Spending well not up

Finance Minister Bill English’s fifth Budget is characterised by spending well rather than spending up.

Budget 2013 has freed up a further $1.5 billion by redirecting spending to where it delivers the best results, Finance Minister Bill English says.

This takes the total amount of reprioritised government spending since Budget 2009 to $14.9 billion.

“At a time when the Government’s finances are constrained, reprioritising spending allows significant additional funding for new or proven initiatives that get better results for New Zealanders,” Mr English says.

“It’s about spending well, not spending up.”

In total, Budget 2013 includes new spending initiatives worth $5.1 billion in the current year and over the next four years, paid for by a combination of new spending and $1.5 billion in reprioritisation and new revenue initiatives. Those savings and revenue initiatives include:

• Tax and revenue changes that net an extra $313 million over four years.
• Reprioritisation of $641 million to new spending initiatives within Budget votes.
• Reprioritisation of $252 million of savings from across budget votes into significant new spending initiatives in areas like health, education, welfare reform, and science and innovation.
• $303 million from existing contingencies.

“These savings are consistent with the Government’s approach across its five Budgets, which have together reprioritised almost $15 billion of spending,” Mr English says.

“New Zealanders were conditioned in the 2000s to believe that Budgets should be about the novelty of new, expensive spending programmes that held out promises of economic and social transformation. Those promises were illusory.

“There was no sustainable revenue stream to pay for the increased spending and there was nothing genuinely transformational to show for it.

“Governments should be judged on what they achieve rather than on what they spend. The value of our spending is a better measure than the amount of our spending. This Government is focused on results, and it’s paying off.   

The idea that a government should be judged on its achievements rather than its spending is a relatively new concept.

Budgets used to be focussed on spending and people waited with excitement to see what was in it for them.

The steep increases in spending from 2005 until 2008 show the cost of Labour’s pre-election lolly scramble.

National changed that, improving results rather than increasing expenditure, even going so far as to deliver a Budget with no increased spending in election year.

John Key, Bill English and their team changed that, making a virtue out of restraint and they’re getting results.

“For example, recorded crime is at a 24-year low, and we’re rolling out new technology for frontline police officers, but the baseline funding for Police is not being increased.  Instead, Police are finding more efficient and effective ways of doing their job which is generating savings they can reinvest.

“At a time when many governments overseas are undertaking radical cuts to get their books in order, we are enhancing high-quality frontline public services while maintaining support for our most vulnerable citizens. That is a real achievement.

“The Government will ensure future Budgets continue to focus on improving frontline public services to deliver better results for New Zealanders, at the same time as improving value for money from more than $70 billion of public spending every year,” Mr English says. . .

A friend who worked in Wellington in the late 80s and early 90s saw the results of spending cuts. She was back there during Labour’s last few years in government and was horrified to see the increases in spending, including steep growth in public service employees, without commensurate improvements in services and results.

National had to change that but its restraint has been restrained rather than radical – focussing on protecting people from the worst impacts of the recession, reducing expenditure, improving efficiency and maintaining services.

The LabourGreen reaction to the Budget shows that they still don’t understand the necessity for such measures, they would undo the good National has done just as the 1999-2008 Labour-led government undid the good done by those which preceded it.

They spent up, they didn’t spend well and LabourGreen would follow that bad example.

$500 in the hand

Continuing improvements in ACC provide an opportunity for significant levy reductions to benefit businesses and households, ACC Minister Judith Collins says.

“The Government is confident that a decrease in ACC levies is sustainable and is allowing for a reduction of around $300 million for 2014/15, increasing to a reduction of around $1 billion in 2015/16,” Ms Collins says.

This follows a $630 million reduction in levies for households and businesses in 2012/13. . .

“The potential 2014/15 levy reductions would leave around another $300 million in the economy for businesses and families.

“The Government is currently working with the ACC board to review its funding policy, with the aim of improving the governance and transparency of the levy-setting process, while ensuring that it reflects the Government’s objectives for the ACC scheme.

