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The Mendacities of Mr Key #9: The Sky’s the limit with taxpayer subsidies!

20 February 2015 3 comments

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key and skycity

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We all know the story by now; how Key admitted to discussing a convention-centre deal over  dinner with Skycity executives on 4 November 2009,

“I attended a dinner with the Sky City board 4 November 2009 where we discussed a possible national convention centre and they raised issues relating to the Gambling Act 2003”.

The lack of transparency in the deal-making process was subsequently criticised by the Auditor-General in February 2013. Toby Manhire from The Listener listed ten quotes outlining the AG’s dissatisfaction with Key and his officials’  behaviour;

1. “We found a range of deficiencies in the advice provided and steps taken leading up to [the] decision.”

2. “Although decisions were made on the merits of the different proposals, we do not consider that the evaluation process was transparent or even handed.”

3. “By the time it was expected that SkyCity would put a firm proposal to the Government for support, officials should have been working to understand and advise on the procedural obligations and principles that would need to govern the next steps. We found no evidence that officials were doing so at this stage.”

4. “The meetings and discussion between the Government representatives and SkyCity were materially different in quantity and kind from those between the Government and the other parties that responded.”

5. “SkyCity was treated very differently from the other parties that responded and the evaluation process effectively moved into a different phase with one party. In our view, the steps that were taken were not consistent with good practice principles of transparency and fairness.”

6. “Overall, we regard the EOI [expressions of interest] process in stage two as having been poorly planned and executed. Insufficient attention was given to planning and management of the process as a whole, so that risks were not adequately addressed and managed.”

7. “We did not see any evidence of formal discussions or decisions on the evaluation process and criteria, or mapping out of the basic options for what might happen next, or advice to Ministers on how the process would be managed and their involvement in it. We do not regard this as adequate for a project of this potential scale, complexity, and risk.”

8. “We have concluded that the preparation for the EOI process and the EOI document, fell short of good practice in a number of respects.”

9. “In our view, the result was that one potential submitter had a clearer understanding of the actual position on a critical issue – that the Government did not want to fund any capital costs – than any other potential submitters … We accept that it is unlikely that this flaw made a material difference to the outcome. However, we have spent some time discussing it because we regard it as symptomatic of the lack of attention to procedural risks, and therefore to the fairness and credibility of the process.”

10. “We are unable to comment on the value of any contribution the Government might make as part of any eventual agreement with SkyCity, because negotiations have not yet been concluded.”

Key’s response, in Parliament was an outright denial;

“Absolutely, and the reason for that, as the member will be aware, is that the Auditor-General’s report was divided into three parts. The first part of it was focused on my involvement, and I was totally and utterly cleared and vindicated in that. That was my only involvement.”

The Auditor General, Phillipa Smith, was less than impressed by Key’s attempts at mis-representing her Office’s report as a ‘vindication’;

”That fact that [the report] took 50 or 60 pages suggests that nothing was entirely clear cut. We have said that we found problems with the process that was adopted and so I think the report speaks for itself.”

Right-wing NZ Herald columnist and National sympathiser, John Armstrong, was trenchant in his condemnation of Key’s comments. On 20 February, 2013, he wrote;

Verging on banana republic kind of stuff without the bananas – that is the only conclusion to draw from the deeply disturbing report into the shonkiness surrounding the Government’s selection of SkyCity as the preferred builder and operator of a national convention centre.

The Prime Minister’s attempt to downplay Deputy Auditor-General Phillippa Smith’s findings in advance of their release yesterday by saying he had not lost any sleep from reading draft copies may turn out to be a costly political miscalculation.

John Key may have escaped personal blame for the serious flaws in the old Ministry of Economic Development’s handling of the convention centre project but the report is far worse than he had been leading people to believe.

He is taking refuge in the report’s assurances that no evidence could be found to suggest “inappropriate considerations”, such as connections between political and business leaders, were behind the final decision for the Government to negotiate with SkyCity as the preferred bidder.

In other words, no corruption. Or at least none that could be found.

Right-wing commentator, Matthew Hooton, was more scathing and pulled no punches;

The procurement process for the Auckland centre was a farce and as close to corruption as we ever see in New Zealand.

As reported by the Deputy Auditor-General, Mr Eagleson – whose best friend and Las Vegas gambling buddy is Mark Unsworth, SkyCity’s Wellington lobbyist – had been conducting private talks with SkyCity through 2009 and early 2010, including about what regulatory relief SkyCity wanted.

Mr Eagleson argued a procurement process was unnecessary and that the government should just go with SkyCity on the grounds no one else could realistically compete.

(Hat-tip: No Right Turn.)

Read Hooton’s full column. It is far more critical and insightful than any left-wing commentator (including myself) has been on this issue.

Even before the AG’s investigation and damning report, Key’s figures of extra jobs resulting from the proposed convention centre were in doubt.

On 3 April 2012, Key stated in Parliament;

“I might add, when we were out announcing that we were doing a deal with Len Brown in Auckland, he was quite a little lamb chops before the election, because Len Brown knew as well that it will create 1,000 jobs in its construction, 900 jobs ongoing, hundreds of thousands of visitor nights for a convention centre, and tourists who will be spending twice as much in New Zealand.”

By June, Key’s claims for “1,000 jobs in its construction, 900 jobs ongoing” were questioned by hospitality and travel specialist analyst, Horwath Ltd. Horwath director, Stephen Hamilton, was blunt;

Horwath director Stephen Hamilton said he was concerned over reports the convention centre would employ 800 staff – a fulltime-equivalent total of 500.

