Reversal of failed policies of the past welcomed
Hon Jim Anderton
Member of Parliament for Wigram
5 May 2008 Media Statement
Reversal of failed policies of the past welcomed
Progressive Party leader Jim Anderton is welcoming the repurchase of New Zealand’s trains, saying they should never have been sold by National in the first place.
“Asset sales are a failed policy of the past. Some assets are so important we can’t afford to have them fail. Where the government has re-entered the economy, such as with Air NZ and Kiwibank, public ownership has led to better service.
“Asset sales helped push our economy to its knees in the late eighties and nineties, and significantly worsened our national debt. Publicly-owned strategic businesses have been successful, while some privatised businesses haven’t been able to achieve national goals, such as integrated transport systems or reducing global warming.
“In 1993 the government of the day sold the Railways Corporation for less than the cost of the railway sleepers. When the government bought back Ontrack we had to accept a deferred maintenance bill for those tracks of hundreds of millions of dollars.
“Now, in public ownership, the railways will have a long-term cornerstone shareholder committed to a successful transport system. It won’t be run down in preparation for sale. It will be operated to be a successful backbone of our transport system.
“The asset sales of the eighties and nineties were mostly a disaster for New Zealand, and the conga line of apologists for asset sales should now be apologising for getting so much so wrong.”
Jim Anderton was excluded from the Labour caucus and in 1989 left the Labour Party because he wouldn't vote for a bill that permitted the sale of the BNZ and other publicly-owned strategic assets.
Public ownership = better service
It’s no coincidence that Air New Zealand changed from near bankruptcy in private ownership to becoming a profitable carrier in public ownership. It’s no coincidence that as soon as the people of New Zealand owned a bank again, bank branches stopped closing, fees stopped rising relentlessly and remorseless interest rate margins came under pressure.
Asset sales contributed to economic reversal
In the months and years after the asset sales programme began, New Zealand experienced its most dramatic ever slip in comparative economic well-being. The slide in our relative world position only stopped when the sell-out stopped, in 1999.
During the asset sales phase, New Zealand’s economic ranking sank even faster than during Britain's entry to Europe, and faster than during the debt-funded Think Big programme.
Asset sales worsened debt
Asset sales worsened New Zealand’s debt. We started paying huge dividends to overseas owners instead of reinvesting in our own country. Asset sales that were meant to pay off debt left us with more debt than when we started. The only time in the last thirty-five years that New Zealand has come close to running a surplus in our account with the world was in 1989. Then our investment income deficit collapsed because we paid more in dividends but earned less; the deficit has never recovered and is now one of the worlds largest.
Assets were sold for far below their true value
As the repurchase of the railway shows, assets were sold for far below their true value. New Zealand sold Telecom for $4.2 billion. The American buyers later sold their slice for $14 billion. When the Government sold NZ Steel to Equiticorp, it was paid with Equiticorp shares that turned to rubbish the day after the sale. Equitcorp's founder, Allan Hawkins, ended his campaign for more privatisation when he was sent to jail.
Publicly owned businesses perform well
Businesses have not performed better in private ownership than in public management. Air New Zealand was only saved from bankruptcy by being returned to public ownership. At the time of its sale, and through the nineties, privatisers had described the airline as the jewel in the Crown of asset sales. In public ownership it would never have paid nearly a billion dollars for Ansett, an asset that turned out to have negative net worth. It would not have bought the airline without adequate due diligence. Air NZ has returned to spectacular performance in public ownership, despite some of the most trying times in the history of the aviation business.
Meridian Energy's business in Australia made $600 million for the taxpayer - probably the most successful business venture by a Kiwi company in Australia. It can be compared to privatised Telecom's attempts to enter Australia, an effort that has bled shareholder value to the tune of hundreds of millions of dollars.
Privatised assets can’t be made to contribute to national goals
In the nineties, National sold our forests to the Chinese government. The purchase consortium was not a success. Much needed investment in wood processing has not gone ahead, and kiwi-owned wood processing companies have encountered difficulties getting long-term supply contracts for their furniture and other high value wood products. Instead, low value raw logs have been exported. Nor would deforestation have taken place at such a rapid pace in recent years if forest ownership had been aligned with the government's climate change policies.