Archive
Tiwai Point – An exercise in National’s “prudent fiscal management”?
.
.
Timeline
3 October 2007: Meridian and NZAS/Rio Tinto sign agreement for the continuous supply of 572 megawatts of power to the Tiwai Point smelter for 2013 to 2030.
30 October 2011: National government announces partial asset sales, of Genesis, Meridian, Mighty River Power, Solid Energy, and a further sell-down of Air New Zealand.
9 August 2012: Meridian Energy (electricity supplier to Rio Tinto) announces that Rio Tinto/Pacific Aluminium is demanding to renegotiate its electricity supply contract between the Tiwai Point aluminium smelter and Meridian.
We were conned.
There is no other way to describe events between October 2007 and February this year; we were conned by a multi-national mining/metals giant that exploited National’s core-policies, for their own gain.
How else to describe the above events?
Once National announced their intention to partially-privatise Meridian Energy and float it on the New Zealand (and Australian) stock exchanges – Rio Tinto realised that the price of Meridian shares would be determined by the income they derived from selling electricity.
As Green Party co-leader, Russel Norman stated,
”Rio Tinto took advantage of Mr Key’s obsession with asset sales by threatening to derail the sale of Meridian by closing the Tiwai smelter, so Mr Key gave them $30 million of public money.”
Rio Tinto was Meridian’s biggest customer, supplying Tiwai Point with approximately 15% of New Zealand’s total electricity output. As such, Rio Tinto had Meridian (and by proxy, the National Government) by the balls. And on 7 September 2012 and 7 August 2013, Rio Tinto squeezed.
By making 130 workers redundant, it sent National, and it’s compliant leader, a clear message; “Don’t f**k with us, Johnny-boy. These 130 plebes are an example of what we can do to screw you over“.
Had Rio Tinto followed through on it’s threats (and make no mistake – they were threats), it would have brought down the government. That would have ended Key’s career and his reputation would have been in tatters. No Knighthood or beersies for Johnny-boy!
Key had no choice but to capitulate. Key admitted as such when he said on 14 February,
“At the end of the day I think the Government took a modest step to ensure there was a smooth potential transition there – that we didn’t have a glut of electricity we couldn’t use or that thousands and thousands of Southland jobs are out at risk.”
The resulting loss of 700 jobs at the smelter, and a further 2,500 downstream throughout Southland, would certainly have been embarrassing for Key and damaging to National . But this is a government that has overseen the sacking of approximately 3,000 state sector workers (up to August 2012) and 29,472 few jobs in the manufacturing sector, since 2006 (2013 Census results), so unemployment per se is not a problem that overly concerns right-wing government ministers.
What really threatened this government was Key’s reference to a “glut of electricity” – note the words. A glut of electricity would have de-railed the entire asset sales programme. Result; end of National; end of asset sales programme (and the neo-liberal agenda on the whole), and the end of Key’s career.
This shabby, self-serving, politically-expedient exercise, has cost us – the tax-payer – $30 million, plus an even cheaper electricity deal than probably anyone else in this country gets. No wonder the contract price is even more uber secret than the goings-on at the GCSB – the public would erupt in fury if they came to know what our electricity was being sold for, whilst the rest of us have mounting power prices, year after year after year.
Meanwhile, the lowest paid workers in New Zealand’s rest homes are paid just barely above the minimum wage;
.
.
To which our well-heeled Prime Minister responded thusly,
.
.
To quote Dear Leader,
“It’s one of those things we’d love to do if we had the cash. As the country moves back to surplus it’s one of the areas we can look at but I think most people would accept this isn’t the time we have lots of extra cash.”
Interesting. Key and his Cabinet cronies found $30 million to throw at a multi-national corporation – which only six months later posted a $4.43 billion ($US3.7 billion) annual after-tax profit.
