and the centre-left losing the next election?

We may well end up winning the war to save our SOEs – but end up a casualty of the battle.

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Related Blog posts

Peter Dunne says

Campaign: Flood the Beehive!

Additional

Asset sales remain unpopular for NZers

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The Muppet Show – Kiwi style!

21 February 2012 5 comments

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I just want to emphasise that it is not our best guess; it’s just a guess. It’s just to put some numbers in that look like they might be roughly right for forecasting purposes.

“That’s an honest answer.”Bill English, 17 February 2012

That may be an “honest answer” – but it also has to rank as one of the dumbest in New Zealand’s political history.

To explain what Bill English was being “honest” about,

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Full Story

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That’s right, folks, our Finance Minister has just let slip that National has no idea how much money they will raise from the part-privatisation of Genesis Energy, Might River Power, Meridian, Solid Energy, and Air New Zealand.

They don’t have a clue.

The $5 -$7 billion they have been quoting pre and post election are figures seemingly plucked out of hot-air from Parliament’s oxygen-depleted atmosphere. (Oxygen depletion tends to have unpleasant side-effects on a brain such as confused, muddled, thinking.)

John Key – realising that Bill English had made National the laughing stock of the country – jumped in, changing the “best guess” to a “best estimate”,

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Full Story

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However, Key didn’t help matters much when he added,

I think they are our best estimates”.

“There are lots of variables in there … what we do know is the Crown will absolutely have a minimum of 51 per cent shareholding but could have more. We don’t know what price the market will pay at the time; we don’t know the exact timing of all these particular floats.”

So let’s see.  Key and English don’t know any of the following,

  • How much will be raised by the partial-privatisation?
  • Whether they will end up with 51% ownership – or more?
  • Or even the timing of the “floats” (sale of shares)?
  • Or what price the shares will be sold at???

No wonder Greens co-leader Russel Norman said, in utter exasperation,

That isn’t how we should be running the finances of New Zealand.”

Norman wasn’t playing usual political one-upmanship games – he was voicing the entire country’s disquiet at what is rapidly looking like mickey mouse incompetance.

Yet again this is an example of National simply not being up-with-the-play.  Much like unaffordable tax-cuts of ’09 and ’10; the Jobs Summit of 2009 that achieved very little;   the credit down-grade they “never saw coming”; the broken promise on raising gst; the $1.4 billion revenue short-fall – National’s economic policies seem to be ad-hoc at the very best.

No wonder even the business community was left wondering if National had any plan at all for economic recovery.

If this was the Muppet Show, it might look something like this,

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Instead, it looks like this,

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Full Story

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These two clowns muppets are in charge of billions of dollars worth of public property?

I am not reassured. In fact, I wouldn’t trust these two to run  a charity sausage sizzle.

I can imagine how that would end badly,

  • 1 x sausage, @ 50 cents wholesale
  • gas, onion, sauces, napkin, est. 50 cents per sausage
  • Retail price: ? 40 cents   60 cents   75 cents!

Cue: muppet theme & roll credits.

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Other Blog stories

Selling assets will cost us more than keeping them – the idiocy of National

“Best guess?” – National and Fairfax are working very hard for one another

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Dunne’s Dumb Deal?

5 December 2011 3 comments

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Full Story

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What Mr Dunne gets:

– No sale of KiwiBank or Radio New Zealand.
– Statutory limits will be introduced on the sale of public asset to no more than 49 per cent of shareholding to private interests and limits would be put on the extent of single entity ownership.
– A ban on guided helicopter hunting on conservation land will be introduced to Parliament.
– The budgets of both Radio New Zealand and Television New Zealand will be maintained.
– The Families Commission will be revamped.
– There will be public consultation on Mr Dunne’s Flexi-Super policy.
– Guaranteed access to rivers, lakes, forests and coastline.
– An agreement to reintroduce Mr Dunne’s income sharing legislation which failed to win enough support in the last Parliament.
– Free health-checks for over 65-year-olds would also be investigated.

Whoa…! Back up that coalition-pony, sonny boy!

No sale of KiwiBank or Radio New Zealand?!?!

Since when did National advocate or campaign on the privatisation of Kiwibank or Radio New Zealand?

In fact, John Key made it a campaign promise that Kiwibank was not up for sale, and that the only state assets on the block were Genesis Power, Meridian, Might River Power, Solid Energy, and Air New Zealand. No mention whatsoever of Radio NZ or Kiwibank.

What’s going on here?

Either Peter Dunne is telling fibs and creating a false “victory” – or else National had a secret agenda of further asset asales!?

Someone is misleading the public.

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+++ Updates +++

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Full Story

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The above article starts out positive and seemingly Dunne has succeeded in saving TVNZ7 from disappearing and being replaced by a shopping channel…

Until one reads this in the same piece,

I would have preferred to have got a much more explicit agreement regarding the future of TVNZ 7 but the National Party wouldn’t go there.”

And Dunne  then adds,

TVNZ keeps saying it needs to run as a commercial body, and it obviously makes its own decisions, but I think it needs to recognise there is a significant chunk of the population that prefers the approach TVNZ 7 takes and would be very disappointed if that channel was to close.

So he really hasn’t “saved TVNZ7” at all. In fact, Dunne admitted as much this morning (Dec 6) on Radio NZ, when he said on “Morning Report“,

” …I wanted to get an absolute committment  to the retention of TVNZ7. We weren’t able to get that. The government wasn’t prepared to make that, uh, concession…”

Ok, so let’s sum this up,

  • Dunne get’s a promise from National that neither Kiwibank nor Radio NZ will be sold.
  • But National never suggested selling Kiwibank or Radio NZ in the first place.
  • So what kind of “victory” is it to get a committment on something that the Nats weren’t intending to do anyway?
  • Dunne then negotiates to get an absolute committment to save TVNZ7.
  • And fails.

Have I missed anything?

Moving right along…

“Free health-checks for over 65-year-olds” – ???

Great. More rip-offs from my generation, the Baby Boomers. Everyone else has to pay for health checks – but all of a sudden we get freebies?

Yet again Baby Boomers – being a sizeable bloc of voters – gain tax-payer funded social services whilst everyone else has user-pays.

No doubt these “free health checks” will be funded from that sale of state assets. Once again Baby Boomers are ripping off future generations for our own selfish benefit.

The word obscene comes to mind.

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Email  Peter Dunne to let him know what you think about asset sales:

p.dunne@ministers.govt.nz

ohariu.mp@parliament.govt.nz

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