He said the feasibility study put the number of people who would be hired at between 318 and 479.

“That’s not the number of employees at the convention centre. That’s the number in the whole economy. Some will be at the convention centre, some will be in the hotels and some will be additional taxi drivers.”

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He also questioned the construction job figures, saying: “I’m not quite sure what the source of that 1000 was.”

The original Horwath report said 150 jobs could be created over a five-year construction period for a total of 750.

But the most well-known promise from Key was that the convention centre would not cost tax-payers a cent. In May 2013, Key justified his deal-making with SkyCity by stating;

“The construction of the new convention centre will not cost taxpayers or ratepayers a cent, with SkyCity meeting the full project costs in return for some concessions from the Government.”

Nearly two years later, inflation appears to have  turned “not a cent” into an estimated “$70m to $130m shortfall”, with SkyCity hustling National for a tax-payer bail-out.

On 10 February, Key appeared to have caved to SkyCity pressure to pay a massive taxpayer-funded subsidy to the casino operator;

“I’m keen to see the best convention centre I can for Auckland, because this is a very long-term asset, so I would hate to see some sort of eyesore constructed down town.

There are issues around the construction of it. Obviously you can spend more and get something that looks a lot better, or spend a bit less and get something that looks worse.

In a nutshell, the Government has an agreement with them [SkyCity]. It could make them meet that agreement but the escalation in prices to build the convention centre, which is bigger than was proposed and flasher than was proposed, means there is a hole.

So there are a couple of options. Option one would be to say to Sky City, ‘Build the convention centre exactly at the price that we all agreed, on the conditions of the deal that we agreed’, but it would be smaller I think than we had hoped and less attractive.

Or the second option is to see if there’s any way of filling that hole and to identify how big that hole is, and that’s the process we’re going through.”

By the following day, as a public and media furore exploded in Key’s face, and even his own Finance Minister was cool on the proposed bail-out,  he was forced to do a sudden 180-degree u-turn;

“We agreed a deal at $402 million…our strong preference is that the SkyCity convention centre is built and paid for by SkyCity.”

It seems that the public and media have become weary of Key’s continual back-tracking; broken promises; and often outright lies.

This was not the first time that Key had promised the public one thing – and then delivered something else. In October 2010, as an industrial dispute erupted between SPADA and Actor’s Equity, there were threats that Peter Jackson’s “Hobbit”  movie project would be moved off-shore (an empty threat as Jackson later revealed).

On 26 October, Key was telling the public that his government would not be paying extra incentives to Warner Bros and that there would be no “bidding war” with other countries to provide greater incentives to the U.S. movie industry;

“If we could make the deal sweeter for them that would help; that’s something we would consider… but we can’t bridge the gap that is potentially on offer from other locations around the world. We’re not prepared to do that and… I don’t think the New Zealand taxpayer would want us to do that.”

When asked about any possible taxpayer subsidies, to match other countries incentives, he added;

“It’s not in the tens of millions, put it that way. There’s a lot of noughts.”

Key was  adamant; Warner Bros would not screw another cent out of the New Zealand tax-payer. There were already generous tax breaks in place. So said Dear Leader at 11.45am, on the morning of 27 October;

“They’ve got movies to make and in the end, money talks in Hollywood. That’s just the way it works. We can’t stop other countries around the world putting up much better and more financially-lucrative deals. If it’s just simply a matter of dollars and cents, I’m just not going to write out cheques that New Zealand can’t afford.”

By 7.38pm – barely eight hours later – Key had pulled out the taxpayer chequebook,

Tax rebates will also be changed for Warner Bros, which will mean up to an extra $NZ20.4 million per movie for Warner Bros, subject to the success of the movies…

… The Government will offset $NZ13.6 million of Warner Bros’ marketing costs as part of the strategic partnership.”

As Key lamely explained,

 “It was commercial reality. We did the business.”

The subsidy that was supposedly “ not in the tens of millionsbecame a $34 million tax-payer funded gift to Warner Bros  – on top of a 15% tax-break given to the movie industry – a tax-break not available to any other industry in this country.

Key had caved to the movie moguls from Hollywood, and the tax-payer would foot the bill.

Three years later, the next corporation to hold a “gun” to Key’s head and extort millions in tax-dollars was Rio Tinto.

As State Owned powerco’s were being partially privatised, the multi-national corporation demanded their electricity-supply contract be “re-negotiated” and tax-payer “assistance” to keep the smelter at Tiwai Point  afloat during low aluminium prices – or else the facility would be closed. The threat was the loss of 800 jobs (some claimed indirect jobs up to 3,000) and economic activity that was claimed to be 10% of Southland’s GDP.

With the possible closure of the smelter – which uses 15% of the country’s electricity – the price of power would collapse, making shares in Meridian, Genesis, and Mighty River Power worth only a fraction of their float price.

Key bravely asserted  on 3 April 2013  that government and the New Zealand tax-payer would not  be “held hostage” to Rio Tinto’s threats of closure;

“It’s quite possible that that power could be used either by new ventures that come to New Zealand or, alternatively, it would allow some less productive assets to be closed down or it would allow New Zealand not to build as much generation as might be required.”

Five months later, on 8 August 2013, Key had surrendered to Rio Tinto’s demands and as well as a deal for increased  electricity subsidies, National handed over a cheque for $30 million to the corporation.

