Q+A interview with Don Brash & David Cunliffe
Sunday 21st August, 2011
Q+A interview with Don Brash & David Cunliffe.
The interview has been transcribed below. The full length video interviews and panel discussions from this morning’s Q+A can be watched on tvnz.co.nz at, http://tvnz.co.nz/q-and-a-news
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DON BRASH & DAVID CUNLIFFE interviewed by GUYON ESPINER about ASSET SALES
PAUL The old bogey – asset sales –
the sale of our state-owned enterprises. It’s going to be
one of the big issues probably of this election. Prime
Minister John Key says if National wins in November,
they’ll put up for sale 49% of the shares in power
companies Genesis, Meridian and Mighty River Power, coal
miner Solid Energy and Air New Zealand. This is proving to
be a very difficult sell. At the start of the year, the
Prime Minister had this to say.
JOHN KEY I think New Zealand’s ready for that grown-up debate about whether we can afford all the things that we’re doing and how we can best fund our future.
PAUL Eight months on, sad to say, he’s not so keen to have that grown-up debate, because none of his people are coming on today. We asked State-Owned Enterprises Minister Tony Ryall to front. He said no to an interview and no to a debate with David Cunliffe, and he has a rule against debating David Cunliffe, it seems. Finance Minister Bill English says National has spelled out its policy and he doesn’t see the need to debate the issue on asset sales, so the government is mum. They are, however, happy to come on if or when they figure out how to ensure Kiwi investors get first dibs on those shares. We’ve said, well, we’ll hold them to that. Today instead we’re delighted to have Dr Don Brash with us, the ACT leader, and the supporter of the asset sales. He joins us in Wellington. And Labour’s David Cunliffe, who doesn’t think they’re a good idea at all, with Guyon.
GUYON Thanks, Paul, and thank you, David Cunliffe and Don Brash for joining us on this issue. Don Brash, can I start with you? For the average New Zealander, say on the average wage of roughly $50,000 a year, not a lot of disposable income, the government comes along and sells a stake in the energy companies. What’s in it for them?
DON BRASH – ACT Leader
Well, I think basically what’s in it for them is that this is a more efficient way of improving growth in the New Zealand economy. Nobody seriously believes that governments run commercial businesses better than private owners do. There’s no logic at all for governments continuing to own them.
GUYON That’s a fairly, you know, ideological and eye-level incentive. What’s the good bit for someone – just the average Kiwi? What’s the good bit?
DON Look, the key
point is how do you make New Zealand a more efficient,
growing, productive economy? And this an issue which
governments have to wrestle with the whole time. The issue
is how do you make those generators more productive, more
efficient and better for the average wage earner. And
keeping them in government ownership simply doesn’t cut
GUYON OK, David Cunliffe, New Zealanders lost $8.5 billion in the finance companies. Labour’s saying to them, ‘Don’t invest in the property market,’ because you’ve got your capital gains tax to try and dissuade them from doing that. What’s wrong with giving the average New Zealander a shot at investing in a good solid New Zealand company?
DAVID CUNLIFFE – Labour Finance Spokesperson
Well, it doesn’t make financial sense for New Zealanders, it doesn’t make strategic sense for the government—
GUYON Why doesn’t it make—?
DAVID It’s not going to make social sense for any of us.
GUYON Why doesn’t it make financial sense for an average New Zealander? I imagine that there’ll be a big queue forming outside when these companies, or if they are, put on the block.
DAVID Well, it doesn’t make sense, because we as taxpayers lose the dividend stream that they make, and within 10 years, we’ll be poorer as a country and as individual taxpayers because they have been sold, no doubt on sold to foreign multinationals, who will then control our power supply and our airline.
GUYON Can I just clarify with you is it the foreign ownership that you don’t like? If it could be guaranteed that that 49% stake stayed in New Zealand hands, would that be OK?
DAVID Well, that’s a really interesting point because that’s the question Bill English was asked at the National Party conference and could not answer. The fact is there is no way to guarantee keeping those shares in New Zealand.
GUYON Well, you could. You could just ban foreigners from owning them, could you? You can issue different types of shares.
DAVID Well, I think you’d have to look very closely at whether that breached World Trade Organisation obligations.
