The Herald expands on the Finance Minister’s comments re asset sales:
Kiwibank was a good example of an asset that needed to be dealt with. It had reached the size where it needed either a Government guarantee or an “awful lot of capital”.
“If there’s any asset that’s regarded as risky by credit rating agencies, it’s a small, fast-growing bank,” he said.
“So one option would be to go to the market and raise capital. Keep majority Crown ownership, but raise the rest of the capital from the market.
This moves in a different direction from National’s asset sales policy in the 90s which was to sell state owned monopolies to businessmen with close links to the National Party at suspiciously low prices and then stand aside and do nothing while those businesses asset stripped the company, price-gouged the public and ruined our economy.
Partial sale of state-owned assets, including power companies, was one of the main recommendations from the Labour-initiated capital markets development taskforce last year.
They thought it might be novel for New Zealand shareholders to invest in companies that paid out dividends instead of stealing all their equity.
[English] said the Government would not sell assets without a mandate from the public.
A spokesman for Mr English said last night that National’s position had not changed and if it did, “everyone will know and the Government will campaign on it at the next election”.
So there’s your choice New Zealand: asset sales, or a party that opposed the GST hike with a nationwide campaign called ‘Axe the Tax’ but refused to comment on whether they would axe the tax or not. Privatisation or a new Prime Minister whose flagship fiscal policy is to cap the salaries of a dozen public servants.
Labour are besides themselves at English’s suggestion: if they were really opposed to asset sales they’d sack their leader, feed his strategy team into a wood chipper and bury the remains at a crossroads at midnight. That way the country might have a genuine choice in the voting booth next year.
It’s indeed a stupid policy. Bank guarantees have worked wonders in the US and everywhere, with taxpayers forking out trillions in the name of crony capitalism.
NZ should have its government guaranteed bank and taxpayers should be liable for its losses.
Keep crony capitalism!
Comment by Berend de Boer — May 22, 2010 @ 9:57 am
lol – “feed his strategy team into a wood chipper and bury the remains at a crossroads at midnight”
hope you’re not suggesting the strategy team are godless comfortable shoe wearing vampires.
Comment by patx — May 22, 2010 @ 10:09 am
The coolade must be in prep stage at the standard and red alert. These shrill lunatics just do not get it. No asset sales without mandate. How exactly is this different from anything the nats said before the election?
There is a certain symmetry in cashing up usefull assets to help fund the narrow gauge train set that Cullen rammed up our collective shitters as a final F U.
Personally I would rather they did not sell anything and look at putting the poor saps who still own shares in Telecom out of their misery by buying it back.
Or even better… Sell the last of the state owned power companies and then kill them slowly with regulation and vote gathering hysteria.
Comment by Barnsley Bill — May 22, 2010 @ 10:14 am
double lol –
“@Blinglish “Partial sale of state-owned assets, including power companies, was one of the main recommendations from the Labour-initiated capital markets development taskforce last year.”"
“@Danyl “They thought it might be novel for New Zealand shareholders to invest in companies that paid out dividends instead of stealing all their equity.”"
So offering shares in Kiwibank and power companies to Mum & Dad investors (aka voters) in the lead up to a general election would have been OK if it was a Labour government?
Comment by patx — May 22, 2010 @ 10:18 am
Bear in mind that Bill English entered parliament in 1990. The BNZ bailout from then would have stuck in his mind. The Richardson years gave him a hell of an education.
Comment by Will de Cleene — May 22, 2010 @ 10:18 am
I couldn’t agree with you more Danyl. You could argue (and many people did) the pros and cons of setting up Kiwibank in the first place, but now that it has proved its worth, is making money and is doing well, its just crazy to flog it off on an ideological whim.
If the government wants to save money, then rather than flog off successful assets they should be looking at closing down the money wasting meddling bullshit organisations which daily interfere with our lives like the Families Commission, Family and Community Services, Fish & Game New Zealand, the Human Rights Commission, the Ministry of Pacific Island Affairs etc etc etc ad nauseum.
This government really needs to leave Kiwibank alone and focus on the essentials.
Comment by Dave Mann — May 22, 2010 @ 10:21 am
I’d be all for Govt maintaining a majority position but freeing up capital from floating some of Kiwibank, Genesis etc. And that is specifically the angle he’s taking. What exactly is the issue with ownership if the Govt maintains majority veto rights?
Also, this Mum and Dad stuff is such tripe – are you going to ban institutional investors? Or anyone who isn’t part of a traditional family structure?