“Already there is general consensus that the improved performance of the ACC scheme makes substantial levy reductions appropriate and sustainable. Therefore, I am signalling a likely further reduction from 2015/16.

“Final decisions on levies for 2014/15 will be made later this year, following public consultation.

“The future for ACC is bright and will be of significant benefit to households and businesses alike,” Ms Collins says.

I read somewhere, and can no longer find it, that the reduction in levies would leave around $500 a year in the average household.

That’s a certain $500 in the hand which is far better than the LabourGreen promise of a $300 saving on power bills about which there is no certainty except any gain would be cancelled out by an increase in ETS charges.

No consensus, no change

One of the arguments used to urge people to vote for a change in the electoral system was that it was the only way we’d get a second vote.

They’ve been proved right.

Justice Minister Judith Collins says since there’s no consensus there will be no change.

In November last year, the Electoral Commission released its review of the Mixed Member Proportional system, estimated to have cost $1.6 million.

It recommended dropping the party vote threshold from 5% to 4% and scrapping the “coat-tails rule”, which would stop a party that won an electorate seat bringing in extra list MPs unless it reached the party vote threshold.

However Ms Collins says the changes would have been significant, and can not be done without widespread support.

On the coat-tails rule, Ms Collins told Radio New Zealand’s Morning Report that five parties want to keep the status quo and three want it abolished, so there are major differences of opinion.

“Law changes in this country require 61 votes to get through Parliament. I don’t have 61 votes to bring forward the law changes suggested by the Electoral Commission. It’s as simple as that.”

It’s not just that law changes require 61 votes, it’s that major constitutional changes should either have the support of at least 75% of parliament or be put to the people in a referendum.

Had a majority of people voted for change in  2011 there would have been a review of MMP and we’d have got to vote between the modified version of the current system and the most preferred alternative next year.

A majority voted for the status quo, there’s been a review but there’s no consensus and so there will be no change before next year’s election.

It would have been better for the review to have been carried out before the referendum then we’d have all known exactly what we were voting for.

As it was some people who supported MMP might have supported it as it is and others as they’d hoped it would be after the review.

LabourGreen might decided to campaign on the issue and promise to implement the recommendations of the Electoral Commission.

But even if they win the election they won’t be able to claim a mandate for change.

They’ve put so much energy into saying National campaigning on the partial sale of a few state assets and winning the election didn’t give them a mandate, they won’t be able to claim campaigning on the electoral system and winning would give them a mandate.

MRP shares open at $2.73

Mighty River Power shares started trading at 12:30 and opened at $2.73.

That’s a healthy premium on the listing price of $2.50 which poses a problem for LabourGreen.

They can’t complain about the money going into the pockets of people selling them because had it not been for their sabotage, more people would have opted to buy them before they listed and the listing price would have been higher.

If they can cost us this much money in opposition the thought of how much they could cost in government is terrifying.

 

Crocodile tears

Green co-leader Russel Norman is still complaining about the float of 49% of Mighty River Power.

Mighty River Power’s shares have been transferred from all New Zealanders to corporates and a small minority of already well off New Zealanders, Green Party Co-leader Dr Russel Norman said today. . . 

Finance Minister Bill English last night revealed that only 113,000 individual New Zealanders bought shares in the Mighty River Power offer with an average purchase of $8220 worth of shares. The Government claimed over 440,000 New Zealanders had pre-registered to buy shares.

“There aren’t too many mum and dad investors with the ability to put down $8,220 on a share portfolio,” said Dr Norman. . .

An average is just that – some people would have bought more than $8220 worth of shares and others would have bought less.

What’s more 68% of applicants didn’t have a CNS indicating they were first-time investors and more likely to have purchased smaller amounts of shares.

But Norman is crying crocodile tears anyway.

As Hey Clint showed, the Green Party is delighted at their act of sabotage and it is the LabourGreen power play which put a lot of the smaller investors off buying shares.

