The papers go on to describe two debt issues that have already taken place – these were to fund expansion of NZ Post and Kiwibank. These are very different from bond issues that Treasury is talking about forcing on SOEs. Borrowing to fund expansion when the return on that expanision is expected to be greater than the cost of borrowing is fine and dandy but the papers the Treasury prepared for the government suggest that the money raised in the bond issues would go to the government instead.
No doubt the money will go to fund more unsustainable tax cuts for the rich, or fill the half billion dollar hole caused by the last round of cash for the elite.
The SOEs will be left carrying a huge debt burden that they must pay off rather than return profits to the taxpayer.
On the Government’s books, this will show up exactly the same way an asset sale does. The privatisation of the profit stream will gut the value of the SOEs – the Crown’s net capital assets will take a hit in return for a one-off boost to its operating revenue, which will then disappear on tax cuts.
It’s the conversion of capital wealth to consumption – like taking apart your house to use the scrap for firewood. The only difference between what the Nats are planning and a straight out asset sale is that in this case they leave the frame of the house standing.
To put it another way, it’s like Dad selling off the family silver and spending the earnings down the pub, but keeping the box and telling us we’ve lost nothing.
John Key and Bill English said they have neither requested nor seen official advice on privatisation. That is a lie. Even just the papers we’ve seen, let alone the eight Treasury says are still under consideration, show that privatisation is very much on the government’s agenda. They’re just trying to work out how to sneak it past us without a public backlash.