Treasury NZ Rail report 'garbage'

Wednesday, 4 August 1999, 3:59 pm
Press Release: Alastair Thompson

A Treasury cost-benefit study on the privatisation of NZ Rail released today is garbage, Alliance leader Jim Anderton says.

'This is far right ideology masquerading as maths. The economic analysis is of such poor quality that it demands an inquiry into the shabby state of economic competence at Treasury and at the Victoria University front-organisation set up to produce the study.

'Analysis of the study by independent professional economists commissioned by the Alliance showed that equations underpinning th e study contained political assumptions normally associated with far-right economic analysis.

'The Government's net revenue is the only truly measurable figure in the document. The rest is based on highly subjective assessments of items such as 'consumer surplus'. The study uses far-right economic assumptions to weight the importance of many elements.

'The welfare benefits of New Zealand and foreign ownership are assumed to be equal. So, for example, if the sale of NZ Rail has resulted in profits flowing out of the country, worsening the balance of payments deficit, then all New Zealanders pay higher interest rates. But the study assumes the effect is zero.

'The study assumes that there is no benefit to consumers from public ownership of a network. So for example, if the railway makes a small provincial town viable, the study assumes there is no benefit from that, nor any benefit to a company which can ship goods more cheaply.

'The most sinister assumption is in the statement 'we do not distinguish between the welfare of economic agents as between their actions as consumers or providers of labour.

' To see what this means, imagine that NZ Rail under private ownership lays off staff and stops providing apprenticeships, but makes more profit and therefore pays more tax to the Government. If the Government used that money to give tax cuts to the wealthy, then the study regards that as welfare-neutral exercise. The person who loses their job or training opportunity is assumed to be no worse off, and society is assumed to be no worse off because of high levels of unemployment and falling skill levels.

'This is economic garbage of the most sinister and far-right variety and Treasury should be ashamed of its involvement in it,' Jim Anderton said.

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Alastair Thompson

Scoop Publisher

Alastair Thompson is the co-founder of Scoop. He is of Scottish and Irish extraction and from Wellington, New Zealand. Alastair has 24 years experience in the media, at the Dominion, National Business Review, North & South magazine, Straight Furrow newspaper and online since 1997. He is the winner of several journalism awards for business and investigative work.

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