Sunday, April 03, 2005

"Hands off our assets"

The Sunday Star-Times has an interesting article in their business section today (sadly not online) on public attitudes to asset sales. According to a poll they commissioned last month, 79% of all New Zealanders opose further sales of state-owned assets. But what's interesting is that while there's a wide split between Labour and National supporters, sales are still opposed by an overwhelming 71% of National Party voters. That's a fairly broad cross-party consensus, and one which the current National leadership should be paying attention to. Unfortunately, though, they still seem wedded to asset sales, with John Key promising partial privatisations of Solid Energy, Genesis, Mighty River and Meridian to ensure that those profit streams currently enjoyed by the public are diverted to private pockets. I guess loyalty to business interests trumps loyalty to their own supporters...

Also interesting are Chris Trotter's comments. He declares that asset sales have joined the nuclear free policy as a "third rail" issue where attempting to move away from the status quo is politically fatal. He also suggests that many New Zealanders would back a political party with a credible plan to buy back core infrastructure assets in transportation (TranzRail - now Toll), electricity (Contact Energy and Trustpower), and communications (Telecom). The problem with this unfortunately is that the promise of a buy-back will simply result in a boost in price; such buy-backs probably need to be opportunistic (as with Air New Zealand), and then the opportunities may not arise. But its still perhaps something left-wing parties could be making a lot more noise about...


I'm not convinced of the merits of buyback as such. There may well be political support from some parts of the electorate, but from an economic perspective there are probably better ways of getting good value for the country. Smart regulation is the obvious alternative. Not quite such a sexy rallying cry, but potentially just as effective and at much lower cost...

Posted by Anonymous : 4/03/2005 07:55:00 PM

I think it has to be approached on a case-by-case basis. I think there'd be a positive benefit to bringing electricity generation back under state control, as clearly the market is not working in that area (and in fact has no incentive to, according to one study). With Telecom I'm not so sure; in that area the market seems to be working better (or can be regulated so as to work better); the chief benefit might be to be able to seperate lines and number allocation vs services, so as to allow the market to work properly. But politically, there is support to be tapped by parties willing to take a simplistic stand on the issue, and I'm surprised they're not doing it.

Posted by Idiot/Savant : 4/03/2005 10:17:00 PM

The Sunday Star Times had some other good articles today as well!
Didn't post them up for some reason Idiot? Wonder why?

Posted by Anonymous : 4/03/2005 10:22:00 PM

How about set up a state sponsored alternative and squeze them out.
Or a state and foreign corporation alliance where that is not feasible. Extra incentives for the state to take on monopolies.

Posted by Genius : 4/04/2005 02:58:00 PM

While it's instinctively appealing in many cases, I think you're right about the difficulties of buyback.

As usual Chris Trotter's analysis only goes so far - many voters may like the idea of bringing telecom back into the family silver cabinet, but to what extent would they be prepared to wear the cost -what is Telecom's market capitalisation, $14 billion or something? I think most voter will actually consider this.

Posted by Michael Wood : 4/04/2005 08:24:00 PM

I just read an interesting article by Sue Newberry, where she suggests that Telecom may be in an asset-stripping phase. I don't understand all the dodgy accounting stuff she goes on about, but there are some kind of circular transactions going on with telecom subsidiaries in tax havens, at the same time as the major foreign shareholders are selling out to small NZ shareholders.

If it turns out to be true then the share price should plummet soon and the government may well be able to afford whatever's left of Telecom after it's been stripped out.

Posted by Anonymous : 4/05/2005 12:02:00 PM

By which stage it would require substantial reinvestment to bring it up to scratch - just like the track.

Posted by Idiot/Savant : 4/05/2005 04:03:00 PM