Key justified the tax-payer bail-out and increased subsidies by pointing to saving jobs;

“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.”

However, the loss of thousands of jobs from the economy seems not to have taxed Key’s concerns when it came to thousands of State sector workers being made redundant;

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State-sector job cuts 'will make life tough'

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By February the following year, Rio Tinto  posted a US$3.7 billion profit, and issued a 15% increase in dividends to it’s shareholders. Part of the dividends pocketed by shareholders was no doubt made up of $30 million gifted  from the pockets of hard working New Zealand tax-payers.

Soon after the tax-payer funded bail-out of Rio Tinto, Green Party MP, Gareth Hughes made this remarkably prescient comment;

“Treasury told National right from the start ‘don’t give them any money’ – it just means every corporation will have its hand out for public money whenever they have any leverage over the Government.

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Is that how you want your government to govern? Do you want your government playing fast and loose with public money; using your cash as a bargaining chip to cut deals over the phone with multi-nationals every time it finds itself backed into a corner?”

I can answer Gareth’s question: the next corporation with it’s hand out is SkyCity.

John Key plays fast and loose  with tax-payers’ money – not to save jobs – but to present an appearance to the public that National is “saving” jobs. It is a matter of the public’s perception he is focused on.

If that involves handing out cheques to Warner Bros, Rio Tinto, and now possibly SkyCity – he will do it.

This is the party that prides itself on being a “sound, prudent, fiscal manager” of the government’s books. Except that New Zealand governments have not engaged in this kind of  tax-payer funded largesse since Supplementary Minimum Prices were paid to farmers in the 1960s and 1970s.

That, to, was initiated by the supposedly pro-free market National Party.

Which leads on to an interesting situation regarding this government; it’s lip-service to the “free market” and supposed hands-off by the State. Committed right wing National/ACT supporters should be asking themselves three very pertinent questions:

  1. Is it ok if future Labour governments intervene and gives subsidies to various businesses as National has done?
  2. Does on-going State intervention by this National government signal the end of the neo-liberal experiment?
  3. Has National’s intervention in the “marketplace” illustrated the failure of neo-liberalism?

One thing, though, should now be clear to all; Key will say one thing, and then renege and do completely the opposite if it suits him politically.

One would think that any self-respecting journo from the media (no, not you, Mike Hosking) these days would be asking Key a very simple question;

“Mr Prime Minister, you have issued statements in the past and then flip-flopped months down the track. Why should we take anything you say at face value value, when you have back-tracked so many times previously?”

Put another way;

“Mr Prime Minister, you’ve said what you intend to do. How long before you change your mind when it becomes convenient to do so? You do have ‘form’, you realise?”

Or, even more bluntly;

“Mr Prime Minister, how long will this decision last? Days? Weeks? Six months?

I’ll leave it to esteemed members of the Fourth Estate to frame their questions in a suitable manner.

Just don’t be expecting an honest answer.

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Opening of Masu at SkyCity Grand Hotel, L to R, Nigel Morrison, Julia Smith Bronagh Key and PM John Key, October 12th 2013

Opening of Masu at SkyCity Grand Hotel, L to R, SkyCity CEO Nigel Morrison, Julia Smith Bronagh Key and PM John Key, October 12th 2013

Image acknowledgement: “The A List

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Postscript 1

As I wrote on 6 February;

In terms of past events; past scandals; and past instances where the PM has been caught out – it is by no means the worst.

This time, however, matters have reached a critical flash-point. The media has awoken to a smell of a government on the defensive and where Dear Leader has pushed the envelope once too often. Journalists and media commentators are no longer as tolerant;  no longer awed; and no longer willing to be mollified by a popular prime minister.

The Shipley Factor has kicked in.

At this point, nothing that National does will counter the  same style of growing clamour of criticism it’s predecessor faced in the late ’90s.

Nothing that has happened since then has caused me to resile from my earlier expressed belief that Key’s current administration is terminal.

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Postscript 2

‘Natwatch’ from The Standard wrote on 12 February;

“The focus group results are in and John Key is backing off from the Government injecting further money into the SkyCity convention centre.”

Which probably makes more sense than anything else this shabby government has done since 2008.

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References

NZ Herald:  SkyCity deal was PM’s own offer

Office of Auditor General: Skycity

NZ Listener: The SkyCity convention centre deal: 10 quotes from the Auditor-General report

Parliament Today: Questions and Answers – June 4 2013

Fairfax Media: Auditor-general backs Sky City report

NZ Herald: John Armstrong: Sky City report ‘deeply disturbing’

NBR: Close to corruption

Parliament: Prime Minister—Statements and Statements Made on His Behalf

NZ Herald:  Puzzle of Key’s extra casino jobs

Fairfax Media: Govt at odds over SkyCity convention centre

NZ Herald: John Key warns of SkyCity ‘eyesore’ if more money is not found

NZ Herald: John Key backtracks on taxpayer cash for SkyCity convention centre

NZ Herald: Sir Peter – Actors no threat to Hobbit

Fairfax Media: Key – No Hobbit bidding war

NZ Herald: PM – I’m not going to write cheques NZ can’t afford

NZ Herald: Hobbit to stay in NZ

NBR: Key on Hobbit deal: ‘It was commercial reality. We did the business.’

