2. Hon PHIL GOFF (Leader of the Opposition) Link to this
to the Prime Minister
What, according to the 2010 Investment Statement of the Government of New Zealand, was the average total shareholder return over the last 5 years from State-owned enterprises and the average bond rate, and is that consistent with his statement that “it is the Government’s intention to use the proceeds of those initial public offerings to actually invest in other assets that the Government would have to fund through the Government bond rate”?
Rt Hon JOHN KEY (Prime Minister) Link to this
The average total shareholder return for the Crown’s commercial portfolio over the last 5 years was 17.5 percent. However, most of the total return was from unrealised changes in value, and Treasury advises that those calculations are not particularly robust and are, in fact, potentially misleading. The average net dividend over the 5 years was only 4.6 percent. The average bond rate was 6 percent. To the last part of the member’s question, yes.
If the average return from the State-owned enterprises to shareholders is 17 percent and the cost of raising money through bonds is 6 percent, how is the taxpayer the winner from selling off the State-owned enterprises instead of raising money through bonds?
The total average return—not the average return—is 17.5 percent, which is probably why the Leader of the Opposition wants the Government to resign. He wants to have a snap election because he is confused between our polling numbers and Labour’s polling numbers.
I raise a point of order, Mr Speaker. I think you have made the point in the past that superfluous comments at the end of the Prime Minister’s statements—[ Interruption]
Mr SPEAKERI apologise to the member. Senior members know they should not interject during a point of order. The honourable Leader of the Opposition had not finished his point of order.
The point of order was quite clear. You have ruled in the past, Mr Speaker, that those sorts of comments at the end of an answer to a straight question are not in order.
I think the member makes a reasonable point that his question was not unfair and did not deserve quite that answer. I think the right honourable Prime Minister should come back to the question and actually answer it. If there is debate about it, I invite the honourable Leader of the Opposition to repeat his question.
How does the Government—and, therefore, the New Zealand taxpayer—benefit when the return from State-owned enterprises is about 17 percent and the bond rate is 6 percent?
I raise a point of order, Mr Speaker. Sorry, but that was not the question that the member asked the first time—[ Interruption]
I say to the Labour front bench that a point of order is being heard and they will not interject. If the question was not the same, it seemed to me to closely approximate it. The Leader of the Opposition asked how the taxpayer benefited when the total—or whatever it is—return from State-owned enterprises was 17.5 percent and the bond rate was 6 percent. I can think of plenty of answers to that question that are available to the Prime Minister, but the Prime Minister did not use any of those answers, which could have been reasonable. The questioner did not attack the Government politically; he asked a reasonable question. I think that question deserves a reasonable answer.
I raise a point of order, Mr Speaker. I will paraphrase for the member: he claimed that the average return was 17.5 percent. He did not say “total”; he said the average return was 17.5 percent. That is totally different and completely incorrect. If he cannot work that out, then he obviously deserves a stupid answer.
Hon David ParkerThe member will resume his seat. The Prime Minister should know that it will not help the good order of the House to make that kind of comment during a point of order. I hear the point the member is making and that is why I invited the Leader of the Opposition to repeat his question, so that what he intended to ask could be asked. I accept the point the right honourable Prime Minister makes that the member may not have asked exactly what he intended to first time round. That is why I invited him to repeat his question.
Yes, I know, Mr Speaker. I am making this point with the approval of my leader. The mistake made was that the Prime Minister misinterpreted Mr Goff’s question. Hansard will show—
The member will resume his seat immediately. There is no need to go back over that old ground. There was a dispute over the exact wording of the question asked and that was why I invited the honourable Leader of the Opposition to repeat it, so that we can get an answer to the question that the honourable Leader of the Opposition intended to ask.
Will not the Government—and, therefore, New Zealand taxpayers—be net losers if the returns to the Crown from State-owned enterprises sold are worth more than the money he would save from not having to raise that money from bonds?