When they list today the price is very likely to go up because institutional investors like ACC, Community Trusts and KiwiSaver funds will want more.

LabourGreen will no doubt complain about people making a fast profit but had it not been for their power play the float price would almost certainly have been higher.

Asset sales petition hasn’t got numbers

The petition seeking a referendum on the partial sale of a few state assets hasn’t got the numbers.

. . . Parliament’s Clerk of the House Mary Harris this afternoon said she had certified that the petition had lapsed because she could not be sure minimum number of signatures required by law had been met.

The petition needed the signatures of 10 per cent of voters to succeed which the Electoral Commission said worked out to 308,753.

But Ms Harris said that following a counting and sampling and checking process she found the petition was short by about 16,500 valid signatures.

The organisers of the petition presented it to Parliament in March claiming they had 393,000 signatures. . .

The petition was started by Grey Power but promoted by LabourGreen with the assistance of taxpayer funds.

They’ve got another couple of months to get the additional signatures needed but they should stop wasting their time and our money.

Might River Power shares will start trading on Friday.

Even if the people and parties behind the petition get enough signatures it will be far too late. The government will have received the money from the sale and will have invested some or all of it in other assets.

LabourGreen made this an election issue and lost.

Whether or not most people support the partial sale of a few assets, enough didn’t feel sufficiently strongly about the issue to vote to stop them.

They missed that opportunity; they’re short on signatures and attempting to get more will show they’ve got nothing better to do than pursue a lost cause.

There’s hope

Quote of the day:

. . . Before the electricity market could be replaced with a state-controlled pricing regime, two things would need to happen. Labour and the Greens would need to win the next election, and if they did they would need to carry out this policy. Neither, I think, is likely.

John Key remains the most widely admired of any New Zealand Prime Minister I have seen. National continues to lead all polls by a margin that is remarkable five years into the life of a government.

Unless something disastrous happens, he looks certain to win again next year. . . 
John Roughan.

But winning the most votes of any party isn’t enough under MMP, parties have to get above 50%, by themselves or in coalition.

Should National go into the election with no partners in prospect, an absolute majority is conceivable. Conventional wisdom says it is practically impossible because it hasn’t happened since 1951. But before then, it was not unusual.

Labour won more than 50 per cent of the vote in 1938 and 1946, as did National in 1949 as well as 1951. Since then many have gone as close as 47 per cent, including National at the last election when it became only the third post-war government to be re-elected with an increased share of the vote.

There is nothing magical about an extra 3 per cent. Conventional wisdom is destined to be surprised sooner or later.

It becomes more possible the more often David Shearer stands too close to the larrikin.

Shearer is a sensible man. To enact Norman’s scheme or Labour’s version of it, he would need to ignore all the economic advice available to him. . .

It can be very easy to ignore the soundest of advice if it doesn’t fit your policy and you’re more interested in power – or the electoral rather than the electrical kind – than people.

Yesterday’s  Roy Morgan poll showed National up and LabourGreen down after the latter’s power plan was announced.

However, that poll is notoriously unreliable.

The next few polls will be more significant but even if they do give the thumbs down to the LabourGreen policy it’s more than a year until the election.

We have few one term governments which makes the odds on winning a second term better than reasonable.

Winning a third term is much harder.

Roughan’s comment shows there’s hope. Enough voters might understand the danger of powering back to seventies socialism to scorn LabourGreen.

But hope doesn’t win elections.

That takes good people, good policy, active party members, money and a lot of hard work.

There’s hope but no certainty.

LabourGreen can’t win this one

The Mighty River Power float closes at 5pm today.

An experienced investor told me he’d written to David Shearer and Russel Norman thanking them.

Their power play was likely to depress the price so he’d get more shares.

Peter Sherwin at the NBR thinks the price is likely to be lower too:

Potential investors may now hold back because of confusion about the future of the power industry, uncertainty whether MRP will stag at a higher price and a fear the price will go down upon listing.

The lack of take up will dampen the listing price, which is more likely to be at the lower end of the scale, around $2.25 rather than the expected $2.80.

