Changing financial mind-set

New Zealanders don’t have a good savings record and too few of us know much about investing in the share market.

The Mixed Ownership Model for a few state owned assets might help change that mindset because the government plans to ensure New Zealanders are at the front of the queue when the partial float in Mighty River Power takes place:

Speaking at the National Party annual conference in Auckland, Mr Key said the initiatives will make buying shares easier for New Zealanders, while at the same time encouraging long-term share ownership.

 

“Each of the share offers will be organised so New Zealanders are at the front of the queue for shares. When we do the share offers, we expect around 85 to 90 per cent New Zealand ownership of these companies. Shares will be owned by the Government, individual New Zealanders, and funds like KiwiSaver, ACC and the Super Fund.”

 

The four initiatives announced today are:

· The appointment by Treasury of a retail syndicate of sharebrokers and banks to help potential investors – particularly first-time share investors – understand how they can participate in the share offer.

· A minimum application for Mighty River Power shares of $1000.

· A guarantee that New Zealanders seeking up to $2000 worth of shares will not have their application scaled back.

· The provision of loyalty bonus shares in Mighty River Power for New Zealand investors. . .

“Accessibility to the share offer is also broadened with the minimum application size of $1000 for Mighty River Power shares, meaning a wide range of New Zealanders will be in a position to apply.

 

“Those New Zealanders seeking up to $2000 worth of shares will not have their offer scaled back. In other words, New Zealanders applying for up to $2000 worth of shares are guaranteed to receive the shares they apply for.

 

“Big institutions aren’t getting any guarantees, so this is another way we’re putting everyday New Zealanders at the front of the queue,” Mr Key said.

 

“Finally, we have agreed to offer New Zealanders a loyalty bonus. New Zealanders who keep their Mighty River Power shares for a certain length of time will get a loyalty bonus, in terms of additional shares.

 

“We’re working through the time period involved, but it’s likely to be somewhere around three years.

 

“We believe it is important to recognise the loyalty of New Zealanders who retain their shares, and we want to encourage long-term share ownership among New Zealand savers.”

These initiatives will make it easier for individual New Zealanders to buy shares and also reward those who hold on to them.

As a nation we haven’t got a good savings record and we’ve not got a large share market in which to invest.

The partial float of a few energy companies will provide new opportunities for investment and the government is doing all it can to ensure New Zealanders are at the front of the queue for shares.

They can’t prevent people selling shares they buy.

But the Port of Tauranga has more local shareholders now that when it was first floated and it is very likely that this will happen with Mighty River and the other SOEs which will under go partial floats.

But those who hold on to shares and benefit from the dividends will learn good lessons about savings and investment. The resulting  change of financial mindset and the realisation there’s more to investment opportunities than real estate will  be good from both a financial point of view and a political one.