Finance Minister Bill English has come under some friendly fire from his own party on the National Party's election policy to sell down stakes in state-owned enterprises.
Speaking to delegates at the National Party's annual conference in Wellington, English said National's policy to sell down up to 49% of stakes in Genesis Energy, Mighty River Power, Solid Energy and Meridian Energy would see New Zealanders at the front of the queue to buy shares.
"If we want to rebalance our economy towards savings and exports, we need dynamic investment markets that offer attractive options for savers and enable local businesses to access the capital the need to expand," English told delegates.
"Extending the mixed ownership model will provide attractive investment opportunities for Kiwi mums and dads and capital for the Government to reinvest in social infrastructure like schools and hospitals - reducing our borrowing requirements," English said.
In a question and answer session, two delegates expressed concern on whether government would look to ensure shares sold initially to New Zealanders would stay in New Zealand hands, and not be on-sold to foreign investors.
English replied to one delegate that incentives to keep shares in New Zealand hands would not go as far as banning New Zealanders from selling the shares on to foreigners.
Another delegate told English he was not convinced about the government's argument the shares would be locally-owned.
English replied by saying some foreign ownership in New Zealand's share market was something that had been lived with for as long as there had been a share market in this country, while foreign ownership in the share market had been dropping over the last five or six years.
"Kiwis will still have the opportunity to on-sell the shares, otherwise it's not a market," English said.
"You can't say, you can have the share but not sell it to anybody," he said.
The policy should not be driven too much by the fear of New Zealanders being able to on-sell their shares to foreigners. Rather, it should focus on the fact energy prices may come down, and the fact that the sell-down would free up government capital for other investment, English said.
'Get used to the turmoil'
Meanwhile, New Zealanders had got the message on debt, putting the economy in a strong position to deal with the turmoil being seen on global financial markets.
English told delegates to expect the bad news streams flowing from the United States and Europe to continue for years as governments there struggled with high levels of sovereign debt.
"I say, get used to it - this is how the world will be, on and off, over the next decade. That is because the underlying problems driving this week's events are getting worse not better," English said.
"Most of the developed world has very high levels of government debt. This is a combination of the huge bailouts of the financial sector that occurred in 2008, and governments spending more than the earned, particularly over the last decade," he said.
“Lenders are starting to get worried about whether they will get all their money back. They used to regard governments as a no-risk customer, but this week they have been jolted by the first ever credit downgrade for the US. That puts every country under the microscope. Are their debt levels acceptable? Are there plans to contain debt and get it down? Do the government's policies help or hinder economic growth?"
There were only two ways to deal with excessive debt – pay it off or write it off.
"Neither is happening in these countries. No amount of shuffling the debt around can hide the fact that in the US and Europe, and to a lesser extent in the UK, debt continues to grow. Because it's government debt, finding solutions to stop the growth of this debt is in the hands of the politicians, and there are no easy political solutions," English said.
"It's not easy to cut pensions, benefits and public services, or to lift taxes. It's no wonder the politicians are struggling, and financial markets are losing faith in them," he said.
"We had our own milder version of this problem through the 1980s and 1990s and it was a long painful process. In fact it took until 2006 to get net debt back to where it was in 1972 as a proportion of GDP."
Fun and games
Meanwhile, on a lighter note, in his opening address to the conference, Prime Minister John Key found a silver lining to the US credit rating downgrade earlier this month, saying of his Finance Minister:
"I gave him just one task this year, and he’s achieved it. That was to get the same credit rating as America."
English retorted by noting he had therefore achieved his goal much faster than the Prime Minister's goal, which was getting the New Zealand economy to catch up with its Australian counterpart.
Tomorrow
The party conference continues tomorrow (Sunday), with Prime Minister John Key set to give his keynote speech at 11:45am.
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