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Finance Minister Bill English quizzed by National Party delegates on ensuring SOE shares not sold to foreign investors by Kiwis

Finance Minister Bill English quizzed by National Party delegates on ensuring SOE shares not sold to foreign investors by Kiwis

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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28 Comments

"it should focus on the fact energy prices may come down"

Sounds like back to 90s and an assurance by Max Bradford that privatising the electricity market would mean cheaper electricity for households etc. Some crap about the glories of the free market. Another Tui moment.

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Yes indeed, English just lost a ton of credibility with me when he came out with that little gem.

The plan is the height of stupidity.

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Me too.....he has to be a cretin to think ppl will swallow that one.

regards

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Look what happened to California when they privitised the electricity market over there.

The good old free market really showed it's true colours that time.
It became an absolute wild west, with blatent out and out corruption, Enron deliberately created power supply problems, and actual power cuts to the whole of California, just so they could push up power prices on the spot market that was created, and make more money.

The fact that some of them are in jail now came probably came about 10 years too late for the consumers in California. 
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When Contact Energy was sold, the shares may well have started out being owned by Kiwis, but when a better price came along, who could blame them for selling them to the highest bidder. The result is that 2/3 of Contact energy dividends, in excess of $1billion worth, are now owned offshore, by mums and dads in distant lands.

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It makes me sick to stand by and watch something as ESSENTIAL as our energy companies being sold to private investors who expect dividends and greater 'productivity.'  Our energy sector is a service that the government ought to safeguard for the benefit of the people.

Too bad most NZlanders don't give a #$(* and will vote for national anyway coz John Key seems like a decent sort of bloke.  What a joke.

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Then buy the bloody shares...think about it....if all those who think selling the shares is a bad idea were to buy the shares...then they could lock them away..right?

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So we buy back whats ours?  nice tax income.....oh and we'd need to guarantee 51% otherwise the greedies wil suck the good out load with debt and run leaving a basket case. 

Why do you think the NZX is so valueless? because every company in there has been gutted...

regards

 

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If we all purchsed shares to protect state assets, then we may as well not put them on the share market in the first place.  Nobody would sell nor buy.  That's just a band aid solution and doesn't address the real issue.

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unfortunatly I agree, even if we as shareholders hold the shares and we control who sits on the board it wont work. Of course inreality the well off will hold the shares and dictate a high return...and no investment. and without a CGT it will be tax free for them.

regards

 

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But we would have to wield them, ie control....look how stupid and short term ppl are.

regards

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Wake Up Wolly

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"vote for national anyway coz John Key seems like a decent sort of bloke.  What a joke."

Indeed....

regards

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I have always been a National supporter but have to admit that I am unhappy with their plan to sell off state-owned assets.

History shows us that within a very short space of time after sale, shares become concentrated in the hands of big corporates and most shares end up foreign-owned.

The Nats should  face the fact that it has made a mistake with its assets sales policy.

And as John Key said that anyone, including himself , can make a mistake and end up in the wrong place. 

They should consider retracting this policy and coming up with an alternative plan.

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There is some reasonable argument that selling badly performing state services to private concerns to make them efficient makes sense....The old Postoffice was awful yes? of course because they didnt tie down Telecom we didnt see the scale of improvement we should have got.

In this case however the power company assets seem well run, are paying a dividend and are thinking medium and long term, exactly what NZ needs to see to protect such a vital service.

I suspect the plan cant be changed because JK made a pact with S&P etc to sell off assets to keep the downgrade at bay.....

In terms of ownership if NZers get shares and then sell them for a quick buck to foreigners well OK, I cant see how you can or should restrict who they can be sold to.  I do think that once in foreign ownership they would be asset stripped and loaded with debt if 50%+ was sold.  So if 51% was retained it might be an OK bet....of course I would bet on that happening...come 2014 or 2015 and we have not got back to zero debt the remainder will be sold in "desperation"...........and then we get screwed over.

I agree with them withdrawing this, I cant vote for them as long as its in place....

regards

 

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Given John Key's track record it is very likely the 51% that is supposed to stay ours will also be sold off as the wheels totally fall off National's bogus economic plan.

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100% agree, with double damage.....and then instead of a tax increase we will all pay in increased power costs via a state sanctioned monopoly (which means its a regressive tax.) for ppl and more cost to the manufacturing sector) ...and in the damage done as the profits are exported overseas.

We will pay, its just how stupid we intend to be on how.

regards

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"Rather, it should focus on the fact energy prices may come down"

Absolute rot.....We had this crap in the UK and prices went up....hand a private entity to sharehholders and they will demand as high as a return as possible...in the short run.

"The fact that the sell-down would free up government capital for other investment, English said."