GUYON We can get into that, but what I’m trying to clarify—
GUYON Just a second, Dr Brash. Is it just the foreign ownership problem?
DAVID No, it’s not just the foreign ownership. As I said, it doesn’t make financial sense. We lose all the strategic advantages of owning those assets. And let’s face it – Labour’s fair tax plan pays down government debt and allows us to keep our assets. Why wouldn’t we do both?
GUYON We’re not talking about your tax plan (laughs) this morning.
GUYON Dr Brash.
DON Guyon, it’s an argument that David Cunliffe is using – it makes perfect financial sense for the government to sell them. Yes, they forgo a future stream of dividends, but what they get is an up-front payment which is the best estimate of the current value of that future stream of dividends. And it’s just absolutely a no-brainer at all.
GUYON OK, if it’s such a no-brainer—
DON Let’s take that on. Let’s take that on.
GUYON Dr Brash, if it’s such a no-brainer, why is it that poll after poll when you ask New Zealanders, overwhelmingly, it comes back, they say they don’t like it. Are they just stupid?
DON Basically, because the Labour Government under Helen Clark sold New Zealand a line of nonsense, quite frankly. Helen Clark was Deputy Prime Minister in the Labour government that sold Telecom. Phil Goff was a minister in the government which had most of the privatisation of SOE assets in the ‘80s and ‘90s— in the ‘80s, excuse me. They’ve basically sold a line to New Zealanders which no other leftist centre government in the world tries to do. Labor governments in Australia routinely—
GUYON Yeah, but we went right through the 1990s with National governments selling SOEs too. My question to you, if you can answer it, is why don’t Kiwis like this?
DON I think because, as I say, we’ve been taught that this is in some way dangerous and detrimental to our interest, and, frankly, that is simply nonsense. I mean, if it made sense for New Zealand to own three competing power generators, why not also have the government buy Foodstuffs and Countdown?
GUYON Well, let me ask that question to David Cunliffe. I mean, if public is always better than private, is Dr Brash right? Why don’t you buy up the supermarkets?
DAVID I’m not saying public is always better than private, but we—
GUYON That’s been your policy, though, hasn’t it?
DAVID We make a very very tidy return on those energy assets while maintaining a guarantee that they behave in the national interest. Now, we pay 6% for the cost of that debt; we make about 17% total shareholder return on those assets.
GUYON Do they behave in the national interests, though?
DAVID New Zealanders understand, Guyon, you don’t sell your ladder when you’re in a hole. And once that family silver’s gone, it’s gone, and we are starting again. That money that Don Brash talks about will pay for less than six months of the current government’s operating deficit, and then where would we be? New Zealanders understand that.
GUYON You’re saying that the power companies act in the national interest. Really?
GUYON They charge a lot of money.
DAVID SOEs are bound by the SOE Act to be good corporate citizens and not to do anything that would be against the national interest. And by the way, if there were minority shareholders and they could make a case that that was costing them money, they would have the right to sue the government for any loss to them.
GUYON What power company are you with at home?
DAVID I am— Mm, that’s a really good question. I think I’m with Mercury.
GUYON You don’t know what power company you’re with?
DAVID I think I’m with Mercury.
GUYON Well, it’s interesting, and I don’t ask that to be facetious, but I ask it because when you ask that question, people often don’t even know. And then you ask, and people can do this at home, who owns the company? And they don’t know either. So is the emotional power in this issue that we’ve seen on assets sales when people have to stop and think about who even owns the company?
DAVID Well, there certainly is the emotional power it in. New Zealanders are very clear in what they think, and I can tell you that polling that lines asset sales up against our fair tax package says three to one, people prefer to keep their assets and pay down their debt, while some of Don Brash’s rich white old men who are enjoying their tax cuts are made to pay a capital gains tax, like they should’ve been as he said when he was the governor of the Reserve Bank.
DON Guyon. Guyon, this is populist nonsense. David Cunliffe has some responsibility to explain to New Zealanders why the sale of assets is sensible in the average wage earner’s interest and every leftist centre state government in Australia has been doing it.
DAVID Guyon, I need to come in there on the question of populist—
GUYON You’ve had a fair go. Dr Brash, he talks about rich white old men, but iwi are lining up to buy these assets too. I mean, is this iwi or Kiwi, or can it be iwi and Kiwi in this asset sale?
