By Alex Tarrant
State Owned Enterprises were not ‘the family silver’, rather a spoon in the cutlery set, Finance Minister Bill English said.
English was asked about the government’s plans on asset sales after speaking to a Cullen Law breakfast last week.
English reiterated the government specifically ruled out selling any public assets in the last election campaign.
“That has meant instead of spending a lot of time on an issue that some people get a bit worked up about, we’ve spent a lot of time on understanding the whole Crown balance sheet,” he said.
The assets people focused on – State Owned Enterprises – were less than 10% of Crown assets, English said. “So the idea that they represent the family silver, it’s more like a teaspoon in the cutlery set, or maybe a dessert spoon."
“So it’s not the family silver.”
“If we were going to sell anything significant, then we would put a plan in front of the public and campaign on it in the next election,” he said.
English then went on to say big gains for the government would be from the efficient use of current capital.
“We have this odd system where, of that NZ$230 billion [of government assets], [cabinet] gets to make a few choices about the next NZ$1.5 billion [in spending], and that’s it,” he said.
“Actually in these constrained times, that’s less than 1% of the [government’s] balance sheet and most sensible organisations would be finding that from their own balance sheet. They wouldn’t be going out and borrowing overseas to finance another half a percent."
“So we’ve had a good look at what’s there, and now we need to start thinking much harder about how we deploy the capital,” he said.
Not sure on broadband investment
Two big demands on government over the next four or five years were going to be KiwiRail, “which is a pretty low returning investment”, and ultra-fast broadband, “which is a bit speculative,” English said.
“[Ultra-fast broadband] is future-proofing the country but we don’t quite know how they’re going to take it up and therefore whether it’s financially viable,” he said.
“Along with calls on capital from disasters, you can see how going out and borrowing money for that stuff is a bit tricky.”
Investment statement
The government therefore needed to form investment strategy of its own, which had never been done before, English said.
In December’s Half Year Economic and Fiscal Update, the government would issue an investment statement which would “clearly set out the Crown’s assets and liabilities, identify emerging issues and state how the Government’s plans to manage its large and growing investment in taxpayers’ assets,” he said.
“We believe this level of transparent information – in a regular publication – will allow the public to demand a much greater level of accountability from the Government and lead to significantly better decision-making across the public sector.”
4 Comments
Alex - from what I take from Bill's reported comments here is something very different from selling off the odd tea spoon...
What appears to be about to happen is a re-valuation of assets, in order to justify more borrow and spend (aka Ponzi action)... there is no more wisdom to Nationals economic growth plan than that.
Iceland, Ireland.... New Zealand her we come!
Oh.... and ps.The bit about Kiwi Rail being a low return investment... is Crap... this from the Guys that are going to borrow 2.4 billion Dollars for a road of national Significance though Kapiti (BCR = 0.5), when spending 180 mil for the western link Road (BCR 1.8) would do the trick for the next 30 years... even if peak oil never arrives.
Standard and Poor’s are sending the National Govt a message... Bill needs to put his ear to the ground; because the buffalo coming!
Alex - from what I take from Bill's reported comments here is something very different from selling off the odd tea spoon...
What appears to be about to happen is a re-valuation of assets, in order to justify more borrow and spend (aka Ponzi action)... there is no more wisdom to Nationals economic growth plan than that.
Iceland, Ireland.... New Zealand her we come!
Oh.... and ps.The bit about Kiwi Rail being a low return investment... is Crap... this from the Guys that are going to borrow 2.4 billion Dollars for a road of national Significance though Kapiti (BCR = 0.5), when spending 180 mil for the western link Road (BCR 1.8) would do the trick for the next 30 years... even if peak oil never arrives.
Standard and Poor’s are sending the National Govt a message... Bill needs to put his ear to the ground; because the buffalo coming!
I don't get where you're coming from, Mouse.
I too disagree with just using the assets as security for more borrow and spend.
I also cannot understand why the term "the family silver" applies to anything that is a net liability. Like our railways. If we want railways to be viable, we need a tenfold increase in population, like the foresighted politicians in the 1800's expected when they commited their country to such an extensive rail network.
Have you read Prof. Dave Heatley's analysis of NZ Rail?
http://www.iscr.org.nz/f511,14914/14914_The_history_and_future_of_rail_in_New_Zealand_RR_.pdf
Basically Rail, over the decades, has left NZ billions poorer than if we had restricted it to the 1 or 2 viable routes. And will continue to make us poorer.
Ironically, if we abandoned marginal farming areas to nature, and abandoned the rail lines that served them, we would be ahead.
I am deeply sceptical of "studies" that show that a road like SH1carrying 23,000 vehicles per day, cannot be improved with extra capacity or an alternative route built, benefit-cost POSITIVE. I would like to do an audit of that study. I have seen this sort of ideological BS many times before. Every possible "negative externality" tossed in to stack the case against roads, while "positive externalities" are not even mentioned once.
It was understood by planners in the 1960's, that positive externalities so greatly outweighed negative ones, that it wasn't even necessary to consider them.
The worry I have is the inappropriate use of business language by politicians. The trap that I hope they do not fall into completely is to then try and run the government as a business. Trouble starts when they use the language of business instead of the language of government. Why governments are not businesses?
1. They are the only game in town
2. They have no competitors
3. They don't really own the things they call assets, they are merely custodians of the common wealth
4. They are governed and controlled by the political process, not any financial one via shareholders, bond holders etc.
5. The Politicians are more accountable than most businesses managers. In that voters have a far greater direct control over who the politicians are than shareholders have in determining who the managers are of any similar sized entity.
6. Politicians get paid far less than managers of similar sized entities.
The risk of running government as a business is that politicians confuse the market with the corporation. They often use the words markets and companies interchangeably. Markets may be efficient sometimes in that they can result in new businesses, business processes, products etc. Individual business may do this as well. Mostly of course they don't. There are very few winners in business, many also ran's and a vast majoirty of ploders. Goverment cannot take the risks that business takes, It cannot act as they do.
So we should start using the lanuage of government to describe the actions of government not the language of business.
Many of the things described as assets are the common wealth of the country. Held in perpetuity by the entity we call government on our behalf. These are not assets to be mortgaged, traded, leased or sold.
A comment was made about broadband and rail. Both things that government in New Zealand has ended up being involved in again. Why? because the market in New Zealand has failed to deliver the services that people need and that many think we will have to have. Rail- may become essential again in the future- for you business guys think of Warren Buffet's latest punt on rail in the US. Broadband - well a monopoly incumbent simply had an incentive to keep investment at a level that suited them but may not be what the country actually needs.
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