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National admits asset sales failure could wipe out surplus

4 December 2013

National admits asset sales failure could wipe out surplus

National has finally admitted that its failed asset sales programme is bringing in $1.2 billion less than expected, which puts the Government’s commitment to returning to surplus in 2014/15 at risk, Green Party Co-leader Dr Russel Norman said today.

Figures released by the Green Party last week show that, because the asset sales have bought in less revenue than expected and cost more, the Government cumulative deficit will be half a billion dollars worse by 2017 than was projected in Budget 2013, including a $109 million hit in 2014/15. New figures released by the Government confirm that asset sales will only raise $4.8 billion, if the sale of Genesis goes ahead, not the $6 billion expected in Budget 2013, leaving a massive hole in the Government’s books.

“Bill English has been forced to admit that National’s failed asset sales have bought in less money than expected and cost the taxpayer a fortune,” said Dr Norman.

“The failure of the asset sales programme to raise as much money as expected means that the Government will have to borrow more and pay more interest on its debt, which puts its promised return to surplus in 2014/15 at risk.

“The Green Party’s calculations show that the failed asset sales so far will worsen the Government’s operating balance in 2014/15 by $109 million, enough to wipe out the surplus of just $75 million for 2014/15 that was projected in Budget 2013. If the sale of Genesis goes ahead, the hole in the Government’s books will be even larger.

“Just last week, John Key was trying to mislead the public by saying that the hole in the Budget caused by asset sales was a Green Party fiction. When he made that claim, Treasury had already provided him with updated figures proving that asset sales were carving a half a billion hole in the Crown accounts. Mr Key should have been upfront with New Zealanders and admitted the failure of his asset sales agenda.

“Nearly a million New Zealanders have already voted in the asset sales referendum. The referendum is our best our chance to send a message to National to stop these failed asset sales and stop wasting our money,” said Dr Norman.


Budget 2013 projections from BEFU 2013

2013

2014

2015

2016

2017

5-year

Proceeds

1,500

1,500

1,500

1,500

0

6,000

Foregone Dividends

0

-120

-170

-230

-290

-810

Finance cost savings

7

79

158

245

291

780

Net debt

1,507

1,459

1,488

1,515

1

5,970

Foregone profits

-10

-140

-200

-270

-340

-960

Finance cost savings

7

79

158

245

291

780

OBEGAL

-3

-61

-42

-25

-49

-180

Gain on sale

175

175

175

175

0

700

Net worth

172

114

133

150

-49

520

Actual (excl Genesis)

2013

2014

2015

2016

2017

5-year

Proceeds*

1,686

1,621

628

0

0

3,935

Foregone Dividends

0

-156

-239

-244

-244

-882

Finance cost savings

5

85

123

156

153

521

Sales costs**

-90

-50

0

0

0

-140

Net debt

1,601

1,500

512

-88

-91

3,434

Foregone profits

-15

-185

-274

-279

-279

-1,031

Finance cost savings

5

85

123

156

153

521

Sales costs

-90

-50

0

0

0

-140

OBEGAL

-100

-150

-151

-123

-126

-650

Gain/loss on sale

163

-313

-160

0

0

-310

Net worth

63

-463

-311

-123

-126

-960

*assumes Genesis is not sold

**the Budget documents fail to account for sales costs. Other sales costs incl the incentives schemes and foregone dividends accounted for elsewhere

Actual (incl Genesis)

2013

2014

2015

2016

2017

5-year

Proceeds*

1,686

2,503

628

0

0

4,817

Foregone Dividends

0

-156

-295

-300

-300

-1,050

Finance cost savings

5

84

157

192

189

628

Sales costs**

-90

-75

0

0

0

-165

Net debt

1,601

2,357

490

-107

-111

4,230

Foregone profits

-18

-193

-338

-343

-343

-1,235

Finance cost savings

5

84

157

192

189

628

Sales costs

-90

-75

0

0

0

-165

OBEGAL

-104

-183

-181

-150

-154

-772

Gain/loss on sale

163

-313

-160

0

0

-310

Net worth

59

-496

-341

-150

-154

-1,082

*assumes Genesis sold at 2012 equity value

**the Budget documents fail to account for sales costs. Other sales costs incl the incentives schemes and foregone dividends accounted for elsewhere

Modelling details: Foregone dividends taken from offer documents, or projected forward at current levels. Finance costs from Budget Fiscal strategy Model. Sales costs not yet announced based on MRP sales costs assumed at Meridian, $25m, Air NZ: $5m, Genesis: $25m. Foregone profits from foregone dividends plus additional foregone profits in Budget table. Gains/losses calculated from 2012 equity

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