DON The reality is we should all have a right to buy into those assets, iwi and other New Zealanders as well. I mean, there’s just no logic at all in government owning three competing power-generating stations. I frankly wouldn’t myself sell Transpower. That’s the ultimate natural monopoly.
GUYON That’s the one you were on the board of.
DON I’m sorry?
GUYON That’s the one you were on the board of.
DON I was on the board, that’s quite right. But I wouldn’t sell it.
GUYON Good. David Cunliffe, Wellington Airport – let’s talk about mixed ownership. I mean, Wellington Airport, right, 66% owned by Infratil, 34% owned by Wellington City Council – effectively public ownership. When you fly out of there, you might fly on Air New Zealand – 75% owned by the government, 25% in private holding. What’s wrong with that? What’s wrong with having a mix of ownership?
DAVID Well, what we’re talking about is the core of our energy assets, our three key generators. Now, if you sell those for the kind of money that the government’s talking about, ask yourself are the new owners going to put up power prices faster than they’re rising already? The answer is yes. Now, we do not need as a short-term—
DON No evidence for that at all, Guyon.
DAVID Look, I really will insist on finishing this, because Don Brash is in no place to lecture the New Zealand public about populism. I did not give the Orewa speech; somebody else did. Now, Mr Brash knows very very well that New Zealanders care about long-term solutions. They know that selling off the family silver to pay for six months’ worth of government deficit and losing on the—
DON That’s nonsense, David. You know it.
DAVID It’s not rhetoric. I know that there is $300 million in dividends from those assets. I know that the government will pay around $350 million to the ticket-clippers who will be involved in the sale, and I know that New Zealanders want to see a real game plan that will feed the kids in South Auckland and grow our economy without flogging off the birthright that we are handing down to the next generation.
GUYON OK, David Cunliffe, this isn’t a Labour Party speech. Dr Brash, can you address that question that David Cunliffe did mention, though? Power prices – do you think that you can guarantee or a government can guarantee that they won’t go up if these are privatised?
DON Look, power prices have been going up for the last decade and more. Why? Because the Maui gas field is running out of cheap gas. Power prices have been going up. The marginal price of growing more electricity is increasing, and that’s true whether the companies are privately owned or government owned. The reality is we’ve got five major competing power companies, three of them owned by the government. There’s no evidence at all that having them government owned is changing the price increases.
GUYON David Cunliffe, he’s got a point there, hasn’t he? I mean, I can’t remember the exact number, but National, I think, has said a number of times in Parliament – didn’t the power prices go up about 63% over the years that you were in government, and this is under state ownership?
DAVID Well, I think Mr Key and Mr English have a history of picking their data sets—
GUYON Well, they did go— Of course—
DAVID Power prices have risen to a certain extent, but the question is if a foreign buyer is going to buy into these energy assets, are they going to assume and pay for the ability to rise prices— raise prices in the future above the current trajectory? And the answer is most probably yes—
GUYON But isn’t it about numbers? Isn’t it about competition?
DAVID Otherwise the numbers which the government is suggesting, which are $6 billion to $8 billion, and that was before world financial markets collapsed again in the last two weeks. That money is predicated on a rate of return that implies prices are going to rise faster.
GUYON Dr Brash? No evidence for that?
DON I just think there’s no evidence for that at all. Not the slightest evidence for that.
GUYON All right.
DAVID I totally disagree with you, Dr Brash, and I’m happy to debate that any time.
GUYON All right, while we have got you there, David Cunliffe, can we address a Labour Party issue – reports that Phil Goff offered to resign. Is that true?
DAVID You know me better than that. I have never commented on a caucus issue or a shadow Cabinet issue, and I’m not about to start now.
GUYON So you’re not denying it?
DAVID No, what I’m saying is there is only one spokesperson for the caucus, and that is Phil Goff. He’s made a very clear statement, and you should go to him.
GUYON Did you hear him offer to resign?
DAVID I’ve already told you the answer to the question, which is there is only one spokesperson, and that is our leader. He’s been very clear about what he said, and you should go to him.
GUYON All right, thank you. Thank you, David Cunliffe, and thank you, Dr Brash in Wellington. We appreciate your time.
DAVID Thank you.