The Greens and Labour may have scored political points, but effectively they have slashed the government’s cash investment to fund health, education and infrastructure programmes. . .

So who pays the price for the opposition’s political gain? Every Kiwi, even those they claim to champion.

Professional and institutional investors will not be daunted by any of this and are making big offers, but with fewer “mum and dad” buyers they may not have to go to the market for as many shares when they are listed on May 10. . .

The investor I spoke to said much the same thing.

The LabourGreen power play was putting off first-time and small investors who had been planning to dip their toes in the water but now have cold feet.

The Hey Clint clip shows that Green MP Gareth Hughes thinks it’s funny. But Patrick Gower points out it’s not:

Now I know a lot of people watch “Hey Clint!” and find it funny.

But to me it showed much more than a bit of humour. It showed what we know – the Greens, like Labour, are trying to act like they are not gleeful that the policy is screwing with the MRP float.

In fact, it looked like Gareth Hughes was stoked. It was in the public interest to run it. No question.

It busted spin, in fact, it blew the spin apart.

It showed that the Greens, like Labour, are trying to come up with ‘lines’ to pretend that it’s not about wrecking the float.

And that’s fair enough; the Greens want to emphasise what they see as the good parts of the policy.

But, thanks to Gareth’s indiscretion, we could show what they really feel. . .

Putting politics before people isn’t the picture LabourGreen wish to portray.

They forgot that what’s good for the economy is good for people and their power play isn’t.

They can’t win on this one.

Support the policy or not, it’s in New Zealand’s best interest for the shares to sell for the best price.

If the float goes well their many attempts – most at the public’s expense – to counter the policy will have failed.

If it doesn’t, they’ll have cost the country millions of dollars.

Either way, they lose.

Green’s not for growth

The Green party is soliciting funds for its election campaign with an email that says:

 . . . National’s policies of more mining, weakening environmental protections, poor economic management and growing inequality are not the recipe for a fair society and a better future.

 In contrast to National, we have the ideas to deliver a richer New Zealand. . .

Green is supposed to be the colour of growth but these Greens are really reds promoting the policies that have failed in the past.

Take their plan to bring down the exchange rate. Prime Minister John Key says currency intervention and printing money won’t work:

. . . “It didn’t work very well for Argentina, or Venezuela or Zimbabwe and it could never be done in New Zealand at the sort of magnitude we’ve seen in the United States,” said Key.

As for the New Zealand dollar versus its United States counterpart, Key used a seesaw analogy.

“It’s a bit like being a seesaw and if I weigh 85 kilos and you weigh 170 kilos, I’m going to go up when you sit on the seesaw and you’re going to go down. And that’s really the situation we’ve got at the moment.”

“We kind of weigh 85 kilos and the United States weights 850 tonnes. Right up to this point it (the US) has been very unwell. It has got everything from aids to bird flu. It has really been pretty unwell so the market’s just massively adjusting what they’re doing.”

When people say the Reserve Bank should be printing money, Key said you wouldn’t do that with base rates – the Official Cash Rate – at 2.5%.

“All you do is cut interest rates for a start off. The second thing was even if you printed money, it’s never going to work. I think they’ve printed US$5.5 trillion in the US. I mean it’s massive. So what would we print? NZ$50 billion or something? It wouldn’t make an iota of difference.”

“So my view would be I know we want to get the exchange rate down and I know it’s hurting a lot of companies. But it’s a cycle you’re going to have to ride through and all the Government can do is control the things that are in our control. So get out there and reform the Resource Management Act, make sure we don’t spend too much money, make sure we keep pressure off interest rates, manage the place well,” Key said. . . .

The reds want to increase the burden of government, their policies will lead to higher interest rates and they haven’t a clue about good economic management.

. . . Furthermore, he said intervention in the currency markets never works.

Here Key cited an example from his previous career at Merrill Lynch, where at one time he was head of global foreign exchange. One of Merrill Lynch’s biggest clients was the Bank of Japan, which used to intervene in the currency markets through Merrill Lynch.

