By Pattrick Smellie
A "grown-up conversation" is needed about whether Christchurch City Councils should consider selling some assets to pay for the city's post-earthquake rebuild, Prime Minister John Key says.
He was commenting on the same day as the Green Party turned up the heat on the government's own asset sales policy.
The opposition party released analysis by the BERL economic consultancy suggesting domestic borrowing could pay for government infrastructure just as easily as asset sales, through the issuance of retail government bonds at attractive interest rates.
Local Government Minister David Carter copped a backlash from privatisation opponents over the weekend by suggesting the CCC might have to sell parts of some existing council-owned assets to fund the reconstruction effort.
Key sought to portray such choices as economically attractive in some cases.
"There are some really exciting opportunities," he told his weekly post-Cabinet press conference.
"Ratepayers might want to them (CCC) to own more of the convention centre than the airport. There's nothing magic about the airport."
Key said it was normal housekeeping to consider whether to sell all or part of an existing asset to buy another one.
"Mums and Dads do it every day. They think about buying something or selling something. Very few people own the same house forever, or the same car forever."
If the city's only options for funding its share of the rebuild costs was debt or rates, "both lead to the bank," said Key. "There's only so much ratepayers can afford to pay."
The Greens' proposal would see higher levels of government debt than under partial privatisation, but the government would also achieve greater net worth by also keeping the investment income and shares from state-owned energy companies on the block for sale of a minority stake.
BERL constructed a baseline scenario in which asset sales proceeds built new public infrastructure, such as schools and hospitals.
"Our assessment finds that a programme of asset sales to finance the construction of new assets leaves the government accounts permanently worse off (compared to the baseline) in terms of debt, debt ratio, net worth, and total assets," BERL concluded. "At best, the annual deficit remains unchanged on the baseline."
The government's books only improved through asset sales by adopting assumptions "at the extreme ends of plausibility."
Asked whether such local debt funding would not still be backed by foreign borrowing, given New Zealand's ongoing deficit in its balance of payments with the rest of the world, BERL chief economist Ganesh Nana said that could be dealt with by increased regulation of the New Zealand banking sector.
Greens co-leader Russel Norman said some of the shares in part-privatised SOEs would end up offshore and the government would lose dividend income from the 49 percent of the SOEs they didn't own, meaning New Zealand's dire external debt position would be worsened by the policy.
External debt levels were New Zealand's greatest concern, rather than levels of government debt, he said. The government has invoked its debt levels as a primary reason for selling up to 49 percent of three electricity companies, a coal mining company, and a further tranche of Air New Zealand shares to private investors.
The first part-privatisation, of electricity company MightyRiverPower, is on track for a float in the third quarter of this year.