3. Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this
to the Prime Minister
Does he stand by his statement that his plan to sell public assets would give “New Zealanders a fantastic opportunity to invest in this country’s future”?
Hon BILL ENGLISH (Deputy Prime Minister) Link to this
Yes. The mixed-ownership model introduced by the previous Labour Government for Air New Zealand is one example of the opportunity many New Zealanders have taken. There are now many thousands of New Zealand investors who lost money in collapsed finance companies telling us they want better investment options.
Hon David Cunliffe Link to this
In that case, is he aware that his Budget supplement to the investment statement says that the Crown would forgo only $200 million in dividends per year by selling $6.8 billion worth of assets, which works out to a dividend return of 3 percent per year—less than people can get in the bank—or does he think that the real forgone dividends would be larger than those described in the Budget?
Well, as we have discussed in this House, if we look at the dividend flow that came from the State-owned enterprises under the previous Government, and when we exclude the special dividends mostly paid by Meridian Energy, we see that those flows were less than $100 million per year for Mighty River Power, Solid Energy, and Genesis Energy. When we add Meridian’s special dividends, it puts the number up, on average, to about $300 million a year. So, as Treasury says in the Budget documents, the mixed-ownership model is likely to be about fiscally neutral for the Government.
Hon David Cunliffe Link to this
Does the Prime Minister realise that if we take him at his word, and impute dividend flows of only $100 million a year, then he is making the problem of the return to shareholders worse, and that the return would, in fact, be only about 1.5 percent; in that case, is he not relying on things like future electricity price increases to bring those assets up to something close to the $6.8 billion sale price he has forecast?
No. This Government has been working hard to improve the governance and performance of the State-owned enterprises. Actually, the big question here is whether Labour will go into the election promising to buy them back—
Mr SPEAKERHon David Cunliffe Link to this
In light of that answer, has he read the Budget documents that state “there is little evidence to suggest that privatisation would significantly improve the financial performance of many of the SOE companies.”, and that “significant participation by foreign investors would be essential to achieve the Government’s overall objectives”; if he has read those, can he confirm what those objectives are, and why foreign ownership is essential to achieve them?
I presume that the member is quoting from Treasury and in both cases we disagree with its views, which, I think, is a very healthy thing. The Government’s objectives are better performance for the companies, better investment opportunities for New Zealand, and reduction in our need to borrow billions of dollars in volatile overseas financial markets. We would rather pay dividends to New Zealanders than interest to foreign lenders. Clearly, that member would prefer to do the opposite.
Hon David Cunliffe Link to this
I seek leave to table the Minister’s executive summary where he signs off—
John BoscawenIt does not yield a strong flow of dividends—that is for sure. I think the return on assets for Landcorp is about 1 percent. But the Government’s continued ownership means it has a greater ability to deal with Treaty of Waitangi claims and various other complications around contested ownership of coastal land, reserve land, and potential Treaty settlement land.
Does he agree that New Zealanders would have an even more fantastic opportunity to invest in the country’s future if the Government simply sold State-owned enterprises outright; if not, why not?
We think that, as one would expect from a considered and balanced Government, the mixed-ownership model represents a good balance between a better opportunity for New Zealanders to invest on the one hand—better than the $8.5 billion they lost in finance companies over the last 4 or 5 years—and a sense of security on the part of New Zealanders that the Government still has majority ownership on the other.