Partial privatisation numbers 'don't add up'
If New Zealand's Government were a business, it would have no case to sell stakes in its energy generation firms, a Christchurch economist told Parliament's finance and expenditure select committee.
And it should not relinquish any control of such an important resource as energy, Sustento director and economist Raf Manji said. It was admirable for the Government to lower debt, but the numbers around selling stakes in energy firms to do so did not add up, he said.
New Zealand debt servicing was at record lows and the energy firms were trading well, returning between 5 and 11 per cent, he said. It looked like the nation was heading into a prolonged period of low interest rates, he said.
"It's never been so cheap for the Government to borrow money and the demand for Kiwi debt has never been higher. If the New Zealand Government was a business, there would be absolutely no reason why it would be selling."
Diluting the public's hold on the firms would risk lower investment in power generation infrastructure and higher prices, he said. No more important public good existed than energy, as it was essential to people and businesses, so it was dangerous to raise the firm's focus on profits.
He did not believe the Government should own businesses for its own sake – but it should retain full control of public goods and assets of national importance.
Once sold, they would be very difficult, nigh impossible, to buy back.
He was not concerned about the plan to sell more of Air New Zealand, as the airline market was an open one, with plenty of competition and potential competition.
Manji said he was not ideologically against privatisation, but "he wouldn't touch" anything to do with water or energy.
Retired economics and accounting secondary school teacher Lindsay Carswell told the committee he also opposed the partial sell-off, and questioned the effect on the nation's balance of payments with the rest of the world, if most of the shares were bought by overseas investors.
If that happened, the flow of dividends from New Zealand to investors abroad would increase, he said.
The current account compares the amount of exports and investment income New Zealand earns from overseas with the cost of imports and foreign investment to the country.
The current account deficit for the year to March 2011 was $7.2 billon, or 3.7 per cent of gross domestic product, Statistics New Zealand figures show.
Kiwi firms paid out $9.6b more to overseas investors than Kiwis received from other countries.
By selling shares in the companies without making sure Kiwis were first in line, or able to buy them, a good chance existed that much of the shares would be picked up by foreign investors, Carswell said.
He said he was concerned the decision to part sell them was caused by ideology, rather than reason.
The Christchurch hearings on the Government's proposed bill to allow the sale of up to 49 per cent of Meridian, Mighty River Power, Genesis Energy and Solid Energy were held on Monday.
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