Rodney Hide writes about the Mixed Ownership Model in his Herald on Sunday column. And despite what the Labour and Green parties may want us to think, the origins of the Mixed Ownership Model predate John Key's time as Prime Minister; check this out:
The state-owned enterprise Mixed Ownership Model that's causing such a fuss was pioneered by Helen Clark and Michael Cullen over a decade ago.John Key and Bill English are simply extending it. The fuss over privatisation is a fuss about nothing much.In 2001, the Labour Government spent $885 million bailing out Air New Zealand. Instead of taking over the company lock, stock and barrel, the Government took an 82 per cent stake and left the remaining share in private hands trading on the share market.Hence was born the Mixed Ownership Model.Mixed Ownership proved itself with Air New Zealand. The trading of the company's shares on the share market means its performance is continually and publicly assessed. That continual public feedback on performance is lacking with state-owned enterprises. Mixed Ownership provides a desperately needed market discipline on SOE directors and executives. That's a good thing.Labour pioneered the model and fully expected to be selling down shares as National is doing.
That's interesting enough on its own account, but what follows is even moreso:
Sir Michael Cullen told Cabinet, in setting up the model, that, "It may, however, be desirable to divest some or all of our shares at a future date." The Labour Government readily accepted that a future sell-down may well prove desirable. And not just some shares, but all of them.
So let's just see if we have this right; Labour not only brought back a majority shareholding in Air New Zealand leaving some shares in private ownership; they were prepared to sell more shares later in the piece.
14 comments:
What really matters in this whole debate is whether there is any economic advantage from selling some of these assets. Treasury did not recommend the sales and BERL's assessment quite clearly shows an economic disadvantage over time.
The ongoing dividends earned have greater value than a momentary sugar rush of funds. Just diverting money from the motorways that have a low cost/benefit analysis would provide the same amount of money.
Sprout, it isn't just the direct benefit to the government coffers from the privatisation. In fact, given this government's, and the previous, rapacious appetite for spending on bribing the poor, weak and stupid I'd rather they run out of money quick-smart.
The other benefit is to the stock market itself. Moribund, I think ISPs the term. Having a few more low-risk, large enterprises listed for kiwisaver funds and individuals to invest in might improve retirement outcomes for kiwis.
And finally, quoting treasury and BERL don't exactly strengthen your argument. Any number issued by treasury, unless after the event, is aura teed to be hopelessly wrong and BERL is a leftist shill-shop.
"Any number issued by treasury, unless after the event, is aura teed to be hopelessly wrong and BERL is a leftist shill-shop."
Gee Guntt, if it's credibility you think is important, can you please set out for us the evidence for your allegation that Obama was a male prostitute when in college? I just want to see how unhinged you are.
You can't resist, can you Judge?
Well, neither can I; have a week on the sideline; you've exhausted your quota of cautions.
What? I think anyone reading the guy's views can more fully appreciate where he's coming from if they know exactly what views he has don't you? You can also get an idea of who your allies are, and that would be instructive (although I can see why you would be embarrassed).
What people post on other blogs is their business Judge. But you leapt and slagged off a perfectly reasonable comment by Gannt by attacking him personally. That's one personal attack too many AFAIAK.
See you in a week.
Gantt, I've seen this stock market argument a few times recently and it isn't one the government has really promoted. Can you explain to me what advantage to the country as a whole of selling state assets to give the stock market a boost. Who benefits?
Sprout, I actually reckon it's difficult to oversell the upside of privatising. Consider the following:
(1) these entities might be owned by "all New Zealanders" now, but because electricity supply operates in a pretend, distorted "market", all New Zealanders pay far more for their electricity than they should.
(2) consider the NZSX. There's a real dearth of boring, (relatively) safe investments. I believe once these entities are listed the share price might bounce around a little bit for a short time, but then they'll settle into a stable range. The value will be in the dividends. I don't think anybody will lose their shirt on these shares, but they will be attractive to (for example) superannuation funds looking for low-risk investments.
(3) once they're listed they will fall under the governance and reporting requirements of all listed entities; their operations will be much more transparent.
(4) once they're listed, any shareholder can rock up to the AGM and ask the Board any question they like.
The non-share market benefits of the privatisation include introducing operation by profit motive will force these companies to become leaner and more innovative, which will either increase their profitability or reduce the electricity price for consumers (surely a benefit to all New Zealanders).
The fact is, government meddling in the electricity supply market has driven up cost, driven down supply, driven out innovation and has meant kiwis have paid out a lot more for their electricity than they otherwise would have. The Auditor-General's report from a couple of years ago stated as much.
Consider the high-cost, low-quality means of generation which watermelons love (wind and solar). They would never, ever get legs in a free market, because they're dirty, expensive and unreliable. But because of government incentives and corruption, companies line up to pocket some taxpayer wedge to keep pushing them.
For what it's worth, my opinion is the government should get right out of the electricity supply chain and let the miracle of the free market do its work. However, I realise that isn't feasible, so IMHO it would have been far better for the government to choose a slice of the supply chain and completely nationalise it. For example, have the government own all generation capability (and charge it out on a cost basis, not a profit basis) with the wholesale and retail slices completely privatised. Consumers would then have genuine choice, the end-user price wouldn't be jacked up by government-controlled retailers and retailers would be free to package as they saw fit, and to compete for custom on a level playing field.
That's more like it gentlemen. Isn't it great that we can have a civilised debate, without abuse being flung around?
And bsprout; when you say "who benefits?", surely the million-plus Kiwisaver account holders benefit if their fund managers invest in NZ-based assets than offshore. I certainly hope that Mercer, my Kiwisaver provider gets in and buys SOE shares.
Though I do wonder if the gains in the stock market will compensate for an increase in power charges. I just switched back to Meridian after the private provider I had changed to increased their charges by 40% and it is generally accepted that charges will increase in the companies sold (I guess they will also have to cover the doubling of directors' pay- $2400 a day).
Look not at the price increases, sprout, but the reasons for them. I can all-but guarantee there's a government program in there somewhere. Some ridiculous renewable target, perhaps? Or price hikes at the generator?
Point is, in a genuine market free from manipulation (government intervention or cry capitalism), prices will always trend lower over time.
The first sentence of your 12.36pm was fine Gannt, but the second sentence was unnecessary. I will be applying my new rules as even-handedly as I can, so don't fall foul of them.
Apologies, Inv. comment deleted. Don't want to stoop, won't happen again.
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