Comment by garethw — May 22, 2010 @ 10:30 am
OK, Raúl & Tony ‘the bear’ investors
Comment by patx — May 22, 2010 @ 10:36 am
Dave Mann: If the government wants to save money, then rather than flog off successful assets they should be looking at closing down the money wasting meddling bullshit organisations which daily interfere with our lives like the Families Commission, Family and Community Services, Fish & Game New Zealand, the Human Rights Commission, the Ministry of Pacific Island Affairs etc etc etc ad nauseum.
Can’t argue with that one. Chances the Nats (or Labour) will do that? Nil.
Because the government needs to be kept at its current size at all costs. Even if that means borrowing for the tax shuffle.
Comment by Berend de Boer — May 22, 2010 @ 10:39 am
I’d also love to know if English had a second speech option – this was clearly a “hey the Budget went well and people like us so let’s float asset sales” speech. I suspect that if the Budget hadn’t been so warmly received that asset sales would have stayed well off the discussion agenda.
Comment by garethw — May 22, 2010 @ 12:52 pm
Also, the Kiwiblog comments on this are surprising – heavily on the “don’t sell it” tip. Odd.
Comment by garethw — May 22, 2010 @ 12:54 pm
Gareth, I noticed that as well. Could it be that most people agree asset sales may have added a few bucks but the end product either breaks or rips us off.
Danyl;
“This moves in a different direction from National’s asset sales policy in the 90s which was to sell state owned monopolies to businessmen with close links to the National Party at suspiciously low prices and then stand aside and do nothing while those businesses asset stripped the company, price-gouged the public and ruined our economy.”
Nice rewrite buddy.
Those Fay Richwhite pricks may have been involved a little earlier than the 90′s nats.. Or does that not fit your narrative?
The most disgracefull price gouging we have seen in the last 20 years has been the SOE power companies toiling under the grasping hand of Cullen. “There is more than one way to fleece a taxpayer” should be that pricks family motto.
Comment by Barnsley Bill — May 22, 2010 @ 1:05 pm
Well it would be a crying shame if, having sold off full monopoly positions to asset strippers, the country now avoids the practical step of joint ownership with Govt majority. Lose-lose really
Comment by garethw — May 22, 2010 @ 1:12 pm
Just this morning I had a converastion with a colleague. Her parents had money invested in Hanover (for their retirement). They had money invested in a flat that got leakey (for their rerirement).
But still they are considering investing what little money the have in going in with her and her husband on a house. Property is still perceived as a better investment than other (what other?)options, especially if it’s a house and not via investment company.
That’s the dilemma that any govt has with trying to shoft investment from property to “prodcutive” areas of the economy. It’s a dilemma because there i very little out there worth investing in.
If the govt can open up KiwiBand to small private investors and have safeguards preventing large shark take-overs then I can see the sense in that argument.
At the moment Labour’s sole job appears to be to make National look good. There’s nothing coming from them but reactionary rhetoric and platitudes and my recent anecdotal evidence suggests a lot of people see that.
Comment by Neil — May 22, 2010 @ 2:52 pm
you forgot stupid bus tours, Ernesto “Che” Guevara-esque motorcycle odyssey’s and election monitoring jaunts to sunny third world islands.
Comment by patx — May 22, 2010 @ 3:14 pm
Or you could vote Green instead of Labour. Unlike Labour, the Greens actually have an idea of what is going on and have a plan: http://www.greens.org.nz/mindthegap
(Waits in anticipation of being flamed)
Comment by Raptor — May 22, 2010 @ 3:56 pm
[...] nobody except die-hard Labour supporters are buying it. Unlike, Danyl at Dim-Post who wishes to make fertiliser out of Goff’s advisors, I don’t think they have a great deal of other options (but great comment [...]
Pingback by Generally Stupid Tax — MacDoctor — May 22, 2010 @ 3:59 pm
Dunno how partial investment in Kiwibank would work. What would you do when the next govt’s latest wheeze comes along, and they decide that they want to ask Kiwibank to become yet another arm of govt social policy? In short, would you really invest your hard earned in a company run by the govt?
I note that the current “profit” turned by Kiwibank is largely funny money. They have a range of hidden govt subsidies that are used to pretend they are profitable – everything from sharing branches with NZ Post through to the subsidy of govt banking business being run through the kiwibank books. Are we sure those will continue forever?
Not that I’m against letting other people invest in Kiwibank – hell, it’s just a tax on stupidity. We’re all into taxing things we want less of, and stupidity is definitely one of the things I’d like there to be less of.
Comment by PaulL — May 22, 2010 @ 8:02 pm
Sharing branches with THEIR OWNER isn’t funny money – and there’s no reason to assume NZ Post would remain as such in any partial float. If they wouldn’t then at least you’d know.