NBR: Key comes through: $34m deal sees Hobbit stay in NZ

TVNZ News: Relief in Southland over Tiwai Point deal

Radio NZ: Tiwai Point closing could have some advantages – PM

Otago Daily Times: PM defends Tiwai payout

Fairfax Media: State-sector job cuts ‘will make life tough’

RadioLive: Why John Key handed $30 million of your money to Rio Tinto

Te Ara:  Government and agriculture – Subsidies and changing markets, 1946–1983

Additional

Fairfax media: SkyCity’s ‘fair deal for all’ questioned (hat-tip Mike Smith, The Standard)

Previous related blogposts

Muppets, Hobbits, and Scab ‘Unions’

And the Oscar for Union-Smashing and Manipulating Public Opinion goes to…

Peter Jackson’s “Precious”…

National under attack – defaults to Deflection #2

Dear Leader caught telling porkies (again)?! (part rua)

Doing ‘the business’ with John Key – Here’s How

Doing ‘the business’ with John Key – Here’s How (Part # Toru)

The Maori Party, the I’m-Not-Racist-Pakeha Party, the Gambling-My-Money-Away Party, and John Key’s Party

ACC. Skycity. NZ Superannuation. What is the connection?

Skycity: National prostitutes New Zealand yet again

Witnessing the slow decay of a government past it’s Use-By date

The Mendacities of Mr Key #8: A roof over your head, and boots on the ground

Other blogs & blogposts

Imperator Fish: It’s about friends helping friends

Insight NZ: National splits in two over Sky City bailout

Liberation: NZ Politics Daily – 13 February 2015: SkyCity

Local Bodies: SkyCity’s Glorious Deal

No Right Turn: More money down the drain

No Right Turn: “Close to corruption”

Polity: Fleeced

Polity: Mo’ money

Polity: Small on “free” convention centre

Polity: I agree with DPF, Jordan Williams, and (mostly) with Matthew Hooton, too

Polity: Why all governments are bad at commercial deals

The Civilian: Disappointment as meteor misses Sky Tower

The Daily Blog: Key’s SkyCity Scam is a dirty deed done relatively expensively

The Daily Blog: Brenda McQuillan – A Problem Gamblers View of the Deal

The Dim Post: On Hooton on Sky City

The Dim Post: Win by not playing

The Standard: The SkyCity Deal

The Standard: Sky City’s playing us for suckers

The Standard: Key is in reverse gear about Sky City

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This blogpost was first published on The Daily Blog on 15 February 2015.

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Blogger lays complaint with Commerce Commission – *UP-DATE*

30 April 2013 5 comments

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Continued from: Blogger lays complaint with Commerce Commission

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Commerce commission logo

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On 1 April (not an April Fools Joke) this year, this blogger laid a complaint with the NZ Commerce Commission, regarding National’s dealings with Mighty River Power and Rio Tinto’s Tiwai Pt aluminium smelter.

The complain was as follows,

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Tony Ryall has recently announced that the NZ Government is intervening directly in negotiations between Meridian Energy and Rio Tinto (which is 80% owner of Tiwai Aluminium Smelter).

Mr Ryall has said,

“With this in mind, the Government has been in contact with Pacific Aluminium’s international parent company Rio Tinto this week to discuss helping to bridge the gap in their positions over the short to medium term, if this could be of assistance in concluding an agreement.

“In the meantime, we understand Meridian’s existing contract with Pacific Aluminium remains in place at least until 1 January 2016 with significant financial and other obligations beyond that.”

Ryall added that “all relevant information – including about the smelter electricity contract – will be reflected in the Mighty River Power offer document which is currently being finalised”.

Source: NZ Herald, Govt steps in to sort out stalled Tiwai power deal ( http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10874174)

I therefore submit the following;

(1) This appears to be a prima facie case of the NZ Government manipulating the future stock price of Mighty River Power (and other state owned powercos), by offering a subsidy to Rio Tinto.

(2) This subsidy is not available to any other company nor individual.

(3) As such, I submit that the NZ Government’s intention to subsidise electricity that is provided to Rio Tinto is done with a view to reduce competition in the market.

Specifically, I draw the Commission’s attention to the Commerce Act 1986; sections 27, 30, and related clauses.

(4) Furthermore, I submit that if any other corporation, company, institution, or individual attempted such an act, that they would be deemed to be guilty of price fixing and manipulation of the market.

I await your response and thank you for your consideration of my complaint.

-Frank Macskasy

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Being somewhat naive, I believed that attempting to  instigate events, that would keep the price of shares for a specific company at an inflated value,  would constitute a form of manipulation of  the share market.

Silly me.

What was I thinking?!

The Commerce Commission replied four weeks later,

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from:     Contact <contact@comcom.govt.nz>
to:     “fmacskasy@gmail.com” <fmacskasy@gmail.com>
date:     Mon, Apr 29, 2013 at 9:56 AM
subject:     282199 Meridian Energy Limited and the government

Thank you for the information you provided the Commission regarding the Government’s announcement that it will intervene directly in the negotiations between Meridian Energy and Rio Tinto (owners of Tiwai Aluminium Smelter).  You suggest that this intervention would amount to price fixing

 We assessed the information you have provided and we are satisfied that the Commerce Act is unlikely to have been breached in this instance. Although it owns one of the parties to these negotiations, Meridian Energy, the Crown appears to have tried to meditate in this dispute on an “honest broker” basis. As such, the Crown probably would not have been in trade for the purposes of this exercise.

