Enough signatures have been gathered to force a politicians’ initiated referendum on asset sales.
The question we’ll be asked is:
“Do you support the Government selling up to 49% of Meridian Energy, Mighty River Power, Genesis Power, Solid Energy and Air New Zealand?”
That is inaccurate and out of date.
MRP has already been partially floated, Meridian Energy is about to be, Solid Energy has been taken off the list and there is no plan to reduce the government’s share in Air New Zealand.
The law states:
The Governor-General sets a date for the referendum within one month from the date of presentation. The referendum must be held within a year of the date of presentation unless 75% of all members of the House vote to defer it.
The left made the partial sale of assets the main policy of the last election.
They could do so again next year without wasting public money on this referendum which will have no impact on the policy.
Homepaddock 
This is excellent news for all New Zealanders – now they have a chance to vote for a topical issue, the sale of our assets for a quick buck, and most importantly, see how all other New Zealanders think about Key’s asset-flogging behaviour.
When the results of this referendum come in, we will all see that despite the National Party spin and Keys weasel words, we, as a country didn’t want to and still don’t want to sell our valuable energy assets.
Then comes the election 🙂
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The asset sales are just appalling economics. Treasury has shown that the sales will actually add $180 million to the deficit over the first four years due to forgone profits. National has already spent $100 million on the asset sale process (which makes criticism of the $9 million cost of the referendum just silly) and the recent profits achieved by Meridian show what we are giving up. The rate of return from our SOEs is much greater than the cost of borrowing.
The Government is effectively selling off 49% of assets of SOE that were fully owned by all New Zealanders and passed that ownership on to a few affluent people and overseas interests. We will lose the ability to manage power prices and few New Zealanders will benefit in the longer term after the initial sugar rush of instant cash.
I have yet to see one poll that comes out in support of the sales and if the Government goes ahead with selling Meridian it demonstrates a clear disconnect from ordinary New Zealanders.
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Selling non-core assets, partially or wholly, and investing the money gained in other core and much-needed assets is sensible.
We don’t manage power prices now – that’s what’s behind the LabourGreen mad idea to let politicians and bureaucrats interfere.
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You can repeat ‘sensible’ as many times as you like, Ele. The New Zealand public is going to vote ‘senseless’ on the Key asset sale.
Then comes the election.
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There’s something odd about your logic Dave. You’re hoping to lower power prices while at the same time still achieve nice big dividends? How’s that gonna work?
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The main driver for selling off our assets is because the tax cuts to the wealthy turned out not to fiscally neutral and have cost the country around $8 billion in lost revenue. If we had kept our tax rates similar to Australia we would be $8 billion better off and would still be collecting the dividends from our power companies. If every time the Government mucks up they sell more assets, what will we do when all our assets are gone?
To get control of our power prices again some poor future government will have to buy back the SOEs like they had to do with our railways and Airnz. It is a myth that private companies always do things better (on average the fully private power companies charge more that the state owned ones).
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The tax take has increased since the tax cuts.
The government doesn’t control power prices now – SOEs are independently rune. When the government control power prices we had blackouts.
Kiwiblog compares power companies and shows the private ones are usually cheaper than the SOEs: http://www.kiwiblog.co.nz/2012/04/grey_power_on_power_prices.html
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Putting words in my mouth, Tracey. Even if the Power companies profits were halved they would still provide a return greater than the three percent that is charged on government borrowing. Once we have given up almost half the power company shares to others it will be extremely difficult to control prices. The focus will always be on increasing profits to support share holder dividends, not providing a service. This nonsense will hurt businesses and families alike.
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This was just a small selection of companies, I was with Just Energy until they increased charges by 40%.
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OK Dave but you need to take into account the value of the money received today is greater than the same amount received as dividends, spread over say 10 or 20 years.
I realise you don’t see putting assets sales capital into schools, hospitals etc as investing. But it is even if it might be difficult to quantify. In fact, it is investing in ‘social capital’ as Russel Norman said in his speech you linked to the other day.
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‘When the government control power prices we had blackouts’ . Can you back this statement up with evidence showing how government control of power prices CAUSED blackouts?
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Tracey, I would have thought that power companies should earn enough to cover the costs production and future developments. I never thought that power companies should also have to pay for the costs of schools and hospitals.
