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National's asset sales: more overseas-owned assets

Hon Jim Anderton

Progressive Leader

7 March 2008 Media Statement

National's asset sales will lead to more overseas-owned assets

Many more strategic assets would end up in overseas ownership under a National government because National could sell anything, Progressive leader Jim Anderton said today.

"The best way to protect strategic assets is to keep them in public ownership.

"But National has refused to rule out selling some or all of our assets. The power generators, Kiwibank, NZ Post, even hospitals and roads could be sold by the National party.

"The more strategic assets that are sold, the more will go to overseas owners. The current issues around Auckland Airport are an example of how much more difficult it is to try to fence off strategic assets than to hang onto them in public ownership.

"Had National and New Zealand First not sold Auckland airport in the first place, there would be no need for intervention. Some of us clearly remember the ads for the sale of the airport. The main reason NZ First helped National to sell it, according to the tv ads they ran, was that President Clinton was going to come for APEC with a large entourage. Now that is long over, but the hangover is still being felt.

"National and NZ First owe us all an apology for the sale of the airport. And they should be open about what they would sell.

Jim Anderton was the only MP in parliament to vote against legislation allowing the sale of state assets in 1989 (for which he was expelled from the Labour caucus).

"Asset sales don't work. Air New Zealand was nearly bankrupted in the hands of cavalier private owners. We had to buy back rail tracks and open Kiwibank. But National could sell all of them all over again. No party ever says before an election what it is planning to sell after its in government. National is trying to pull that ruse all over again."


Asset sales in New Zealand: a summary

Asset sales coincided with the most dramatic slip in our economic well-being in recent history.
We sank further than during Britain's entry to Europe, and faster than during Muldoon's disastrous splurge.
The slide in our relative world position only stopped when the sell-out stopped.

Asset sales that were meant to pay off debt left us with more debt than when we started.
Our national debt was $151.1 billion in September last year.
Total overseas debt in 1989 was $46 billion. So it tripled.

The assets were sold at firesale prices
40 public assets were sold for a total of $19 billion.
They included: the Bank of New Zealand, Petrocorp, New Zealand Steel, Postbank, Shipping Corporation, Air New Zealand, State Insurance, Telecom, Railways, and forests.
In 1999 they had a combined value of $36 billion - nearly double the sale price.
Most of the increase in value went overseas.

NZ sold Telecom for $4.2 billion. The American buyers sold out just 10 years later for $12 billion. A tax-free capital gain of $7.8 billion.

The government sold the Railways for less than the cost of the railway sleepers. We had to buy Ontrack back to guarantee the future of rail in New Zealand.

And when the government sold NZ Steel to Equiticorp, the purchaser's name alone should have been warning enough of wideboys abroad. The government gave the company away for Equiticorp shares that turned to rubbish the very day after the sale.

Air NZ did so well in private management it was only saved from bankruptcy by the government. In public ownership it would never have paid nearly a billion dollars for an asset with negative net worth (and without due diligence!) It has returned to spectacular performance in public ownership despite some of the most trying times in the history of the aviation business.

In the nineties, National sold our forests. They never explained why the Chinese government was supposed to be a more efficient operator than the New Zealand government. The purchase consortium was not a success. Then we spent the next decade trying to persuade private owners to invest in wood processing instead of exporting low value raw logs. If we owned more forests, kiwi wood processing companies would not have had such a hard time getting long-term supply contracts for their furniture and other high value wood products. And we would not have experienced the rapid deforestation of recent years because forest ownership could have been aligned with the government's climate change policies.

The assets we kept have been a success.
Meridian Energy charges least in virtually every market where it has a presence. It is almost always cheaper than the private alternative.
Meridian's business in Australia made $600 million for the taxpayer - probably the most successful business venture by a kiwi company in Australia ever. Compare that to privatised Telecom's attempts to open a shop across the Tasman - Telecom has bled shareholder value to the tune of hundreds of millions of dollars. That cheque Meridian wrote to the government - earned entirely from Australians - helps pay for hospitals, schools, prisons and the like.

SOEs are called "assets" because they have value.
If you sell them, then the services they help pay for have to be cut or your taxes have to go up.

Asset sales sent cash to overseas owners, instead of to kiwi business
Consumers are paying higher prices to the new overseas owners and to consultants instead of investing their savings in wealth-generating New Zealand businesses. Every dollar sent to the Australian owners of what used to be New Zealand banks is a dollar not saved, not invested in a farm or business, or spent at a local retailer.

What could National still sell?
The power companies.
The roads, which National thought about selling in the nineties. (Last year John Key was talking about 'innovative' new forms of financing for our highways. Just think what a wall of private toll booths around Auckland will do to ease congestion there.)


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