 The above is merely our view that no prima facie breach of the Commerce Act has occurred. Such a view is not a ruling of law, as only the courts can decide whether there is a breach of the Act. The Commission’s decision not to pursue this matter does not prevent an individual from initiating their own action.

 We have closed the file in regard to your complaint enquiry number 282199.

 Yours sincerely

 Katey Salmond

Commerce Commission |Senior Contact Centre Adviser
44 The Terrace |PO Box 2351 |Wellington 6140 |New Zealand
Free phone 0800 943 600 |Fax +64 (04) 924 3700
Follow us on Twitter @NZComCom

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One would have thought that by providing subsidised (cheaper) electricity to Rio Tinto’s aluminium smelter; for a short term period (as Dear Leader has stated:  PM John Key says fresh Mighty River Float detail due on Friday; may include detail on risks around Tiwai Pt closure);  for the purpose of maintaining a high price for Mighty River Power’s shares – would constitute a form of share-market manipulation.

After all, the point of the whole exercise was to maintain Mighty River Power’s share-value. As Key himself pointed out on 2 April,

“But obviously, for the number of people involved, the jobs, the impact on the local community and the impact in the short term on the electricity markets, the government would like to see the orderly exit of the smelter, or a long term agreement between the companies.”

Acknowledgment: Interest.co.nz – PM John Key says fresh Mighty River Float detail due on Friday; may include detail on risks around Tiwai Pt closure

In an ironic side-issue, it’s interesting to note that merchant bankers, share-brokers, Federated Farmers, etc, haven’t raised merry hell on this issue – as they did with the Labour-Green proposal for a single electricity buyer-desk, NZ Power.

I think we can see all manner of vested interests involved here.

Last point, Ms Salmond writes in her 29 April email to me,

The Commission’s decision not to pursue this matter does not prevent an individual from initiating their own action.”

That almost comes across as a sly hint…

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What’ve you been smoking, Mr Roughan?

1 April 2013 3 comments

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Perfect chance to can Tiwai

Acknowledgement: NZ Herald – Perfect chance to can Tiwai

There’s nothing quite like a threat to the New Right economic theory to bring the apologists slip-sliding out of the wood-work.

Case in point: John Roughan’s column in the NZ Herald on 30 March. According to Mr Roughan, the ‘blame’ for this latest fiasco can be sheeted home to John Maynard Keynes and our  post-War desire for full employment.

Because, as we (except for neo-liberals)  all know, full employment is a good thing for society.

First of all, read Mr Roughan’s article. Then come back to this blogpost, and scroll down…

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Ok, read it?

Now who spotted the outrageous piece of delusional rubbish  that Mr Roughan wrote in his column?

Let me quote;

“The price of most things at that time was controlled or subsidised and nobody knew or cared that prices didn’t align the item’s cost of production to its value in a competitive market. The economy was a job-creation scheme that ended with double-digit unemployment in the 1970s.”

Acknowledgement: IBID

Either Mr Roughan doesn’t know his history – or he is being wilfully mendacious to promote his rather obvious neo-liberal views.

Let’s have a look at unemployment in the 1970s though to the 1990s,

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unemployment - new zealand - 1960s - 1970s - 1980s - 1990s -

Acknowledgement:  Ministry of Business, Innovation and Employment  – How bad is the Current Recession? Labour Market Downturns since the 1960s

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And to put that graph into actual stats,