Electricity supply is important infrastructure that supports business and the quality of life for families, it is not a golden goose to be used to bail out incompetent governments. It is crazy that our electricity costs should have increased 700 percent since the Bradford reforms when we are blessed with resources that should provide the lowest cost supply in the world.
In Southland we have elderly people resorting to food banks partly because of electricity costs.
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An interesting question. I would have to say no to it. As I have said before there are good reasons for thinking the partial sale plan isn’t a good one. The problem with the question is we are not told the alternative. If we don’t sell 49% of the shares what do we do? let the government keep them, bad idea; sell 100% of the shares, much better idea.
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Well done, Paul. Your ‘no’ vote will be appreciated, no matter what your rationale.
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I wouldn’t worry about it, if I were you, Ele. After all, everyone knows the government has a mandate to sell these assets, John Key said so himself and why would he lie?
The outcome of the referendum is a foregone conclusion. As the government so obviously has a mandate the result will merely serve to confirm this.
That the question is outdated and incorrectly worded reflects poorly on the people who prepared it and can only add to the magnitude of the defeat they are about to suffer.
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Lack of investment in generation so that power supply didn’t match demand caused the blackouts and the government owned the companies at the time.
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Which blackouts and when?
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Remember there have also been blackouts in Auckland and elsewhere since. The recession was caused by private companies and Airnz and our railways had to be bought back by the state to become financially viable again.
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In recent comments there seems to be some confusion on privatisation and why we want to do it and what the results are of doing it are. May be the following will help.
On the theory side see here for a discussion of the pre-1990 theories and thiei problems; and here for the post-1990 theories. On the empirical front see here. On why New Zealanders do not own SOEs see here. For some examples from around the world of some of the problems that come with SOEs see here. For some discussion on what can go wrong when privatisation is badly handled see here. For a case where it is not clear whether privatisation or nationalisation is better see this discussion of private prisons. For discussion of the Kiwirail case you mention here and here. A short comment on the setting up of Kiwibank is here.
As a general comment on government ownership in New Zealand let me say this. As a general guide, Hart, Shleifer and Vishny (“The Proper Scope of Government: Theory and an Application to Prisons”, Quarterly Journal of Economics, 112(4): 1127-61, November 1997 – see the post-1990 theory link for discussion) argue that the case for government provision of goods or services is generally stronger when non-contractible cost reductions have large deleterious effects on quality, when quality innovations are unimportant and when corruption in government procurement is a severe problem. It has been argued that the case for government production is strong in such services as the conduct of foreign policy, police and armed forces. The case can also be made reasonably persuasively for the case of prisons. The case for private sector provision is stronger when quality reducing cost reduction can be controlled through contract or competition, when quality innovations are important and when patronage and powerful unions are a severe problem inside the government.
Its not clear that the government’s interventions have been in areas where the Hart, Shleifer and Vishny arguments would suggest the government should be involved. Banking, for example, is not a area where cost reduction come at the expense of quality, where innovation is unimportant or where there are any problem with government procurement. So why have the government owning Kiwibank? Also government involvement in Air New Zealand is hard to justify on these grounds. As noted above, the case for private sector provision is stronger when quality reducing cost reduction can be controlled through competition, and the airline industry is very competitive, when quality innovations are important, and we want a high quality and innovative airline industry, and when patronage and powerful unions are a severe problem inside the government, which are things we wish to avoid with an airline. Here private provision makes sense.
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You said ‘when the government control power prices we had blackouts’. WHEN did the government CONTROL power prices? And WHEN were the blackouts caused by this price control? Or did you just make that up Ele?
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“The experience after the reforms – both in 1992 and subsequently – has in fact been considerably better than in the past, which typically involved the blunt instrument of blackouts. Since the reforms, and especially with the advent of the NZEM, supply
insecurity has been felt more in terms of rising wholesale prices – but not retail prices, at least not immediately or extremely – illustrating how this innovation has provided a useful tool for managing supply insecurities.”
Click to access Chapter_6_Coping_With_Crises.pdf
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Viv – I was relying on memory, which can be unreliable, but Tracey’s link gives examples or threatened and actual blackouts.
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Dave, if you don’t mind, I’m going to be provocative (with the risk of being shot at from both sides). Is that OK with you and Viv if I do? Ele is free to delete my comments if she wishes. I shall try not to insult anyone’s sensitivities, but make no apologies if I happen to inadvertently.