“To tell you how bad it got, one night we were sitting there and the Bank of Japan rang up and the US$-yen was about 90 or something and they didn’t want it to go down lower. And the guy said to me ‘I want you to start buying dollars at 90′. And I said ‘how many do you want me to buy’, and he said ‘well, I’m going out for three hours so I’ll give you a yell when I get home.’ And I said ‘yeah, but how many do you want me to buy?’ And he said ‘I’m going out for three hours, don’t you understand the conversation?’

“I bought US$4.5 billion in three hours. He said ‘where is it (the US dollar-yen exchange rate)’ and I said ‘it’s 90, you bought US$4.5 billion. And he said ‘ah, well I’m off to bed now give me a ring in the morning’,” said Key.

“It never worked, it just never worked. I don’t know how much money they lost on intervention but it was massive.” . . .

Who do you believe – someone who has worked in international finance and has managed the country through the global financial crisis or people who want to print money and whose power policy would have a chilling effect on on private investment? Rob Hosking writes:

. . . There is something essentially frivolous about anyone who would cheerfully rip up the value of some of the country’s largest firms, and the value of the investment in those firms, simply for a political positioning exercise.

This is why the exchange caught by TV3 between Green energy spokesman Gareth Hughes and party spin zambuck Clint Smith was so telling.

For those who missed it, Mr Hughes was asked if the party was pleased at the reaction: Mr Hughes paused, turned to Mr Smith and asked “Hey, Clint – are we pleased?”

It was telling that he even had to ask.

But the almost palpable glee coming out of the Green and Labour camps at the destructive impact of their policy is highly revealing. 

It underlines – not for the first time – the problem with the makeup of both parties. They are dominated at the MP and the staff level by the sub-genus homo politicus.

That is, they are full of people who have done nothing in their lives apart from politics. All parties have a complement of this group, but with Labour and the Greens the group has reached critical mass.

This group has been involved in politics at university, moved from there to various political/union offices and then into parliament. 

There is little real world experience and everything is viewed through a very narrow prism of political advantage.

It’s the sort of attitude which means the value destruction seen this week can be just laughed off.

There will, unless we are careful, be more such frivolous policies to come.

I would use a far stronger word than frivolous and the business community certainly isn’t taking it lightly.

In an open letter to LabourGreen they say the policy would harm jobs, growth and investment, causing interest rates to rise, reducing KiwiSaver retirement savings and making people less well off.

. . .Business shares your concerns about constantly rising power prices and their impact on our global competitiveness. Businesses and consumers work hard every day to minimise their spending on electricity in order to stay in business and

to make their household budgets stretch further.

However, we do not think that electricity policies based on subsidies and greater state control are the right answers. Such policies have been tried in the past and have been shown to be incapable of meeting the challenges of a modern economy

with a complex, real-time electricity market.

 

Putting aside the sheer complexity of their implementation, policies that protect businesses from the full costs of the inputs they use ultimately dull the incentive to innovate and make them less, not more internationally competitive. Reducing retail

prices below the full marginal cost of production encourages households to use more than they should.

Of particular concern with the policies announced is their chilling effect on investment across the entire economy.

 

We are especially concerned at investment analyst reports noting the potential for $1.4 billion of shareholder value to be wiped off the books of the private power companies. A similar amount, if not more, will come off the value of the public power companies.

 

 

Capital destruction on such a scale will severely undermine business confidence.

It sends signals to investors, on whom the New Zealand economy relies, that their wealth and the benefits it provides are not welcome.

 

Investment plans and job creation opportunities are foregone.

 

Rather than remote and intangible, this dampening of investment intentions will have a direct and real economic impact on those of all walks of life who seek to accumulate wealth by working hard to save, invest and grow. It causes interest rates

to rise, depletes retirement savings held in KiwiSaver accounts and means that other economic opportunities such as first homes are foregone and new business ventures as savings are unexpectedly reduced.