Date Unemployment rate
Mar-56 0.6
Jun-56 0.6
Sep-56 0.6
Dec-56 0.6
Mar-57 0.6
Jun-57 0.6
Sep-57 0.6
Dec-57 0.6
Mar-58 0.6
Jun-58 0.6
Sep-58 0.6
Dec-58 0.6
Mar-59 0.6
Jun-59 0.6
Sep-59 0.6
Dec-59 0.6
Mar-60 0.6
Jun-60 0.5
Sep-60 0.5
Dec-60 0.5
Mar-61 0.5
Jun-61 0.5
Sep-61 0.5
Dec-61 0.5
Mar-62 0.5
Jun-62 0.5
Sep-62 0.5
Dec-62 0.6
Mar-63 0.5
Jun-63 0.5
Sep-63 0.5
Dec-63 0.5
Mar-64 0.5
Jun-64 0.5
Sep-64 0.5
Dec-64 0.5
Mar-65 0.5
Jun-65 0.5
Sep-65 0.5
Dec-65 0.5
Mar-66 0.5
Jun-66 0.5
Sep-66 0.5
Dec-66 0.5
Mar-67 0.6
Jun-67 0.7
Sep-67 1.0
Dec-67 1.2
Mar-68 1.3
Jun-68 1.2
Sep-68 1.1
Dec-68 1.1
Mar-69 1.0
Jun-69 0.9
Sep-69 0.8
Dec-69 0.8
Mar-70 0.8
Jun-70 0.8
Sep-70 0.8
Dec-70 0.8
Mar-71 0.8
Jun-71 0.9
Sep-71 1.0
Dec-71 1.2
Mar-72 1.3
Jun-72 1.3
Sep-72 1.3
Dec-72 1.3
Mar-73 1.2
Jun-73 1.1
Sep-73 1.1
Dec-73 1.0
Mar-74 1.0
Jun-74 1.0
Sep-74 1.0
Dec-74 1.0
Mar-75 1.1
Jun-75 1.2
Sep-75 1.2
Dec-75 1.2
Mar-76 1.2
Jun-76 1.1
Sep-76 1.0
Dec-76 0.9
Mar-77 0.8
Jun-77 0.8
Sep-77 0.8
Dec-77 1.2
Mar-78 1.5
Jun-78 1.7
Sep-78 1.7
Dec-78 1.4
Mar-79 1.4
Jun-79 1.5
Sep-79 1.4
Dec-79 1.3
Mar-80 1.4
Jun-80 1.6
Sep-80 2.2
Dec-80 2.5
Mar-81 2.6
Jun-81 2.6
Sep-81 2.6
Dec-81 2.7
Mar-82 2.6
Jun-82 2.7
Sep-82 3.0
Dec-82 3.6
Mar-83 4.4
Jun-83 5.0
Sep-83 5.1
Dec-83 4.8
Mar-84 4.7
Jun-84 4.4
Sep-84 4.3
Dec-84 3.9
Mar-85 3.7
Jun-85 3.6
Sep-85 3.6
Dec-85 3.9
Mar-86 4.2
Jun-86 4.1
Sep-86 4.1
Dec-86 4.2
Mar-87 4.0
Jun-87 4.2
Sep-87 4.2
Dec-87 4.4
Mar-88 4.9
Jun-88 5.4
Sep-88 6.4
Dec-88 6.3
Mar-89 7.1
Jun-89 7.5
Sep-89 7.4
Dec-89 7.3
Mar-90 7.2
Jun-90 7.7
Sep-90 8.1
Dec-90 8.9
Mar-91 9.8
Jun-91 10.5
Sep-91 11.2
Dec-91 11.0
Mar-92 10.9
Jun-92 10.4
Sep-92 10.6
Dec-92 10.6
Mar-93 10.1
Jun-93 10.1
Sep-93 9.5
Dec-93 9.4
Mar-94 9.3
Jun-94 8.5
Sep-94 8.0
Dec-94 7.6
Mar-95 6.8
Jun-95 6.4
Sep-95 6.2
Dec-95 6.4
Mar-96 6.4
Jun-96 6.2
Sep-96 6.4
Dec-96 6.2
Mar-97 6.7
Jun-97 6.8
Sep-97 7.0
Dec-97 7.0
Mar-98 7.4
Jun-98 7.9
Sep-98 7.7
Dec-98 7.9
Mar-99 7.5
Jun-99 7.3
Sep-99 7.0
Dec-99 6.4
Mar-00 6.5
Jun-00 6.3
Sep-00 6.0
Dec-00 5.8
Mar-01 5.5
Jun-01 5.4
Sep-01 5.4
Dec-01 5.6
Mar-02 5.3
Jun-02 5.3
Sep-02 5.5
Dec-02 5.1
Mar-03 5.0
Jun-03 4.8
Sep-03 4.5
Dec-03 4.7
Mar-04 4.3
Jun-04 4.2
Sep-04 3.9
Dec-04 3.8
Mar-05 3.9
Jun-05 3.8
Sep-05 3.8
Dec-05 3.8
Mar-06 4.0
Jun-06 3.7
Sep-06 3.9
Dec-06 3.8
Mar-07 3.8
Jun-07 3.7
Sep-07 3.6
Dec-07 3.5
Mar-08 3.8
Jun-08 4.0
Sep-08 4.3
Dec-08 4.7
Mar-09 5.0

Source: NZIER, Statistics NZ.

Acknowledgement:  Ministry of Business, Innovation and Employment  – How bad is the Current Recession? Labour Market Downturns since the 1960s – Data Table Figure 1: Unemployment Rate

At no point in the 1970s did unemployment ever rise above 1.7%. Hardly the “double-digit unemployment in the 1970s” that Mr Roughan presented as the unvarnished truth.

In fact, if we look at the actual stats, the only time unemployment rose into double-digit figures was from Jun-91 to Jun-93, when National implemented it’s infamous “Mother of all Budgets”. That Budget, written by arch-neo liberal Ruth Richardson, sent businesses to the wall as well as unemployment skyrocketing,

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Bolger and Richardson 1991

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John Roughan then attempts to use his bogus “facts” to push the typical New Right line,

“Pacific Aluminium asked Meridian to renegotiate a price that was set just before the world economy went sour in 2007 and demand for aluminium dropped. Meridian agreed to a lower price until 2016 but would not commit to a lower price beyond that.

Last week the Government intervened. Some of your taxes and mine are going to be promised to a global mining conglomerate that wants to sell its New Zealand smelter but cannot find a buyer.

The Government could not have better demonstrated the pitfalls of public ownership if it had tried.”

Acknowledgement: NZ Herald – Perfect chance to can Tiwai

“The Government could not have better demonstrated the pitfalls of public ownership if it had tried”, wrote Roughan.

Based on – – – ?

Falsities?

Ideology?

Whimsy?

Or just plain bullshit.

The stoush between Rio Tinto and Meridian Energy does not “demonstrate[d] the pitfalls of public ownership” at all.

What it demonstrates is that Rio Tinto has seized the main chance to re-negotiate it’s contract. Does anyone who is not on hallucinogenic drugs not believe even for a moment that Rio Tinto wouldf not try it on with Meridian even if that powerco was 100% privately owned?

Does Mr Roughan honestly believe, with hand-on-heart, that Rio Tinto would behave differently if Meridian was a private company, like Contact Energy?

How f*****g naive can some commentators get, for gods-sakes?