But no money for the lowest paid, hardest-working people (predominantly women) in our community. Key responded to Russell Norman’s criticism of the $30 million welfare handout,
“If Tiwai Point had closed straight away then hundreds and hundreds and hundreds of jobs would have disappeared and the Greens would have said the Government doesn’t care about those workers and is turning their back on them so they really can’t have it both ways.”
If only we could believe Key. But considering that thousands lost their jobs since the Global Financial Crisis, and National has not bailed out any other company, the Prime Minister’s protestations ring hollow.
In fact, it’s fairly well obvious that the taxpayer-funded payout to Rio Tinto had nothing to do with jobs or the Southland economy – and everything to do with the state assets sales. As David Hargreaves wrote on Interest.co.nz,
“So, it will cost you, I and him and her a combined NZ$30 million of our hard-earned to keep the Tiwai Point aluminium smelter open just long enough so that the Government can flog off 49% of Meridian Energy.
That’s about the size of the deal struck between Meridian and the company controlled by global giant Rio Tinto, with additional sugar coating supplied by the Government, courtesy of us.
From the point the Government first stepped in earlier this year in an attempt to ‘help out’ it was always obvious tax payers were going to be forced to front up with some readies for the pleasure of keeping the always controversial smelter running for a while longer.
I have no doubt that the smelter will be closed in 2017, which is now when the owners get the first chance to pull the plug.”
The most asinine aspect to this deal (and there are many) is that Finance Minister, Bill English, told Radio New Zealand on 9 August 2013 that “ensuring the safety of those jobs was not part of the deal and no undertakings were sought on the operation of the company”.
No guarantee for preserving jobs?!
Question: So what, precisely, did $30 million buy?
Answer: Rio Tinto not rocking the boat and upsetting National’s asset-sales programme.
This was a most odious, repugnant deal.
Every New Zealander contributed some of their hard-earned cash, which ended up in Rio Tinto’s shareholder’s pockets.
All done to achieve the sale of state assets which we own.
John Key gave away our money; which ended up in shareholder’s pockets; to sell assets we own; to other share investors.
This is the crazy side of National’s economic policy. This is corporate welfare and crony capitalism rolled into one. Which begs the question to National’s supporters; is this what they see as “prudent fiscal management”?
How “prudent” is it to pay a subsidy to a multi-national corporation, that posted a multi-billion dollar after-tax profit, that will most likely close the smelter regardless in some near future date (2017?)?
And why was that $30 million not invested in other job creation industries in Southland, so that a multi-national corporation could not hold this country to ransom? After Rio Tinto and Warner Bros – who is next to hold a gun to our collective head demanding a taxpayer subsidy/payout?
This was an odious, repugnant and wasteful deal.
This should not be allowed to be forgotten this election.
.
.
*
.
References
NZ Herald: Meridian boss hails deal with smelter
Radio NZ: Details of Meridian share offer announced
Radio NZ: National announces plans for asset sale profits
TV3: Rio Tinto seeks new Bluff smelter terms
TV3: Rio Tinto eyeing smelter closures
Australia Mining: Rio Tinto’s New Zealand smelter to axe jobs
Fairfax Media: More jobs to go in smelter revamp
Interest.co.nz: Govt pays NZ$30 mln to smelter owners in a deal that will clear the way for the float of Meridian Energy
Radio NZ: No job guarantees sought in smelter deal
Otago Daily Times: Rio Tinto profit more than $4.4b
NZ Herald: PM defends $30m payout to Rio Tinto
NZ Statistics: 2013 Census QuickStats about national highlights
Dominion Post: 555 jobs gone from public sector
Fairfax media: Resthome spy hails saint-like workers
Fairfax media: PM – No money for aged care workers
Previous related blogposts
John Key’s track record on raising wages – 4. Rest Home Workers
“It’s one of those things we’d love to do if we had the cash”
.
*
.
Above image acknowledgment: Francis Owen
This blogpost was first published on The Daily Blog on 18 February 2014.
.
.
= fs =
Radio NZ: Focus on Politics for 21 February 2014
.
– Focus on Politics –
.
