Editorial: Asset sales

The commitment by the Government to press ahead with the partial privatisation of some state-owned assets, along with the announcement by the Prime Minister, John Key, at the weekend of how New Zealanders will be encouraged to participate in the share offering when it is launched, will buoy the prime minister's supporters.

They will take heart that, after a rocky start to its second term in which it was forced to make at least one embarrassing U-turn, and the threat of trouble from its Maori Party governing partner, which has since been smoothed over, Key is standing firm on the most important policy initiative of his term in office so far.

There is no doubt that he has a mandate to do so. Despite all the attempts by opposition parties to suggest otherwise, partial privatisation (or the mixed-ownership model, as the Government prefers) was a central plank of the National Party's platform and was thoroughly canvassed during the last general election campaign.

While voters may have taken many factors into account in the election, if the numbers backing National cannot be seen as giving the party a mandate for the policy, then nothing can.

Opposition parties like to point to polls showing that, when people are asked their opinion on partial privatisation in isolation, a majority oppose it. But far more telling are the polls that continue to show consistent support for the Government overall.

Opposition parties and some political analysts spin this as support holding up despite the Government's commitment to partial privatisation. It might just as plausibly be said that the wider poll is a more accurate reflection of general opinion and that the Government's support is being maintained because of its commitment to partial privatisation.

At the weekend, the prime minister also announced incentives designed to induce ordinary New Zealand investors to buy shares in the SOEs when they are offered and to hold on to them, rather than sell if there is the possibility of a quick profit.

The minimum application size has been set at a low $1000 and New Zealand applicants seeking up to $2000 worth of shares have been guaranteed that their applications will not be scaled back. Individual New Zealand applicants will also become eligible for bonus shares if they hold them for a minimum period, likely to be three years.

Since one of the Government's aims in the partial privatisation is to encourage New Zealanders to consider stock-market investment in sound entities, this all makes sense. The low minimum parcel size is well within the means of most income earners - it is, for instance, no more than the price of a packet of cigarettes a week for a year and less than the price of some digital television sets.

The loyalty bonus has also been shown in government privatisations overseas to be effective in inducing people to keep their shares long enough to qualify for the bonus and then to continue to hold them. The bonus will, of course, cost some money after three years, but by encouraging more New Zealanders to apply for shares, it is likely to drive the price up, so the net cost to the Government, if overseas experience is any guide, is likely to be minimal.

Most New Zealand income earners are exposed to the stock market through superannuation funds anyway, but encouraging more to become so privately - in other words, getting Kiwis to invest in sound New Zealand enterprises - is surely no bad thing.

The Press