John Roughan’s column is nothing less than neo-liberal propaganda. It is a blatant attempt to twist the current situation, and mis-represent the facts.  It is a deflection. It is an acolyte of neo-liberalism trying to white-wash his failed dogma and blame everyone else except his own failed system for this total screw-up.

As if the 2007/08 Global Financial Crisis wasn’t enough to show us that neo-liberal capitalism is a failed ideology. (Who would Mr Roughan blame for that collapse, I wonder? Solo-mums in South Auckland?)

But then, we all know how well Right Wingers take responsibility, don’t we?

Not very well.

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tiwai point - meridian energy - rio tinto

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Hat-tip

Chris Trotter

References

NZ Herald: NZ Herald – Perfect chance to can Tiwai (30 March 2013)

The Daily Blog: Chris Trotter, Lying For The Revolution: John Roughan Defends Neoliberalism (1 April 2013)

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Asset Sales: two down, three to go!

22 August 2012 21 comments

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Oh dear, National seems to be in a spot of bother over it’s planned partial privatisation of  five SOEs…

Earth, Air…

One state owned enterprise, Solid Energy, appears now to be off the sales list. According to Finance Minister Bill English,

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Full story

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On top of that, there appears to be a real questionmark over the sale-value of Air New Zealand, as well, according to outgoing chief executive Rob Fyfe,

However, outgoing chief executive Rob Fyfe has said he would be “surprised if the Government would be wanting to sell” at the current low share price.

The company was in the midst of a “cyclical low” on its share price, Fyfe said in June.”

See: ibid

Fyfe is correct.

A look at Air New Zealand’s recent and longer term share price history shows that it has been badly affected by the Global Financial Crisis (GFC).

In 2007, Air New Zealand’s share price stood at $2.47 a share,

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Source: Google Finance – Air New Zealand Ltd

At the end of trading (22 Aug), today, that share price stood at 92.5 cents each. That’s a loss of  $1.545 per share,

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Source: Google Finance – Air New Zealand Ltd

In fact, the share price dropped from 94.5 cents a share yesterday (21 Aug) to it’s current level of 92 cents.

Looked at another way; it’s like having your home valued at $247,000 in 2007, prior to the onset of the GFC – and having it valued at only $92,500 today.

Not a good environment to be a seller.

NOTE: It is interesting that, of all the SOEs, Air New Zealand is the only one that has a small, privately-owned component. The state owns 73.13% of Air New Zealand, other investors own 26.87%.

See: Air New Zealand – Shares on Issue

This situation is a ‘quirk’ of Air New Zealand’s re-nationalisation in October 2001, when it faced collapse under a massive $NZ1.425 billion operating loss incurred by then-private owners.

See: Wikipedia – Air New Zealand, Re-nationalised era

So it’s current share value is a relatively true reflection of it’s present market-value.  There is no “guesswork” involved, as Bill English revealed in February this year, with the other four SOEs,

See: English admits his SOE figures just a guess

Helluva way to run an economy…

Most sane people wouldn’t sell at such a ridiculously low price and would wait for the market to recover.

However, despite misguided belief, National’s commercial nous is vastly over-rated. In fact, some of their commercial decisions have been absolutely apalling.

The most famous being that these assets – especially the power companies – actually return a higher dividend to government than would be the cost of borrowing that same money. As BERL reported in May,

Partial asset sales will do nothing to curb New Zealand’s growing debt problem, a new report by economic analysts Berl says.

The Berl report, commissioned by the Green Party and released today, says the Government’s partial asset sales programme to build new assets would leave the Crown accounts ”permanently worse off”.

Government debt, the ratio of debt to assets, net worth and total assets would all be worse off after the programme was carried out, Berl found.

”The interim loss of earnings resulting from reduced dividends and the period of time before the new assets reap benefits is never recouped,” the report said.

”Subsequently, the option of asset sales can only significantly improve the Government’s accounts if a set of assumptions are adopted that are at the extreme ends of plausibility“.”

See: Asset sales will leave Govt worse off – BERL

Madness.

The up-shot?  Unless the global economy stages a miraculous recovery in the next two years (about as likely as The Second Coming or Klingons camping out in my backyard),  and National ministers are dumber than I thought, Solid Energy and Air New Zealand can be scratched from the privatisation agenda.

Added to this, is a brewing toxic mess involving commercial interests and  Treaty claims over water rights…

Water…

At the beginning of August, Key realised that the partial-sale of SOEs was not going to go smoothly.  Until now,  state owned power companies were exploiting water resources for the benefit of the nation as a whole.

Maori were content with that status quo; for as long as no one owned the power companies – they were owned by us all – the same could be said of water.

But the moment that private ownership of  hydro-power generation was mooted – the situation changed. Water would be used to generate power, which would be sold, and would deliver profits to private owners.

Saying that “no one owns the water” that hydro-power stations use is akin to saying no one owns the coal or gas that are used in coal-powered and gas-powered stations.  Ridiculous.

The Waitangi Tribunal will shortly be delivering it’s response to Maori Council claims over water rights.

Most likely, the Tribunal will find in favour of Maori. This blogger can conceive of no reason why this should not happen, and just as land can be owned – so can water rights.

It’s a bit late-in-the-day for capitalist National voters and politicians to now be claiming socialist principles of  “collective ownership”. That just ain’t gonna wash, Jethro.