– Friday 21 February 2014 –
.
– Brent Edwards –
.
A weekly analysis of significant political issues.
Friday after 6:30pm and Saturday at 5:10pm
Disagreement about how to reduce poverty and inequality is looming as one of the big debates of election year.
.
.
Click to listen: Focus on Politics for 21 February 2014 ( 16′ 38″ )
.
.
.
= fs =
Radio NZ: Politics with Matthew Hooton and Mike Williams – 17 February 2014
.
– Politics on Nine To Noon –
.
– Monday 17 February 2014 –
.
– Kathryn Ryan, with Matthew Hooton & Mike Williams –
.
Today on Politics on Nine To Noon,
.
.
Click to Listen: Politics with Matthew Hooton and Mike Williams (24′ 09″ )
- Kim Dotcom/Russel Norman
- Green Party in government
- GCSB/surveillance
- David Cunliffe
- Fairfax/Ipsos Poll
- Shane Jones/Countdown supermarkets
- Labour’s “Best Start” Policy/Taxation
- Passports/Syria/Al Qaida
- Green Party Home Solar Policy
.
= fs =
Letter to the Editor: National’s response to Green solar policy is sheer hypocrisy!
.
.
FROM: "f.macskasy" SUBJECT: Letters to the Editor DATE: Sun, 16 Feb 2014 20:31:51 +1300 TO: "NZ Herald" <letters@herald.co.nz>.
The Editor NZ HERALD . The Green Party policy, to fund the installation of solar panels on 30,000 homes, is sheer common sense. As power prices continue to rise and power supply is heavily reliant on good rainfall in hydro-areas, anything that make homes more self-sufficient is to be welcomed. I was therefore stunned and flabbergasted to hear National's energy minister, Simon Bridges, almost hysterical in his condemnation of the Green Party, “Money doesn't grow on trees, even for the Greens. This is just back to the old roll out the printing press and start printing money from the Greens.” Someone please take Mr Bridges aside and flash the National Party's Energy Policy document in front of his baby-fresh face and remind him that in 2009 National allocated $1 billion for home insulation, as part of an agreement with the Green Party. In a media release dated 16 May 2013, Bridges waxed lyrical about the home insulation scheme, “Warmer, drier homes provide real benefits to New Zealanders Mr Bridges says. As well as energy efficiency gains, insulating homes reduces health risks such as respiratory illnesses and serious diseases like rheumatic fever. Warm Up New Zealand: Healthy Homes will help boost the health and well-being of New Zealanders living in poor housing and is part of the Government’s response to child poverty.” So spending $1 billion on home insulation is a good thing? But lending for solar panels for our homes is bad? Considering that the $1 billion spent by National was in the form of non-recoverable grants (up to $1,500 per home), whilst the Greens are talking about low-interest loans, it occurs to me that the Greens are more fiscally conservative than the money-splurging National Party, who waste tax-dollars like it grows on blue trees. This is the National Party that gifted $30 million to Rio Tinto and over $90 million to Warner Bros to subsidise 'The Hobbit'. Both Rio Tinto and 'The Hobbit' have made billions in profits. I'd rather spend our taxes on New Zealanders rather than subsidising billion-dollar foreign corporations. Mr Bridges - breathe through your nose! . -Frank Macskasy (address & phone number supplied)
.
*
.
References
TV3: How The Hobbit came to stay in NZ
Beehive.govt.nz: $100m for investing in warmer, healthier homes
Fairfax media: $1b Budget warmup
TV3: Labour backs Greens’ solar panel policy
.
*
.
Above image acknowledgment: Francis Owen
.
.
= fs =
You Have Mail…
.
.
National, ACT, and Peter Dunne have passed legislation to enable the partial-privatisation of our property; Meridian, Genesis, Mighty Rive Power, Solid Energy, and Air New Zealand.
I will not take this lying down. Neither should you.
