By Alex Tarrant
Up to NZ$400 million from the proceeds of National's planned sale of shares in State-owned enterprises will be invested in irrigation projects from 2013, Prime Minister John Key and Agriculture Minister David Carter announced today.
That brings the total spending already promised from the expected NZ$5-7 billion proceeds from the share sales to just under NZ$1.5 billion.
The National Party earlier this year announced its intention to sell down up to 49% in each of Solid Energy, Meridian Energy, Genesis Energy and Mighty River Power, as well as some of its 73% holding in Air New Zealand, if it is re-elected on November 26. The shares would be sold down over a 3-5 year timeframe.
Last month Prime Minister John Key said the proceeds would be earmarked in the government's accounts for investment in social infrastructure such as schools and hospitals. In Budget 2011, released in May, Treasury indicated any new capital expenditure over the next five years would have to be found from the government's existing capital base - ie, the government would basically need to sell assets in order to invest in others.
Announcing the 'Future Investment Fund' - the section in the government's accounts for the SOE share-sale proceeds - Key said the government would use NZ$1 billion over the next five years for upgrading schools.
Adding in the latest NZ$400 million contribution brings the total promised spending from the SOE share-sale cash to NZ$1.480 billion.
Key has also indicated some of the NZ$5-7 billion proceeds could be given to KiwiBank for the State-owned bank to lend to the small to medium enterprise (SME) sector.
Key has said the future investment fund would be used to fund new capital expenditure over at least five Budgets, and could effectively disappear within a decade. The Future Investment Fund is not an investment fund like the Superannuation and ACC funds, which invest their capital in local and global assets for returns, but rather a section earmarked in the government's accounts for cash from the SOE share sell-down.
In May before releasing the Budget, National announced plans to spend NZ$400 million by investing in regional-scale irrigation schemes to try and encourage third-party investment. At the time, Key said he expected spending to commence in 2013/14, which was reaffirmed today.
“Should National win the election, we will provide up to NZ$400 million from the Future Investment Fund to confirm the funding for the second phase of our water priorities, to be called the Crown Water Investment Company. Funding will be available from Budget 2013, and will carry on for the following four budgets," Key said in a statement on Wednesday.
“The scheme would operate through the Crown being a minority partner, and investing with the expectation of a commercial return on that investment. The intention would be that the stake would be sold off over time. It would not be a grant scheme," Key said.
“Because we are using the Future Investment Fund, which draws from proceeds of the mixed ownership model, we will not have borrow more at a time when financial restraint is needed," he said.
“Government investment in large-scale irrigation schemes can deliver high quality projects, sooner, and give confidence to capital markets to invest. Our plan will be good for jobs, good for growth, and good for the economy.”