Before the government launched its asset sales policy, the Treasury told it that “significant participation by foreign investors” would be “essential” to provide “pricing tension”. In other words, if they can’t sell to foreigners at a high price, they wouldn’t get the revenue they want. So, the second global financial crisis should scupper the plan, eh?
Even John Key has admitted that the crisis means that, with asset prices falling everywhere, the Nats wouldn’t be able to get the price they had banked on for our energy companies. Even in the government’s over optimistic analysis (they don’t count lost equity growth and underestimate lost dividends), the case for asset sales is razor thin. If the sales revenue is reduced from the projected $5-7 billion to, say $4 billion, then it becomes even more a case of selling off profitable assets for not enough money and no good reason.
Naturally, Key is blase. He thinks that, at worse, sales might be delayed by a couple of months. The sales programme is meant to take 5 years, so that’s a pretty mild reaction.
Even more basically, Key is complacent about how bad things are getting in the global markets. He says that it won’t be as bad as 2008. S&P says it may well be, not least because 2008 drained the reserves of governments, including New Zealand’s, so that they can’t afford to do another round of stimulus and bailouts. S&P singled us out as a country whose credit rating is as risk. He can’t smile and wave his way out of this.
Like Phil Goff says: it’s dumb to sell these assets anyway, it’s even more dumb to sell them now.