Every New Zealander who believes, hand on heart, that what National is doing is just plain wrong must take whatever (non-violent) action they can to make their anger known to our elected representatives,
.
To the editors…
.
from: Frank M <fmacskasy@yahoo.com>
to: Sunday Star Times <letters@star-times.co.nz>
date: Tue, Jun 26, 2012 at 7:17 PM
subject: LettersThe Editor
SUNDAY STAR TIMESIf ever there was a government that has deliberately ignored the will of the people, it is this John Key-led National Party, along with it’s one-man band supporters, John Banks and Peter Dunne.
By passing legislation to enable asset sales, they have thumbed their noses at the entire country. This government is now so far out of touch with the public, that they are blind to what New Zealanders want for the future of their country.
Mr Key can smile and dress-up the proposed asset sales in any way he wants – but the people will revile him for selling what we alreadsy own.
Shame on you, John Key, and on you, Peter Dunne. Shame of you for taking what belongs to us – and then trying to sell it back to us, and any carpetbagger that pops up from overseas.
If I have one word of advice to this wretched government, it is this: resign.
-Frank Macskasy
Blogger,
“Frankly Speaking”
.
from: Frank M <fmacskasy@yahoo.com>
to: NZ Herald <letters@herald.co.nz>
date: Tue, Jun 26, 2012 at 7:08 PM
subject: LettersThe Editor
NZ HERALDOne cannot help but be thoroughly disgusted at the actions of John Key and his wretched “government”, in passing asset-sale legislation.
The manner in which they have blatantly disregarded public opinion on this issue, is simply appalling.
This government has lost it’s legitamacy and should resign. Give the people a new election, and a fresh chance to determine the future of our country.
-Frank Macskasy
Blogger,
“Frankly Speaking”
.
from: Frank M <fmacskasy@yahoo.com>
to: Dominion Post <letters@dompost.co.nz>
date: Tue, Jun 26, 2012 at 6:58 PM
subject: LettersThe Editor
DOMINION POSTPeter Dunne – you should be thoroughly ashamed of yourself.
-Frank Macskasy
Blogger,
“Frankly Speaking”
.
from: Frank M <fmacskasy@yahoo.com>
to: Peter Dunne <peter.dunne@parliament.govt.nz>
cc: Dominion Post <letters@dompost.co.nz>,
Morning Report <morningreport@radionz.co.nz>,
Jim Mora <afternoons@radionz.co.nz>,
Nine To Noon RNZ <ninetonoon@radionz.co.nz>
date: Wed, Jun 27, 2012 at 12:35 AM
subject: State AssetsPeter Dunne
MP For OhariuSir,
Congratulations for ignoring the will of the people, including those in your own electorate. Bravo!
The majority of New Zealanders wanted our state assets kept in public ownership – and you have steadfastly refused to respect those wishes.
I wonder how you will be viewed by future historians? As a politician who stood against 3.8 million New Zealanders; that you were right and everyone else was wrong?
Or as another ‘Roger Douglas’ and ‘Max Bradford’ – politicians who also went against the will of the people, and are now scorned figures in our history?
Mr Dunne, you could have stood against the tide of privatisation – seen as sheer theft by the rest of us – and gone down in history as the man who made a difference. You could have been a stand-out figure in our history.
But you failed. You failed us, the people. And you failed yourself.
You have participated in an act of infamy and you will have to share a measure of the responsibility for your actions.
Right about now, a fair number of people throughout the country, and in your own electorate, want you gone from Parliament. But no doubt you will resist that demand as well, just as you resisted our calls not to sell our state assets.
The next two and a half years will not be happy for you, sir. And deservedly so.
Begone from Parliament.
-Frank Macskasy
Blogger,
“Frankly Speaking”
.
