Strong fund manager support for SOE sales

As the debate on the proposed Mixed Ownership Model Bill rages in select committee, a survey of fund managers shows there is strong support for floating a number of state-owned enterprises. 

The bill will allow the government to sell a minority shareholding in Genesis Power, Meridian Energy, Mighty River Power and Solid Energy.

The new legislation will ensure the Crown retains 51% of the voting rights in each of the companies and restrict individuals and entities to 10%.

A Russell Investments' quarterly survey of fund managers found restrictions on foreign investment are unlikely to deter investors.

While fund managers support the sales, submitters told the Finance and Expenditure Committee that government’s push to raise $5 billion to $7 billion to control debt is “shortsighted”.

Tensions were palpable yesterday as Labour and National members sparred during the committee meeting, which heard dozens of submissions -- some from as far afield as Norway.

Labour MP Clayton Cosgrove lambasted chairman Paul Goldsmith for not controlling proceedings adequately.

“I invite you as chairman of the committee to allow members a chance to ask questions and for submitters to reply, not to simply sit there,” he said.

Mr Goldsmith asked members on both sides not to “antagonise” each other - but submissions were interspersed with jibes from both sides of the room.

Norway-based New Zealander Stacey Dickson says mum and dad investors would not benefit from sale of the shares, as most will inevitably find their way to buyers offshore.

Russell Investments head of consulting Daniel Mussett says most investment interest will be local, therefore limiting the impact of foreign ownership.

Many fund managers were not worried about the cap because foreign ownership in New Zealand companies usually sat at about 15% anyway, he said.

Whatever the cap may be, or who owns the shares, the proposed bill, which has been labelled “a threat to democracy”, has caused a public outcry with submissions against it running into the thousands.

Not one of the many heard to date has been in favour. 

“People may have voted for National, but they weren’t casting a vote for asset sales," Megan Salole wrote.

"I would call for this to be taken to referendum, including those who voted for National, to find out whether they are happy or not for this to go ahead.” 

Morehu Rei said in his submission there were more “rational” ways to get back into surplus.

“I grew up thinking democracy is what the people wanted. The people say they do not want this bill, it is clear.

"I don’t see how you can look your constituents in the eye and say this is what they want.” 

Speaking in the House on the Budget policy statement after the select committee meeting, Labour MP David Parker, again criticised National’s economic plan.

“Asset sale will not improve the output of our economy.

"I think it is an outrage Treasury allowed the government to book the proceeds of sales from SOEs, but didn’t show the drop in income as a consequence of not getting the full dividends from those companies.”

If the sale of SOEs proceed, despite the “overwhelming opposition” from New Zealanders, the government deficit will get worse, he says.

While many of those opposing the bill have been labelled “hand wringers”, submitter Noel Ferguson says those concerned are not “left-wing nutters who don’t know anything about capitalism”.

“If we release our ownership, we don’t have a plan B or a plan C available, then we really limit our options.

"And given the scale of what is coming towards us, it’s not a ripple, it’s a bloody tsunami. We do not have a lot of wriggle room.

"We have to maintain our options if we don’t do that we are going to be royally screwed by events,” he said.

Submissions continue.

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7 Comments & Questions

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Golly, am I the only one that remembers National campaigned on these sales? Megan Salole, if they voted for National I am sure they knew what National had proposed. Or are you saying voters are gormless and have no idea that when voting they are saying to the party the vote fore we approve what you have said you will do, please get on with it. Come on people, wake and smell the clean debt free, ( until Labour/Greens get in charge again) environment

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Yes, voters were gormless and only now are starting to get clued up.

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Perhaps they've seen this?

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JP - LOL, debt free my ass. The revenue from this bit of treachery will just be lost in the ever mounting budget deficit, used to pay the middle class bribes that WFF and interest free student loans are. Selling the family silver in order to avoid taking the hard decisions National - you are gutless.

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Are you saying that anyone who voted National (or any other party) agrees 100% with every policy. Asset Sales were one policy.

Have a look at polls on the subject there is less support for this than National got at the election, so by default not all National Voters support asset sales, I suspect some Labour voters do support asset sales.

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Of course the "anties" are all making submissions to the Select Committee, expressing their opposition to the mixed ownnership model. The rest of us, who support this, and believe the government has a mandate for this, having campaigned on it, and won the election, are just getting on with our lives.

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Collapse the profit driven bureaucracies into one efficient entity that is charged with delivering essential infrastructure at the lowest possible price, just as everyone expects local government to do.

The cost of water, wastewater, storm water and roads (the other essential infrastructures) are collectively delivered more effectively with lower increases than the energy sector.

The costs will be lower and payback to all New Zealanders will be greater than the short sighted benefit of a few billion now.

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