Bob Jones may be a facetious old bugger but he knows a rort when he sees one. And asset sales are a rort: “Since the advent of the industrial revolution every business has sought the bliss of a monopoly. The competitive market economy denies that, except in unique situations, such as for example with our hydro electricity generating dams. So why sell them?”
“Here the Government becomes a little slippery. To reduce debt, says the Finance Minister, despite our public debt being low by world standards and interest rates never being lower. To enable future capital-raising, argues the PM, overlooking that if, as an appeasement to objectors, the Government intends retaining half ownership, it will still be up for 50 per cent of any capital-raising while receiving only half the previous dividend return.”
There, Jones knocks over three of the Government’s main arguments in two paragraphs:
– privatisation won’t increase competitiveness, it just provides monopolistic profits to private investors through higher power prices
– it doesn’t make sense to reduce the amount of cheap debt you’re borrowing by selling relatively high-return assets (returns that still aren’t high enough for a private investor’s cost of capital)
– privatisation would actually constrain the ability of these companies to raise capital because they’ll have to get 51% from the government every time.
That leaves them with ‘mums and dads’. And we already know that the Government expects 93% of us won’t buy shares. So, which mums and dads are these?