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BusinessDesk: Key urges 'grown-up conversation' on Christchurch asset sales - 'Mums and Dads do it every day'

BusinessDesk: Key urges 'grown-up conversation' on Christchurch asset sales - 'Mums and Dads do it every day'

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.


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What the heck?
Why doesn't Key come up with some solutions instead of looking for irreversible quick fixes? 
Most of the Council Assets have full replacement insurance apart from roads and services which only have partial cover.  Roads and services only need to fixed at a slightly faster rate than normal maintenance (diverting all works to worst affected areas and neglecting slightly damaged areas).
So if they don't get carried away with rebuilding unecessary facilities for the reduced population then they could get away with not spending excessive amounts of extra money.

Perhaps J Key is the front man for global forces to get access to NZ assets  -  then when the global socialisation occurs, well it's a done deal.
David Skilling:
"New Zealand needs to align all major policy areas as a "coherent response to globalisation," developing an economic strategy on how the country should compete internationally, how national risk exposures such as an ageing population and education and labour market policies are managed, and how the country positions itself in the world, Skilling said.
The country will "need to over-invest in order to overcome the disadvantages" of its distance from global markets and exposure to international forces.
Skilling identified New Zealand's "out-dated view of the global economy" in a March note published by his Singapore-based Landfall Strategy Group, and revisited it in a lecture in Wellington last week at the Treasury."
NZ stuck in fortress mentatility?   How many jobs are actually in the productive sector?  Too many public servants, teachers, WFF beneficiaries, cafe workers, jobs simply re-selling internal producst/serices to each other?  Trademe may be sucking us dry....
The Science, Tech, engineering focus is fine - but companies need to be in these industries with jobs ready. 
Poor old John Key  -   he thought it was all going to be Helicopter rides etc,,  didn't realise the social, economic, complexities that need real social, spiritual, complex solutions beyond just trading your way out of an FX position .....

"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."
Mums and Dad sell a car and buy a replacement.
He's suggesting selling a rental property that's's achieving 10% p.a. and investing the money at 5%.