 

Individuals are less well-off as a result.

 

With the good of all New Zealanders in mind we ask you to withdraw these damaging policies. We offer to work with you in increasing public understanding of the operation of the electricity market and in ensuring consumers, both small and large,

have better choice from one of the increasingly competitive electricity markets in the world.

 

Yours sincerely,

 

 Phil O’Reilly Chief Executive BusinessNZ

 

Ken Shirley Chief Executive Officer Road Transport Forum

 

Catherine Beard Executive Director Manufacturing NZ

 

Ralph Matthes Executive Director Major Electricity Users Group

Chris Baker Chief Executive Straterra

John Scandrett Chief Executive Officer Otago Southland  Employers’ Association

Raewyn Bleakley Chief Executive  Business Central–Wellington

Kim Campbell Chief Executive EMA

Peter Townsend Chief Executive CECC

Michael Barnett Director  New Zealand Chambers of Commerce

These people represent people who employ people, the ones who need certainty and confidence to make investment that creates jobs, earn export income and pay taxes.

These are people who work in the real world.

They know there’s nothing funny about bad policy that would take the country backwards, cost jobs and make us all poorer.

They know that Green isn’t for growth and it doesn’t mean go.

Green economic policy is bright red and it will mean stop to economic growth and job creation.

We’lll pay for it

Keeping  Stock asks how much we’ll really save on power under a LabourGreen government?

Ministers Bill English and Steven Joyce gave the answer at yesterday’s National party Mainland conference: nothing, we’ll be paying more.

They’re promising households a $300 saving on power bills. Even if they can deliver on that which is most unlikely, they’re also going to impose a $500 cost through their ETS.

The best we can hope for under LabourGreen is a net $200 increase in our power bills, not any decrease.

Less here, more there

The LabourGreen power policy is supposed to save households money but will less there compensate for having to pay more elsewhere?

. . . Though much of the commentary on the Labour-Green policy see it as a game-changer, with most households struggling with winter power bills, voters may be more ambivalent when they absorb the fact the tighter emissions trading scheme both Labour and the Greens have said they will enforce (including agriculture for example) will force prices higher across the household spectrum than the savings they project from their power price scheme.

There are doubts about whether the LabourGreen power plan will save as much as promised, if any at all.

But there’s no question about higher costs and it won’t just be as a result of the emissions trading scheme.

Their socialist policies with higher spending will require higher taxes and result in higher inflation and interest rates.

That in turn will lead to lower growth, if not recession.

All of that will more than cancel out the $300 a year less for power bills, which is a promise unlikely to be fulfilled anyway.

Where’s the context?

Critics of Margaret Thatcher and her policies have long lists of what she did wrong and those who were worse off as a consequence.

But few of the criticisms I’ve come across in the wake of her death have put what she did in context.

The British economy was in a parlous state and the country was hostage to militant unions which led regular and prolonged strikes.

Something had to be done and Thatcher did it.

Whether she did the right things in the right way can be argued, but that she needed to act is beyond dispute.

Critics of “failed” policies of the 80s and 90s in New Zealand and their architects Roger Douglas and Ruth Richardson take a similarly blinkered view.

They too have a list of what was wrong without even a nod as to why it was needed. The dire economic situation in which New Zealand found itself after years of over generous public funding, Budget deficits and protectionism required urgent action.

There might have been other ways in which to tackle the problems  but had they had to be tackled and more of what caused them would not have provided a cure.

The policies which caused the problems won’t work now either but the LabourGreen lurch to the left threatens to impose them on us again.

The full direct and indirect costs.

The LabourGreen spin on their power plan is that it will cut the nation’s power bills by up to $700 million a year, lowering household power bills by up to $330 a year, and giving the economy a $450 million annual boost.

Mark Warminger, Portfolio Manager at Milford Asset Management, says that analysis is naïve and does not take into account the full direct and indirect costs.