To the politicians…
.
from: Frank M <fmacskasy@yahoo.com>
to: John Key <john.key@parliament.govt.nz>
cc: Dominion Post <editor@dompost.co.nz>,
Jim Mora <afternoons@radionz.co.nz>,
Morning Report <morningreport@radionz.co.nz>,
NZ Herald <letters@herald.co.nz>
date: Wed, Jun 27, 2012 at 12:15 AM
subject: Asset SalesJohn Key
Prime MinisterSir,
Congratulations. You must be feeling quite a sense of victory and accomplishment;
Victory: over 80% of the people who opposed asset sales. You have ignored the vast majority of New Zealanders who do not believe that our power companies; Solid Energy; nor Air New Zealand should be sold. These are people who understand that (a) they make good profits for the State, (b) would not help the country if they were sold, and (c) they belong to us and our children.
The last point is especially pertinent; these are state assets that belong to each and every one of us.
At best you and your Parliamentary colleagues are guardians of these assets – not the owners.
But that hasn’t stopped you from passing legislation to part-sell these SOEs. That is our property you intend to sell.
Accomplishment: you took a slim electoral victory and have converted it into some kind of warped, over-hyped, “mandate” to sell assets that you do not own and which the people do not want sold.
Right about now, you must be feeling a sense of relief that your Party has overseen this legislation passed. But I am guessing that you may also be sensing a fair measure of unease.
Well you should. You and 60 of your fellow Parliamentarians are facing three and a half million very pissed of New Zealanders. That’s quite a feat to have gone from being one of the most popular Prime Ministers – to someone who is now reviled up and down the country.
Sir, I suggest that these partial-asset sales is a mistake – probably the greatest mistake and miscalculation of your career. If you think that New Zealanders will come to accept what you are doing, then you are wrong.
It is not too late. You can still post-pone any asset sale until after the referendum. If you truly believe that New Zealanders will come to support your plans, then you will give us a chance to express ourselves through the referendum ballot paper.If you choose to ignore public opinion, then you have lost the support of a majority of New Zealanders. People are angry now. But wait until the first SOE is sold, and that anger will manifest itself in a myriad of ways.
You will have lost respect in the eyes of the country, and any legitamacy you have as our elected leader.
-Frank Macskasy
Blogger,
“Frankly Speaking”
.
David Shearer
Leader of the Labour PartyRussel Norman & Metiria Turei
Co-leaders of the Green PartyWinston Peters
Leader of NZ FirstHone Harawira
Leader of the Mana PartyKia Ora to you all,
I am writing to you as a New Zealand citizen – one of many – who is apalled and disgusted at the passing of legislation, making way from the part-privatisation of Genesis, Meridian, Mighty River Power, Solid Energy, and Air New Zealand.
Like 80% of other New Zealanders, I am utterly opposed to any partial sale of state assets – especially strategic state assets such as our energy companies.
As has been pointed out innumerable times, there is no sound commercial or social reason to sell-down any of these assets. As well as making sound returns for the State and us, the taxpayer, these are assets that belong to all New Zealanders – not just those who can afford 1,000 parcel-shares.
John Key and his colleagues have ignored public opinion; scorned public expressions of protest; and swept aside sound arguments against privatisation. They are resisting the will of some 70-80% of New Zealanders by proceeding with their actions.
Accordingly, I offer to you a proposal to undermine their ill-conconceived and undemocratic plans.
From a blog-post I made on this issue:
How to sabotage the asset sales…
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.
The Greens and Labour are luke-warm on the idea, quite rightly stating that there are simply too many variables involved in committing to a buy-back two and a half years out from the next election. 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 on Q+A, 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.
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.
The question is, can an incoming Labour-Green-NZ First-Mana government accomplish such a plan?
A plausible scenario would have the leadership of Labour, NZ First, the Greens, and Mana, meeting 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,
- 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.
- The Mana Party buy-in to NZ First’s plan and pledge their support.
- 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.
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.
* * *These are desperate times, calling for desperate measures. Bold measures.
If all four opposition parties can create a plan that will undermine National’s asset-sales programme, then that may be the only way to preserve what rightly belongs to us all.
