Papers obtained by Radio New Zealand under the OIA (not yet online) show Treasury told the Government that investing $100 million in extra capital in Kiwibank would bring the Crown a healthy return. Not long after, Bill English and John Key started talking about selling Kiwibank (until Key was reminded of his pre-election promises never to sell it). It raises the question: if people are so keen to buy are our assets, why would we be keen to sell?
Obviously these private would-be buyers think that they would make a worthwhile return on their money if they bought, which implies that if we don’t sell we would be the ones making the worthwhile return instead (or private buyers plan to increase profits by asset-stripping).
It seems to me there are three times that selling a profitable asset makes sense:
– when you’ve got an unsustainable debt problem.
– when you’ve got other places that the capital could be invested more profitably.
– when joining forces with a private company would increase the profitability of your share.
The first condition is not met. New Zealand has low debt by international standards and even compared to where we stood a decade or so ago. And, although we are borrowing at the moment, the debt track sees us return to surplus in a short amount of time without the need for the drastic measures we’re seeing in Europe. Our net debt will peak below 30% of GDP in 2015.
With the other two conditions, we would need to see evidence in individual cases that they are met, but I am doubtful.
The Nats seem intent to spend every spare cent (and borrow more) on tax cuts, which all the evidence shows is a very inefficient way to promote growth and is unlikely to be a better investment than keeping ownership of an SOE.
And, while we constantly hear this mantra that introducing private ownership to SOEs will somehow bring the magic of the market to them and turn them from caterpillars into super-profitable butterflies, no-one seems quite able to explain how that works or why SOEs can’t adopt any more efficient practices that exist without privatisation.
If the Nats want to sell our assets, they need to make the case that the sale matches one of these tests. So far they haven’t even tried, which tells you how weak their case is and that their drive for privatisation is purely based on ideology.