NZ currently has $253bn of external debt and each 0.01% movement in the cost of debt adds $25m in interest payments. The uncertainty caused by the Labour/Greens Nationaliation by stealth policy is likely to add up to 1% to the cost of debt for New Zealand, due to lenders requiring an increased return for lending to a nation with political and economic instability. The cost of capital for all New Zealand companies will rise due to the same factors. A 1% increase in debt servicing costs for New Zealand’s overseas borrowing, in time would add up to NZ $2.5bn a year to the debt bill.

In addition to higher financing costs for the economy as a whole, the Government would receive around $450m a year less in dividends from the state owned power companies. The state owned power companies would need to write down asset bases by around 30% on an asset base of $15bn. This equates to $4.5bn of capital destroyed.

The flow on effects to New Zealand’s listed power companies is just as detrimental. Analysis suggests that share prices for Contact Energy, TrustPower and Infratil could on average fall by 20%. This is around $1bn loss of wealth for New Zealanders when adjusted for overseas ownership of these companies. On top of this there will be a cut in dividends for the listed companies of say 20%, further reducing returns to New Zealand shareholders. This will adversely affect many KiwiSaver schemes that have direct exposure to these companies.

It seems inevitable should the Labour/ Greens proposal be enacted that the listed power companies would take legal action, based around property rights. This is likely to be lengthy and costly with the Government footing much of the bill.

In conclusion, to save $700m per annum from our total electricity bill the direct and indirect costs of such a scheme would be in the order of the following; $2.5bn in additional debt servicing costs, $450m reduction in dividends, $4.5bn asset write-downs from State owned enterprises, $1bn of capital destruction of the listed power companies and a reduction of $100m of dividends per annum to New Zealand shareholders. In addition, there will be highly skilled jobs lost as power companies reduce capital expenditure and development. In the short term this will not be an issue whilst demand catches up with supply but by the time supply and demand are in balance it will be too late to add additional capacity in a timely manner.

Rolling blackouts anyone?

Other financial advisers have raised similar concerns.

Who do you believe – politicians desperate to be in government or a professional who understands finance and the markets?

Economic sabotage

Ever since National came to power it has concentrated on making the economy stronger.

It is succeeding but more than a year away from the next election the spectre of a LabourGreen government is providing a hurricane force headwind.

The government has put a lot of effort into policies which encourage savings, investment and export-led growth and LabourGreen are sabotaging that.

The façade behind the Labour-Greens power plan is crumbling as it becomes clear their electricity nationalisation ‘plan’ is nothing more than deliberate economic sabotage for attempted political gain, Economic Development Minister Steven Joyce says.

“Comments made in recent days by Grant Robertson, David Parker, and Russel Norman show they don’t care about the damage to KiwiSaver accounts, mum and dad investors and the wider New Zealand economy,” Mr Joyce says.

“Financial analysts including JB Were, Woodward Partners, Milford Asset Management, First NZ Capital, Devon Funds Management and Forsyth Barr are unanimous in their condemnation. One has labelled it a ‘hand grenade’ to the New Zealand economy, while others have said it will cut the value of every New Zealanders’ KiwiSaver account and lead to rolling blackouts.

“Investment in new power generation would suffer as would wider investment in the New Zealand economy. The National-led Government is focused on attracting investment in new business and jobs for New Zealanders. Labour and the Greens would do the exact opposite.

“Kiwis are deeply suspicious about the Labour-Greens announcement and its timing. It’s simply economic sabotage.

“The great irony is that it’s clear the policy is not worth it for anybody. The last time that we had central planning of the power industry, prices went up faster. Labour’s own Cabinet paper in 2006 said it would push costs up.

“New Zealanders will see it for what it is: a cynical and selfish attempt by left-wing parties to play politics with the value of New Zealand’s economic assets.”

The market isn’t perfect but I’d rather put my faith in it than an army of expensive bureaucrats.

And I’d feel much happier investing in companies that weren’t going to be at risk from government interference.

Divide or grow?

