Douglas slams Govt's F&P bailout talk

The Government’s approach to a possible bailout for Fisher & Paykel Appliances and next week’s jobs summit are both ill-thought out and lack logic, former Finance Minister Sir Roger Douglas says.

Shares in Fisher & Paykel Appliances fell 35 percent to 65 cents on Monday after the whiteware maker warned that it expected net profit to fall sharply, and that it was looking for new capital and a cornerstone shareholder amid tough trading conditions and a debt blowout.

“The Government has started talking about a bailout of Fisher & Paykel without any financial data on the issue and without seeking independent advice on the implications of a bailout. The only known advice that [Prime Minister John] Key sought was when he made a phone call to the managing director of Fisher & Paykel,” said ACT finance spokesman Sir Roger.

“How is Fisher & Paykel now meant to raise the finance required when any rational investor will fear that the company will be nationalised?” he added.

The plunge in F&P Appliances’ share price prompted Key to phone Fisher & Paykel Appliances managing director John Bongard. Key has denied assistance was offered or sought, but the Treasury is continuing to monitor major companies as the global recession deepens.

Sir Roger said recent talk about attaching conditions to a potential bailout, such as requirements that jobs stay in New Zealand, was worrying.

“Government should not be in the business of business. We’ve tried that before and it failed. Companies need to be competitive and innovate. Governments tend to monopolise and stagnate. Picking winners is no way to run an economy."

He added that although bailouts might reduce fears now, we would regret them in the future when we have to pay back the debt taken on to fund them.

The Government could not afford to prop up businesses given its own accounts were in deficit. More spending meant more borrowing which meant higher taxes in the future.

“None of us are personally willing to mortgage our children’s future, so why is it okay when the Government does it through borrow and spend policies?”

Sir Roger said the real issue was growing job opportunities rather than seeking to keep current jobs. The only way to do this was to lower compliance costs associated with employing people.

National seemed unwilling to remove these employment barriers.

“We must stop fiddling with the cents and move on to the dollars,” Sir Roger said.

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