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Get set for election year battles over asset sales as warnings grow about our high costs and rising debt.<\/p>\n
High on the list of the asset sales proponents are more than 100 farms owned by P\u0101mu\/ Landcorp, a state-owned enterprise; parts of MetService, and Quotable Value.<\/p>\n
More controversially, partial sales of KiwiRail and Kiwibank are also touted as solutions to our high debt and new infrastructure demands.<\/p>\n
\u201cDoes the government put hundreds of millions of dollars into a bank or does it put that money elsewhere?\u201d asks Jen\u0113e Tibshraeny, Wellington business editor of the New Zealand Herald.<\/p>\n
\u201cAnd could Kiwibank still fulfil its purpose of being a disruptor bank \u2026 New Zealand-owned if the government owns, let\u2019s say 50 percent. I think that\u2019s a fair question.\u201d<\/p>\n
But the disastrous sale of KiwiRail\u2019s predecessor, New Zealand Rail, is held up by critics as a reason not to sell the \u201cfamily jewels\u201d.<\/p>\n
It was sold in 1993 for $328 million to a consortium led by US firm Wisconsin Central.<\/p>\n
\u201cThey ran it down, they asset stripped it and then they abandoned it, and we had to buy it back and we\u2019re still recovering from that experience,\u201d says former Labour minister Phil Goff.<\/p>\n
\u201cI\u2019m not for ownership for the sake of ownership but I think that you should own the things that are your strategic assets that occupy monopoly positions in the economy, like your power companies,\u201d Goff tells the politics podcast Cross Party Lines.<\/p>\n
Asset sales have divided voters for decades but Generate Kiwisaver investment specialist Greg Smith says it needs to be taken seriously given persistently bad news about the state of the economy.<\/p>\n
Last week, Moody\u2019s was the second international ratings agency to downgrade the outlook for New Zealand from stable to negative.<\/p>\n
It pointed to the country\u2019s debt burden, a slower return to surplus and price shocks.<\/p>\n
Ratings downgrades mean the country risks having to pay more to borrow money at a time when our roads and water pipes are crying out to be fixed, and new schools and hospitals need to be built.<\/p>\n
\u201cThere\u2019s growing urgency around it and really it\u2019s about being smarter with that $460 billion, $470 billion balance sheet,\u201d says Smith.<\/p>\n
\u201cYeah you can raise taxes, you can borrow more or you can make better use of what you already own \u2013 but we\u2019ve got net core Crown debt that\u2019s set to hit $230 billion by 2028. You work that out, that\u2019s over $40,000 for every Kiwi, about 46 percent of GDP.\u201d<\/p>\n
We\u2019ll get an update on the size of the government debt in the May 28 Budget announcement but at the last count our annual interest bill was $8.9b.<\/p>\n
Money spent on paying that bill means less spent on health, education and infrastructure, Smith says.<\/p>\n
He tells The Detail what should be top of the list, starting with the \u201clow hanging fruit\u201d such as surplus property, to give people a taste for it. And he doesn\u2019t rule out the government selling more of its shares of the power companies Genesis, Meridian, and Mercury.<\/p>\n
Tibshraeny doubts asset sales will be announced in the Budget on May 28.<\/p>\n
\u201cBut then as we look to the election I think parties will form firmer views on this,\u201d she says.<\/p>\n
Treasury is asking every government department to look at its assets.<\/p>\n
Social assets such as roads and schools make up the biggest cohort in state-owned assets, the second largest grouping is financial assets such as the bonds owned by the Reserve Bank, the shares owned by ACC, and the Super Fund.<\/p>\n
The smallest group is called commercial assets by Treasury \u2013 the government\u2019s stake in the energy companies, Air New Zealand, NZ Post, AssureQuality, and Kordia.<\/p>\n
Tibshraeny uses the analogy of car ownership to explain asset sales.<\/p>\n
\u201cIs that car now costing me too much to run, is it breaking down all the time, is this asset now becoming a liability, I\u2019m having to put too much into it? Is it time to sell the car and buy a different car, or buy an EV, or a bicycle? Or have my circumstances changed and I\u2019ve moved into an apartment in the city where having a car no longer makes sense?\u201d she says.<\/p>\n
\u201cThat\u2019s how we think about our own assets, and I think it makes sense for the government to think about it like that as well. I think a lot of this does already happen, it\u2019s just that a lot of the political focus is on those commercial entities.\u201d<\/p>\n
She explains how asset recycling has emerged as a more popular phrase that\u2019s touted as the fix for our infrastructure deficit.<\/p>\n
\u201cThose on the left or those opposed to asset sales might be concerned that the right-wing government would sell those assets and not buy anything new with that money. But what National says is \u2018yes we need to look at the assets we own, we might need to sell some\u2019.<\/p>\n
\u201cThey haven\u2019t committed to anything but using that money to reinvest in investments, that might make more sense for New Zealand.\u201d<\/p>\n
Tibshraeny says the debt cohort of assets gets the least attention but has been very costly to the country.<\/p>\n
During the Covid crisis the Reserve Bank decided to keep interest rates low to stimulate the economy and instead printed money and bought New Zealand government bonds, valued together at $55b. The debt helped pay for things like the wage subsidy.<\/p>\n
After the crisis, the Reserve Bank was left with bonds on its balance sheet which later fell in value.<\/p>\n
\u201cDue to the mechanics of that programme the taxpayer will end up footing a $10b bill for the creation of money, the buying of bonds and sale of bonds.<\/p>\n
\u201cThat whole complicated process will come at a net cost of about $10b. That doesn\u2019t get a whole lot of attention in the media because it\u2019s boring and complicated,\u201d she says.<\/p>\n
\u201cWe focus a lot on these commercial assets like the energy companies, Kiwibank, NZ Post but the way the state, the Reserve Bank, deals with some of the programmes like the bond buying programme can have a much larger impact on the government books. And if we\u2019re really worried about the state of the books then that\u2019s where the focus should be.\u201d<\/p>\n
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