P word and the fear of failure

It may seem churlish to criticise the government for finally embracing the need to sell state assets. Public opinion is usually given as the reason why “privatisation” has become a bogey and alerts every journalist wanting a quick hit.

The government will be hoping this time around the subject will soon be forgotten and accepted as part of the future. As NBR political editor Rob Hosking has observed, National has taken “a couple of an opponent's most popular policies and used them to justify a policy those opponents would choke on.”

One is the superior performance of Air New Zealand on the NZX which is better than if it was 100% government owned; the other is to provide solid investment opportunities for the tide of KiwiSaver money, which is mostly going offshore.

Sir Roger Douglas questions this one-step-at-a-time approach, pointing out that Landcorp, Quotable Value, Learning Media and AsureQuality all remain in state ownership.

“It is bizarre that National can see the benefit of selling power companies and an airline but at the same time insists that taxpayers continue to own large tracts of farmland, a publisher, and a property valuation company,”

His other objection is partial privatisation itself, which poses the risk that assets remain open to political interference.

"This creates uncertainty and scares off private investment – precisely the opposite to what is intended. We have witnessed the benefits previously of privatisation in New Zealand. The sale and deregulation of Telecom had net gains of around half a billion dollars per annum for the New Zealand economy between 1987-93.

"For customers this meant significant reduction in the price of phone services and increased access to those services. For Telecom it meant increased productivity and output. History has shown that full privatisation of state assets in New Zealand leads to greater investment, efficiency and productivity gains, and frees up government resources to invest elsewhere or even pay off government debt.”

I would agree but accept that political realities do not often rank with business ones.

Hitting the rich pricks – again
Labour has embarked on a crazy back-to-future path of re-imposing large taxes on high-income earners and creating an even larger number of low or non-taxpayers.

Peter Dunne, revenue minister under both Labour and National regimes, has revealed what’s wrong on two counts.

One is that a making the first $5000 of all incomes tax-free would be of “minimal benefit for a very small number of low income earners.” The words are, in fact, those of former finance minister Michael Cullen, Mr Dunne says.

He adds that voters will see this for what it is: “a political party down in the polls and grasping for populist straws.”

Mr Dunne’s other raspberry is even sourer – at least to those on high incomes – because it would a top margin tax rate of 52c in the dollar for those on incomes above $120,000 to recoup the cost of giving everyone a $10 a week tax break.

That compares with the government’s recent cut from 38c, imposed as soon as Labour was elected in 1999, to 33c, which came into effect last October. Mr Dunne’s calculations are based on the tax-free zone costing $1.5 billion.

Rather unnecessarily, he adds:

“Once a government starts taking half of a dollar earned, you have got to ask if you are talking taxation or robbery. It is simply getting beyond what can be justified in any fair system aimed at incentivising people to earn.

"That kind of short-sighted policy kills aspiration and sends higher-earning, skilled workers overseas in their droves, and is just part and parcel of Labour’s politics of envy.”

Will one grisly year turn into another?
The raft of predictions that accompanies any new year is coming to an end. Earlier in the month, some brave calls were made on what will happen in 2050.

One from HSBC, The World in 2050, is summarised in the Daily Telegraph and predicts this mega outcome:

China would snatch the top slot as expected, but only narrowly. China at $US24.6 trillion (constant 2000 dollars) and the US at $US22.3 trillion will together tower over the global economy in bipolar condominium – or simply the G2 – with India at $US8.2 trillion far behind in third slot, and parts of Europe slithering into oblivion.

The models are based on the demographic growth theories of Harvard’s Robert Barro and basically say those with increasing populations – either from higher fertility or immigration – will do better.

PricewaterhouseCoopers has several 2050 reports that reach similar conclusions, with Australia being overtaken by at least eight emerging economies such as Nigeria, Mexico, Indonesia and Turkey.

The Canterbury earthquake had no immediate fatalities but was still a costly one for reinsurers, who say last year was exceptional for natural disasters.

The Haiti and Chile earthquakes, and floods in Pakistan and China, killed more than 295,000 and cost $US130 billion. The last time so many people died in natural disasters was in 1983, when 300,000 people died, mainly due to famine in Ethiopia, Munich Re spokesman Gerd Henghuber told AFP.

Chile’s quake was the most expensive, at $US30 billion, but Canterbury’s was the second most expensive at an estimated $US3.3 billion.

Three other reports are to hand on the more immediate future. A new global order heads the Eurasia Group’s Top Risks 2011 report. It also highlights fragmentation in the European Union, cybersecurity threats, internal struggles within Mexico and Pakistan, and the likely implementation of currency controls around the world.

The World Economic Forum’s Global Risks 2011 report focuses on globalisation’s disorders – economic disparities within and among countries, as well as a lack of global governance – which could lead to further fiscal and monetary instability, a rise in illegal economic activity and resource shortages.

Finally, the UK’s chief scientific adviser, Sir John Beddington, this week launched the Future of Food and Farming report, which predicts the end of the cheap food era and continued hunger for billions unless urgent changes are made to farm production techniques while reducing waste.