I know where your stupidity tax needs to lie…
Comment by garethw — May 22, 2010 @ 8:31 pm
Ha, it needs to lie on me it seems: substitute “no reason to assume NZ Post would” with “no reason to assume NZ Post wouldn’t”
Comment by garethw — May 22, 2010 @ 8:34 pm
No reason to assume NZ Post would, or would not remain as such? My understanding is that NZ Post does not change Kiwibank the full loaded cost of using that branch, only the variable cost. In short, NZ Post is making less money than it should, and Kiwibank more than it should. All good as long as it continues – but if the govt was now paying some of that money to shareholders (maybe foreign shareholders) do you think it would continue the cross-subsidy? If I wanted to invest in a NZ bank, I’d be more interested in buying TSB shares (currently owned by a community trust).
Comment by PaulL — May 22, 2010 @ 9:00 pm
Ah, see your correction now I post that. And need a correction of my own: change=charge.
Comment by PaulL — May 22, 2010 @ 9:01 pm
PaulL: Last I checked, the govt did all it’s banking with Westpac. Just sayin’.
Comment by Simon Poole — May 22, 2010 @ 9:03 pm
Kiwibank is owned by NZPost – if it’s to be partially floated the majority owner would likely remain NZ Post, and if that changed then investors would understand the new business model. Yes, as with any proposed PPP you’d be entering a business investment with the Government and would need to be aware of that and value accordingly – but that’s the point of PPPs.
Why would the people that are investing in Kiwibank not do the usual levels of due diligence? Why would anybody invest in any stock that has a majority owner with its own intentions and points of value? Why would a significant change in leasing costs not be communicated to investors through regular channels and the market respond accordingly?
Comment by garethw — May 22, 2010 @ 9:11 pm
Look, perhaps you’re right, perhaps (despite it’s amazing market share grabs) Kiwibank is a dog and can’t be profitable if minority shareholders are introduced. But that won’t be able to be hidden, and investors will respond accordingly. The argument could be that they’ll try and pull a Burger Fuel and focus on “Mum and Dad” investors while the pros avoid them – but they’ll be such media scrutiny they won’t be able to do that…
Comment by garethw — May 22, 2010 @ 9:19 pm
PaulL on this thread:
…would you really invest your hard earned in a company run by the govt?
Danyl in an earlier post:
…we have a business environment in which company directors can – and frequently do – defraud their investors, take all their money and suffer virtually no consequences.
Govt ain’t looking too crap, actually.
Comment by Psycho Milt — May 22, 2010 @ 9:56 pm
What percentage of people’s investments are raided by company directors? I’d suggest that, despite publicity to the contrary, very few companies are going broke and leaving investors in the lurch. Most of those that are, should have been blatantly obvious as being dodgy. My simple maths is that any investment that is returning more than about 10% is inherently risky. It is not possible to have returns at that level risk free. These companies going broke is entirely expected – what exactly do people think “risk” means? I know that’s hard for mum and dad investors in Hanover, but really, I don’t see how you can protect those people – if you’re investing most of your hard earned in a company that is sailing that close to the wind, there’s something wrong with your due diligence (that supposedly investors do, as noted by garethw above).
Yes, there are a handful where the directors paid themselves good salaries, and then bailed when the company went broke. Are we really damning the entire sharemarket on that basis? And, really, is that illegal?
Comment by PaulL — May 22, 2010 @ 10:02 pm
Also, this Mum and Dad stuff is such tripe – are you going to ban institutional investors?
and
Dunno how partial investment in Kiwibank would work.
You issue two share offers to the market: An ‘A’ and ‘B’ share.
‘A’ shares are offered at an initial $1/share, parcels of 1,000 (for arguments sake) and preference is given to those applying for the minimum parcel (ie; ‘Mum and dad’ investors). To keep with the approach used with AirNZ, limit the ownership to NZ residents.
The ‘B’ share is an institutional block. Standard share issue: first-come, first-served. Meaty chunks, international interest. Of course, if you and I want to get in on the action here (price movements will be more volatile) we’re more than welcome to.
—
Based on their Dec09 General Disclosure Statement, Kiwibank has $420mln of Capital and a $12bln balance sheet. If the government plugged in another $80mln (to $500mln) and then sought out $250mln to each of an ‘A’ and ‘B’ share as above (total $1bln capital) you could realistically see Kiwi grow to a bank of nearly $30bln in activity.
That’s still well short the Big-four, but it would give them the warchest to swallow up TSB and SBS banks, and then you’d have a serious player.
Comment by Phil — May 24, 2010 @ 11:09 am
The amount of rent escalation is written in the agreement, lease must meet or exceed the expected increase in the level of expenditure in the coming years, the landlord is otherwise going to lose money
Comment by manateepro.com — June 3, 2010 @ 10:54 am