The recently announced additional investment in education (http://www.beehive.govt.nz/release/27-million-investment-education-initiatives-aimed-priority-children) included “$3 million over the next two years to support children in the first year of school to develop literacy and numeracy skills.” There was a whole bunch of other money announced too, but it’s the group the $3m targeting that interests me particularly.
$3m sounds like a lot, but when divided up by the number of new entrants to start school in 2014 and 2015 it works out to be less than $30 per child (and that does not take into account the children already in those years who are behind in literacy and numeracy).
Now not every new entrant child will need extra help but we know that about one in every five do. So that’s $150 per child per year. That is not enough to make the difference some children need.
So where is any more money going to come from to make a difference to children’s literacy and numeracy in those early years? Higher taxes for the ‘rich’? The cow that keeps on giving. Surely not all new spending can be funded on the back of higher taxes Dave.
Russel Norman is so entrenched in his opposition to asset sales that he cannot even see the good in something that matches his own rhetoric, that of investing in “social capital”. Luckily I can, so am not likely to be influenced by a man who will utilise any issue, no matter how misleading, in order to get himself the job he wants in government.
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Can either of you ACTUALLY show where the NZ Government CONTROLLED power prices and where this CAUSED ACTUAL blackouts in New Zealand ?
Relying on memory, hmm, inaccurate & out of date it seems.
Tracey- you’ll need to do better than linking to a 167 page document where someone said they used blackouts in the past- EVIDENCE please.
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From the link Tracey gave: . . . “but the 1970s saw a return to supply shortages. Added to the previous problem of low hydro inflows into storage lakes were the oil price shocks (and embargo) of the 1970s, growing transmission constraints affecting regional demand/supply balances, and general demand growth requiring new generation capacity.
Once again government made calls for voluntary reductions backed up with threatened and actual cuts. Television broadcasting hours were sometimes reduced, hot-water cuts
were applied where supply authorities had installed ripple control in domestic hot-water systems, and from July through to September 1973 blackouts were common 6:30-
7:30pm weeknights, and early afternoon on weekends. Rolling blackouts were another tool used in the 1970s to manage supply shortages, and generation capacity reliant on oil was in some cases converted to cheaper or more secure fuels (e.g. based on newly developed indigenous gas supplies). . . ”
Is this: “Once again government made calls for voluntary reductions backed up with threatened and actual cuts.” not government control?
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The way I read it was that the water shortages and some mismanagement combined to create a supply shortfall.
Threats and actual cuts were used as the mechanism to bring demand into line with supply. Whereas now market pricing fulfills this role.
Lower overall prices with blackouts may seem fairer to you Viv than what we have today. But it isn’t of course, because the government has no control over people’s response to the ‘threat’ phase. Many people ride on the back of those who make voluntary savings (and the sacrifices which go with them) continuing to use as much as they want at the lower prices.
Blackouts don’t affect people fairly either, because no power at certain times of the day will affect some more than others, and on an indiscriminate basis.
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How about the blackouts that happened from the late 1970s through to deregulation in the mid 1990s? There’s an almost 20 year gap there where you’ve lost the cause-effect nexus. Or perhaps the causal link you suggest just does not exist.
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Is this: “Once again government made calls for voluntary reductions backed up with threatened and actual cuts.” not government control?
You said “When the government control power prices we had blackouts.” That was scaremongering , meant to be interpreted as if the government controls prices that will cause blackouts (like it supposedly did in the past, but neither of you can,as AC said, establish a causal link between Government control of prices and blackouts)
“The way I read it was that the water shortages and some mismanagement combined to create a supply shortfall.”
OK, there was a supply shortfall and “ the government made calls for voluntary reductions backed up with threatened and actual cuts.” The blackouts were NOT CAUSED by the government controlling power prices.
So, that was just Ele being “provocative” I suppose you’ll say. The rest of us would call it making stuff up.
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“Lower overall prices with blackouts may seem fairer to you Viv than what we have today”
Will you ever stop making up what you think other people think Tracey. We have been over this ground SO many times, I never said that- you did. So other than this little rant, I’m not going to bother arguing with you about a position I don’t hold.
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Ah no Dave – The recession was caused by government meddling in the market (just like the Greens want to continue). The sub prime market was created by government interference. I know the truth doesn’t suit your agenda, but keep rolling out the lie and it will become the truth ay?
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