I, and others, encourage and support you to work together on this critical matter. Without firm leadership from the four Opposition Parties, the public have little hope of stopping National.
-Frank Macskasy
Blogger,
“Frankly Speaking”
.
And their responses…
.
from: David Shearer david.shearer@parliament.govt.nz
to: Frank Macskasy <fmacskasy@yahoo.com>
date: Wed, Jun 27, 2012 at 8:06 AM
subject: RE: Stopping Asset Sales – A proposal
mailed-by: parliament.govt.nzThank you for your email.
I will pass it to David Shearer.
Yours sincerely
Dinah Okeby
Office of David Shearer
labour.org.nz
.
from: Winston Peters Winston.Peters@parliament.govt.nz
to: Frank Macskasy <fmacskasy@yahoo.com>
date: Wed, Jun 27, 2012 at 9:18 AM
subject: RE: Stopping Asset Sales – A proposal
mailed-by: parliament.govt.nzGood morning
Thank you for your email. I will pass your message on to Mr Peters for his attention.
Kind regardsAnne Moore
Executive Assistant
New Zealand First
.
from: Isabelle Lomax Isabelle.Lomax@parliament.govt.nz
to: Frank Macskasy <fmacskasy@yahoo.com>
date: Sat, Jun 30, 2012 at 4:25 PM
subject: RE: Stopping Asset Sales – A proposal
mailed-by: parliament.govt.nzKia ora Frank,
Thank you for your email to Russel and Metiria. They have asked me to reply on their behalves. We appreciate you taking the time to send your idea through to us. You have obviously put a great deal of thought into this and seem to have a very thorough understanding of the issues involved. It’s an interesting idea. I have forwarded it to our advisors on the asset sales issue, and we will have a think about it!
Thanks again for taking the time to write, and for your passion about this important issue.
Nāku noa, nā
IsabelleIsabelle Lomax
Executive Assistant
Office of Dr Russel Norman MP
Green Party of Aotearoa New Zealand
14.14 Bowen House
T (04) 817 6712Authorised by Russel Norman, Parliament Buildings, Wellington
.
*
.
Related Blogposts
Is John Key showing desperation on asset sales?
How to sabotage the asset sales…
Other Blogs
Aotearoa – a wider perspective: Asset sales and Nationalisation, Argentina leads the way!
.
.
= fs =
The “Free Market” is a fair-weather friend.
Ir seems quite likely that New Zealand will soon be joining the ranks of Japan and San Francisco, where earthquake insurance is either highly expensive, or unavailable to home owners,
.
.
Earthquake Recovery Minister Gerry Brownlee may chest-thump and bellow till the cows come home, but if insurance companies – as Chris Ryan is suggesting – no longer consider New Zealand property a safe risk to insure against earthquakes, then he had better start taking notice.
Internationally, the insurance industry has been hard-hit after the severe floods in Queensland; two major quakes in Christchurch; and a triple-whammy in Japan; earthquake, tsunami, and atomic reactor disaster. Insurance companies have been hard hit, as Reuters reported in March,
“Some analysts said the disaster, combined with heavy losses already suffered this year from floods in Australia and last month’s New Zealand earthquake, could push up global insurance prices, boosting insurers’ shares.
“In our view the loss will be so large that it will probably provide the trigger to ensure a re-rating of the non-life sector,” Panmure Gordon analyst Barrie Cornes wrote in a note.” Source
Climate-related disasters were also impacting on the insurance industry,
“Climate change is largely to blame for Australasia putting in almost a quarter of the world’s natural disaster insurance claims last year.
Data from major reinsurance provider Munich Re, shows that from 1980 to 2009, Australasia was responsible for 3% of natural disaster insurance claims in dollar terms. But after the Christchurch earthquake, floods in Queensland, and enormous hailstones in Melbourne and Perth, that skyrocketed to 22% last year.
Munich Re, in its own report on the deluge of natural disasters, said climate change “is real and continuing” and cited floods in Pakistan and wildfires caused by a heatwave in Russia. The Christchurch quake was not climate-change related.