Since coming to power in 2008 National has worked hard to get better value for every dollar, reduce public spending and implement policies which encourage savings, investment and export led growth.

The motivation for that and the result of it is a stronger economy and it’s working.

the economy is growing, interest rates are low, inflation is low and the high dollar which makes it difficult for exporters makes imports much cheaper.

That doesn’t just mean luxuries like electronic goods, it also means fuel, machinery and health supplies.

This is a government focussed on growth which will make the country more resilient, and better able to afford to look after those who need help.

The LabourGreen plan shows contempt for business and disdain for growth.

They are focussed on division of what’s already here rather than growth to make more available.

National is working hard to take the country forward. LabourGreen policies will take us backwards.

And now for an even sillier idea

If you think the LabourGreen power plan is silly – Winston Peters has an even sillier one.

He wants the government to use Kiwisaver and the New Zealand Superannuation Fund to buy back Contact Energy and Mighty River Power.

Kiwisaver funds aren’t public. That money belongs to individual account holders.

The Superannuation Fund is supposed to help insulate future governments against the cost of superannuation in the future.

Its investment decisions are supposed to be based on sound financial considerations, balancing risk and return, not politics.

Won’t his elderly support group be delighted to know he’s prepared to take their savings and put politics before security?

 

Do they know what they’re doing?

One of the LabourGreen complaints about the sale of minority shares in a few state owned energy companies was that the country would lose out on the dividends.

Under the Mixed Ownership Model the government would still get at least 51% of the dividends and the tax on the rest.

Under the LabourGreen plan to set up a monopoly wholesale market they’re offering to forgo all dividends.

Another of the LabourGreen complaints about the sale of minority shares was that the company would be sold too cheaply and the buyers of shares would make money out of them.

Thanks to their preposterous plan it is likely the shares will sell for less than they otherwise would have and those who buy them will make even more money from them.

Do they know what they’re doing?

Why are they doing it?

Why is LabourGreen powering back to the socialist 70s?

* It’s political – they want to sabotage the Mighty River Power float.

* It’s political – they want to differentiate themselves from National.

* It’s political – they want back in power and are prepared to put their ambition ahead of the country’s interests.

* It’s political – they don’t understand business and investment.

* It’s political – they don’t care about the consequences of plummeting share prices for Kiwisaver and other superannuation funds, ACC, community trusts, other institutional and private investors.

They realise that voters have accepted the sense of National’s insistence on getting back to surplus.

They realise that means they can’t spend their way back to power with our money and so they’re going to try to bribe people by taking over assets instead.

It’s political, it’s stupid and it’s wrong.

What are they doing?

For all the rhetoric about the failed policies of the 80s and 90s from Helen Clark and her caucus, they didn’t reverse them.

They made other mistakes as they taxed and spent the country into recession before the Global Financial Crisis.

But while they tinkered at the edges they made no substantial changes to the policies which got the country out of the economic mire into which we’d sunk.

That was partly because they couldn’t and partly because they understood the dire consequences of trying.

The LabourGreen power play walks away from that.

It ignores the hard lessons that were learned from the socialist policies which led to huge deficits, high interest rates, high inflation and low or negative growth.

It shows a woeful ignorance of the hard work the National-led government has done and why it had to be done.

It illustrates their disdain for investment and businesses confidence which are needed for growth and the jobs that follow.

What are they doing?

They’re abandoning the centre and  striding to the left.

Hopefully they’ll be scaring moderate, thinking voters to the right in the process.

Why not nationalise councils?

LabourGreen policy is to nationalise wholesale power in a misguided effort to control prices.

Quite how reducing competition will do that when they say that too little competition is one of the causes of prices rises, hasn’t been explained.

But if price rises is the problem, why stop at power?

Federated Farmers points out that power price rises have been eclipsed by run-away price increases in the less productive non-tradable sector, with near triple digit council rate increases since 1998.

If nationalising power will reduce the price, why not nationalise councils to bring down rates?

Either that, or replace them all with teddy bears.