Prebble Speech to Waikato/BOP Conference
Extract from Speech to Waikato/BOP Regional Conference
The liberals believe in ideas. It is our belief that out of open free debate will come the truth. This is what leads ACT to tell it as it is. The old parties' fear of ideas and fear of the future, leads them into denial.
Let me raise the issue of privatisation. Neither Labour nor National now mention privatisation. The media comments are usually misinformed.
This week I was asked by the media, does the problems that Tranz Rail is having with it bankers mean that New Zealand Rail should not have been sold. "Not at all," I replied. "Not one cent of taxpayers money is at risk in Tranz Rail. The only people at risk are Tranz Rail shareholders and there is no reason for the taxpayer to bail out the private sector. The free market is capable of handling business failure."
The Tranz Rail privatisation has been a success. A study by New Zealand Institute of Competition and Regulation found the savings to the country from privatising rail had been up to $9.8 billion.
Everyone has won. The taxpayer, because no more subsidies. Tranz Rail customers, because of cheaper freight prices. The country, from a more efficient transport network.
The privatisation of government State Owned Enterprises has been very successful. The World Bank and other organisations have studied privatisation and said it's a successful policy - any way you look at it.
Phil Barry in his recent book `The Changing Balance' states that privatisation worldwide has been an extraordinary success. He points out that over 100 countries have privatised government businesses.
It's successful because in nearly every case the private sector has proved a better manager creating a better business. Better for customers because private owners have produced better goods and services at lower prices. Better for taxpayers because the proceeds of privatisation have lowered government debt.
Phil Barry has looked at New Zealand studies by Victoria University indicating that the privatisation of Telecom has added $500 million to the economy every year.
No one in parliament, or among the commentators has pointed out that the present surplus in the government accounts is because of privatisation.
In 1992 government debt equalled 54% of GDP. That's South American debt levels. In 1992 debt repayment cost the taxpayer $4.1 billion. Privatisation allowed the repayment of $19 billion of government debt. Today the national debt is just 20% of GDP.
In this year, budget debt servicing is just $2.3 billion - that is in today's dollars. In real terms the saving is $2.7 billion.
It is the reduction in debt that has allowed successive governments to increase health spending, in real terms, by 65% in 10 years. To increase education spending in real terms by 35%.
Put it another way, without privatisation if social spending remained constant, debt servicing would be so high, today New Zealand would be in the red and in a serious financial crisis.
Phil Barry also points out that in the OECD only New Zealand has a ban on privatisation. A Socialist government in France did $50 billion of privatisation. The Social Democrats in Germany have an active privatisation programme, selling Duetsche Post. Labour in Britain has privatised air traffic control. Only North Korea, Cuba and New Zealand have a total ban on privatisation.
A financial crisis is heading towards New Zealand. Our population is getting older. As Sir Roger Douglas has pointed out it's not just the cost of superannuation but the cost of healthcare that will cripple the economy. As the population ages, to maintain the present level of healthcare requires health spending to go from 8½% of GDP to 11½%.
Only ACT is looking at practical solutions. The government still owns three major electricity generators, the transmission business, a coal company, a postal service, a retail bank, and now an airline. Phil Barry points out, using World Bank research, if the government were to privatise the remaining SOEs we would increase New Zealand's wealth.
Let me quote, "Privatising New Zealand's SOEs would increase New Zealand's welfare by over $1 billion per annum." That is similar to the impact of a free trade agreement with the USA.
A billion every year, is another $350 million a year in taxes to the government to spend in health, education and retirement incomes. It means shorter hospital waiting lists, better schools and more security in retirement.
It's for Labour and National to argue why keeping the ownership of a coal company is better than lowering a hospital waiting list.
ACT's role in politics is to lead because no one else will. Lets advocate the advantages of private sector ownership of SOEs. ACTs not saying that the private sector will not fail. Indeed there will always be business failures in the free enterprise section. The inability of State Owned Enterprises to fail is one of the reasons why the state sector over time is a poor performer. Failure is never penalised. Good money is thrown after bad. In the private sector poor owners and bad managers are put out of business and replaced by new owners and new management.
Tranz Rail's problems are even more reason for privatisation.
All that this really shows is that transport is a risk business. All taxpayers should be totally opposed to any proposal for a state bailout of the shareholders. The underlying rail business is profitable. Should rail end up in liquidation, new shareholders, and new management will take over rail.
I do not agree with those who say that Air New Zealand is a case of a failure of a private airline. The state still owned a Kiwi controlling share in Air New Zealand. The Labour government used that golden share to block Singapore Airlines recapitalising Air New Zealand.
The collapse of Air New Zealand and Ansett is an example of why the state should not own airlines. It cost the taxpayer $850 million.
Under Labour we are seeing the government re-entering the private sector. An airline, a bank and the rail tracks in Auckland. The state owned SOEs are buying up private firms. This week the New Zealand taxpayer has bought the government testing labs in Australia. New Zealand Post has gone into the consulting business in South Africa and lost a substantial sum.
The experience here and overseas is that governments are not good at business. If the state were to sell all SOEs, we could cut government debt in half.
No other party has a policy to increase the wealth of the country by a billion dollars a year - every year.
This country is crying out for real leadership. For MPs who have a vision of how New Zealand can lead the world again. Lets make New Zealand a country our children do not want to leave. A country our grandchildren will call home.