So we take an asset(s) that makes money and sell it to build assets that wont make money....

That makes so much sense.......not.

Or better he could use the dividend to raise capital cheaply by ring fencing it.

English really is a loser....glad he's made it impossible to miss, thanks you just guaranteed I wont be voting National.

regards

 

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Agreed, I would vote national but for this.  They should have offered it as an option as part of the referendum on the voting system.

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In effect they are, its their election manifesto....vote says yes, thereofre you have to vote Labour, for me the msg from JK and BE is clear.

regards

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For the sake of fairness, it would be obvious to have the people who benefited most from the -- in retrospect undesirable-- developments of the boom years, and from the subsequent rescue packages, shoulder the costs of fixing the crisis. That would be an argument in favor of raising additional revenue not only through income tax, but also through capital gains tax.

http://www.spiegel.de/international/world/0,1518,779893,00.html

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For the sake of fairness, it would be obvious to have the people who benefited most from the -- in retrospect undesirable-- developments of the boom years, and from the subsequent rescue packages, shoulder the costs of fixing the crisis. That would be an argument in favor of raising additional revenue not only through income tax, but also through capital gains tax.

http://www.spiegel.de/international/world/0,1518,779893,00.html

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Really its a financial problem....we are in a ponzi scheme with nothing real to support this financial "wealth".

Though I agree with a CGT on the basis all profit should be taxed equally, a  CGT taxes the symptom and not the cause.

http://www.debtdeflation.com/blogs/2011/08/10/ann-pettifor-in-australia/

regards

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"The Cracked Conservative Mirror

This morning, FT Alphaville linked to a post by Mike Shedlock on the failure of Keynesianism. I’m not sure why: the post was a standard-issue evidence-free rant. But there is something interesting about it, all the same: none of the alleged policy mistakes used to declare Keynesian economics a failure have anything to do with Keynesian economics.

Here’s the list:

By following today’s apologists of the British economist John Maynard Keynes (1883-1946), the so-called ‘welfare’ states pumped too much money (which they didn’t have) into consumption: into pensions for all (Europe), exorbitant armament (US), endangered industries (both), and finally bailouts for ailing mortgage banks (also both). This intervention was celebrated by Keynes’ disciples as the ‘return of politics’.

Pensions are Keynesian economics? Bloated defense budgets are Keynesian economics? Who knew? Even bank bailouts, whatever you think of them, have nothing to do with anything in the Keynesian model per se.

So what’s going on here?

I’m not the first person to notice this, but whenever you read conservatives trying to critique what they think the other side believes, you find them assuming that their opponents must be mirror images of themselves. The right believes that less government spending is always good, regardless of circumstances, so it assumes that the other side must always favor more government spending. The right says that deficits are always evil (unless they’re caused by tax cuts), so they assume that the center-left must favor deficits in all conditions.

I personally get this a lot, of course. Not a day goes by without someone blithely asserting that I have never called for spending cuts on anything, and that I have never called for action against budget deficits. A few minutes searching this blog would disabuse them of these beliefs, but they don’t need to check — they know.

What seems beyond their intellectual range is the notion that other people might have subtler beliefs than their own. Keynesianism, in particular, is not about chanting “big government good”. It’s about viewing recessions through the lens of an economic model under which temporary increases in government spending can, under certain circumstances, help reduce unemployment. Indeed, not all recessions call for fiscal stimulus; it’s the special conditions of the liquidity trap that make it essential now — which is why the Bush deficits, run under non-liquidity trap conditions, say nothing at all about the desirability of deficits now.

I have no hope of actually getting through with this, of course. For to actually understand what people like me are saying, we’d have to get past crude slogans and simplistic nostrums. The problem is obvious."

indeed, stupidity...

Though the second interesting thing is the above thought is in the US mainstream politics ie from one of the two major political parties, with NZ its ACT and (and possibly far) right of, at least in the public domain.

regards

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Poor old  J M Keynes will be turning in his grave.

Steven makes a good point.

We all love page 1 of Keynes - more stimulus spending - but we then ignore page 2 which requires running surpluses during the good times ( Much more politically difficult )

So we just keep runnning off page 1 through good times and bad and then slag John Maynard when it turns to custard.

 

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"running surpluses during the good times"  Indeed....but its not just running surpluses but squirreling them away so the capital is available to draw down....So while HC and Cullen ran surpluses they didnt really save much, they spent it....and of course had to bribe the voters with WFFin 2005 when Brash offered  tax cuts....Also of course we dont have a neutral tax level....we have a tax level thats neutral but only in boom times...crazy so in bust we are hammered.

regards

 

 

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labour cgt own goal

national asset sales own goal

one all half time

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CGT actually is ahead I think, Asset sales behind....

regards

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