Munich Re said 2010 was one of the warmest years since 1850 and featured the second-highest number of loss-related weather catastrophes since 1980, when it started keeping data.
Niwa principal climate scientist Dr James Renwick agreed that weather events like heavy rain were linked to global warming. “It’s possible part of the change since the 1980s is natural variation, but I’m sure there’s a climate change component. We know the globe has warmed and it’s well-documented that the occurrence of extreme rainfalls around the world has increased in a way that’s consistent with the climate models,” he says.
“It’s just what you’d expect – you warm things up, more moisture, more energy, more rain falls. There’s definitely a climate change component in extreme rainfalls around the world.” ” Source
So it seems a little strange that Gerry Brownlee is (a) attempting to dismiss Chris Ryan’s warnings as “scaremongering” and (b) is in denial that re-insuring properties in this country will not be a major problem in future. Of course it will be a problem! How can it not?
Insurance companies and their re-insurers have suffered billions of dollars worth of claims over the last year – $34 billion estimated for the Japanese ‘quake and tsunami, alone, according to a Bloomberg report.
Mr Brownlee should know how the free market works. After all, his party – National – espouses the doctrine of the free market as part of it’s core-philosophy.
Even as we face the prospect of the insurance industry abandoning New Zealand households – we may be left to our own devices when it comes to insurance. Which may be the EQC.
Whilst the EQC is not a full-insurance company in the sense of Tower, AMI, AMP, etc, it has provided a level of protection to New Zealanders since it’s inception in 1945.
The only thing is – it’s broke. Two calamitous earthquakes in Christchurch have effectively emptied the Commission’s ‘war-chest’. Source. As John Key said in February of this year,
“”The good news part of the story is that EQC had about $6 billion before that (quake), that’s going to be exhausted, but we pay in on a continuous basis and we had significant re-insurance in the order of $5b, that will be exhausted.”” Source
Irrespective of Mr Brownlee’s futile rantings against the Insurance Council, it should be abundantly clear that in the near future we will not have the insurance cover that we once enjoyed. Those days are over.
We will have to rely on our own resources and our own ingenuity, whether we like it or not. (Most likely ‘not’, going by past experiences of Baby Boomers who like to Spend Now, Pay Later (or Never, preferably – let the kids pay). To that end, the Greens – as usual – have once again realised what must be done,
“So, it seems, the Greens were right all along – a special levy to fund the costs involved with the Christchurch earthquake still makes good sense, if only (this time around) to replenish the funds available to the Earthquake Commission. Yesterday, it became apparent that the likely cost of the Christchurch rebuild had risen by a massive $4 billion.
This blowout means the EQC couldn’t cope with an additional major disaster (ie anything costing over $2.5 billion) and the government would have to pick up the tab, directly. There are three options on the table : (a) a special levy on all taxpayers (b) a further additional charge attached to insurance premiums already expected to rise significantly, or (c) a rise in income taxes.” – Gordon Campbell, Source
However, in the light of Chris Ryan’s warnings, we may have to reconsider the role of the EQC to adopt a more wide-ranging, pragmatic role in earthquake and flood insurance. The EQC may have to step in where private insurers once provided a service – or else face the prospect of uninsured properties. That would have serious consequences for current and prospective building owners. (Banks currently insist on full insurance cover before they will consider extending a mortgage over a property.)
Once upon a time, we owned an insurance company called – quite simply – State Insurance. State Insurance was sold in June 1990 by the Bolger-led, National government of the day.
It now seems that may have been a mistake (as most asset sales were). The people of this country may yet discover that the Free Market is a Fair Weather friend and when times are tough, we will have to step up and put in place our own, Very Kiwi Solution(s).
The time for a new State-owned insurance company – “EQC-Plus” – has come.
.
.
News Archives
Crony Watch
Keeping an eye on dodgy government appointees, crony-by-crony!
Frankly Speaking... 