Possibly, but not necessarily. If that was always going to be the case then arguably that might be the situation. However, a mixed-ownership model may in fact allow the new entity to generate even more returns, so that is not necessarily the case. I can present to the member an example of where buying a State-owned enterprise did not yield a terribly good return for the New Zealand Government. That State-owned enterprise is called KiwiRail.
Was the percentage dividend return from State-owned enterprises earmarked for sale higher or lower than the 10-year bond rate last year?
I do not have that information to hand. But the point is not really what it was; the point is—if one wants to follow this argument—what the likely returns are vis-à-vis the Government bond rate over the next 10 years. I am not aware of those returns at this point.
Is he aware that the total return to the Crown of State-owned enterprises that are earmarked for sell-down has been double or treble the dividend return over the last 5 years?
As I said, that is not the average net dividend, which is what the Crown receives; it is actually from a benchmark Treasury analysis of its assets. As I said in answer to the primary question, Treasury advises that those calculations are not particularly robust; in fact, they are potentially misleading.
Does he propose to restrict the sale of shares in those State-owned enterprises to his so-called mum and dad investors, or will a substantial number of those shares ultimately find their way into the hands of foreign investors, with dividends being sent out of the country?
The Government is taking advice on how to prioritise New Zealand mum and dad investors. It is worth remembering, of course, that at all times the Government will hold a majority ownership, because we will not go below 51 percent. It is also worth looking at Contact Energy as a good example of where New Zealand mum and dad investors bought shares. Although the shares may have individually changed hands, as Pattrick Smellie pointed out, it is actually misleading to say that they do not continue to hold them. In fact, as he wrote in a piece he did about a year ago, there is a loyal bunch of Contact Energy’s Kiwi shareholders—the register shows a very wide range of ownership by Kiwi mums and dads.
In respect of Contact Energy, which the Prime Minister has just mentioned and which was privatised by a former National Government, is it not correct that now more than $100 million a year goes out of this country and into the pockets of foreign investors out of assets that were once owned, and benefited from, by all New Zealanders?
That might be the case, but I also point out, given that New Zealand has one of the highest levels of external liabilities as a percentage of GDP, that our borrowing, and therefore bond returns, would go overseas as well.
Is he aware of, and does he accept, the findings of energy expert Molly Melhuish that the sale of energy companies overseas to private shareholders, and pressures from them to increase profits, have resulted in the prices—[ Interruption] I raise a point of order, Mr Speaker. I am sure the Prime Minister wants to hear the question. If his colleagues stop barracking, they might do that. [ Interruption]
Both members will stand and—no, I will not ask that of the shadow Leader of the House, because it is somewhat difficult for him to stand up at the moment. But I say to both the Leader of the House and the shadow Leader of the House that I am on my feet—[ Interruption] The Hon Simon Power will also respect that. The Leader of the House will not interject during a point of order, neither will the shadow Leader of the House—unless I got that wrong.
Hon Trevor MallardSomeone on my left interjected. I apologise to the shadow Leader of the House. I understand it was the honourable Leader of the Opposition. I apologise to the honourable member; I obviously got that wrong. But both members will cease interjecting. OK, we have had a bit of fun now, but we will come back to order. While the Prime Minister has been answering questions there have been quite loud interjections from the Opposition, and I have not stopped them. Maybe I should have, but if I were to come down on the Government because of interjecting during that question, it would have been unfair of me. I ask members to be a little reasonable about the level of interjection. The Leader of the Opposition had better start his question again.
Thank you very much, Mr Speaker. Does the Prime Minister accept the findings of energy expert Molly Melhuish that the sale of energy companies to private shareholders, and pressure from those shareholders to increase profits, have resulted in the prices of electricity to Kiwi consumers for the shareholder-owned companies in New Zealand going up much faster than prices for the State-owned enterprises?
No. I point out that the dividend return over the 9 years that Labour was in office for the three State-owned enterprises in the energy sector—Genesis, Mighty River Power, and Meridian Energy—was 72 percent. If gouging was happening, it was actually happening under a Government-owned company.