If National over-rules the Tribunal findings, then Maori will go to Court – the High Court to be precise. Of all Pakeha institutions, Maori have a great affinity for the legal system. They know how to use it for greatest advantage.

Going to Court will have one result; a lengthy delay in the asset sales programme.

On 22 August, National admitted what the rest of us already knew,

The Government says it is going to have to start making judgments about how much of its partial asset sales programme can be completed in this term of office…

[abridged]… Finance Minister Bill English says the Government also has to deal with other issues, such as the Waitangi Tribunal report on water rights relating to the partial sale of Mighty River Power, and possible legal action.

Mr English says he is not taking it for granted that the Government will be able to complete the full programme this term. “

See: Govt less bullish about partial asset sales

Fire…

And as if that was not enough to put a spoke in the wheels, two corporate interests have recently made announcements that could have a significant impact on share prices for the remaining three SOEs; Mighty  River Power, Meridian, and Genesis.

Norske Skog Tasman

Norske Skog Tasman’s plan to halve newsprint production at its Kawerau mill will have implications for the power generation industry if it goes through with it, says an industry analyst.

The company, which accounts for about 2.9 per cent of New Zealand’s power demand, is looking at cutting its annual production to 150,000 tonnes from 300,000 tonnes because of dwindling domestic and offshore sales.

The analyst, who requested anonymity, said the partial closure would further extend the “significant” generation over-capacity in the New Zealand electricity market.

A 50 per cent reduction in Norske Skog Tasman’s electricity demand would equate to about one year of demand growth estimated in Ministry of Economic Development forecasts. “

See: Paper mill cuts threat for power industry

By coincidence, Norske Skog buys most of its power from Mighty River Power, which is the first SOE that National  plans to partially privatise.

Any potential “mum and dad” investors may be warned off from investing in MRP shares. If  Norske Skog proceed with their plans, power consumption will decrease dramatically – and so will profits.  Which will mean a cut in dividends paid to shareholders.

Tiwai Aluminium Smelter

Perhaps the ‘nastiest’ surprise for National and it’s Dear Leader was this announcement on 11 August from multi-national conglomerate, Rio Tinto,

Meridian Energy’s announcement that it had been approached by New Zealand’s biggest power user, Rio Tinto, to discuss potential changes to its supply contract has created uncertainty for the Government’s plans to partly privatise the three power generators, analysts said.

State-owned South Island power generator Meridian said it had been approached by Pacific Aluminium, a business unit of Rio Tinto, the majority shareholder of New Zealand Aluminium Smelters (NZAS), to discuss potential changes to the electricity contract with the smelter.

The statement comes a time when Rio Tinto is assessing its options for the NZAS smelter at Tiwai Pt.

Tiwai takes about 15 per cent of New Zealand’s electricity, so the prospect of changes to the contract between Meridian and Rio was enough to send Contact Energy’s share price down 20c to $4.80 on Thursday.

Few in the financial markets expect Tiwai Pt to close, but if it did, much more power would be added to the national grid, depressing prices and affecting the profitability of all the power generators. “

Rio Tinto’s announcement immediatly  sliced 20 cents off  Contact Energy’s share price. What will it do to the three state owned power companies?

It’s hardly surprising, really. Everyone else appears to be putting their hand out, or up, to gain benefit from the asset sales – why not multi-national corporations who are already parked here in our country?

The Herald report goes on to say,

Morningstar analyst Nachi Moghe said there was ongoing concern about the feasibility of Tiwai Pt and the possibility that it might eventually shut down.

“Obviously, if that happens it will hurt everyone, but it will hurt Meridian the most,” he said.”That additional supply will throw the supply-demand balance out of kilter.”

One fund manager said the news was a “bolt from the blue”.

In the contract negotiations, he said, the pressure could go on Meridian to reduce its price, or to reduce the volume of power it supplies, which would have an impact on the wholesale electricity market.

“It’s poor timing but great timing on behalf of Rio Tinto as we go into the mixed ownership model process,” said the fund manager, who did not want to be identified.”

See: Smelter power review ‘bolt from blue’ for asset sales

Rio Tinto appears to be exploiting current uncertainties and confusion in  the current  environment.  As pressure mounts on National from every direction, this appears to be an opportune moment for corporations to start  flexing their own muscles.

Just what the Nats needed – their own corporate allies to shaft them at the worst possible moment.

Capitalism. Ya gotta laugh.

Weather

And the most critical factor to impact on the electricity generation industry: the weather.

This is something that even the “invisible hand” of the free market is utterly powerless to influence. Meridian’s profits have already been affected,

The worst inflows into its hydro lakes for 79 years took a toll on Meridian Energy’s earnings in the year to June 2012.

The state-owned generator and electricity retailer yesterday reported a net profit after tax of $74.6 million, down from $303.1 million the year before.”

See:  Dry year helps knock 28%  off Meridian profit

At this point, Dear Leader John Key might be starting to wonder. With all these ‘forces’ ranged against his Party’s plans to flog off our state assets – perhaps the Fates are trying to tell him something?

What next?

This blogger is surprised that China and Australia – both nations with which we have Free Trade Agreements – have not put their hands up to line up and buy shares.

After all, that is what FTAs are about. Legally, we might not be able to stop them.

Will we be hearing from our Chinese and Aussie cuzzies next?

Watch this space.

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Additional

Tiwai Pt threat could delay Mighty River sale

Energy float may turn into a s(t)inker

Other blogs

No where to go on Maori water rights

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