All the parties have reasons to feel satisifed with the first state asset float. But why is it OK to intervene to boost the markets, but not to boost families?

It hasn't been a great week for political parties and their predictive powers. The Greens and Labour had 100,000 invalid signatures in their petition to force a referendum on asset sales, meaning only 292,000 have signed on; and National could muster only 113,000 individual buyers in Mighty River Power, having just weeks ago crowed about the 440,000 who registered and how it was more than those who had signed the petition.

Both sides had expected more than they were able to deliver.

After the petition fell 16,500 short of its required number – and be in no doubt, the petition organisers wanted the kudos of getting the numbers first time and will be disappointed to have failed – John Key was quick to mock. He said a petition where one in four signatories were invalid wasn't much a of a petition and should be withdrawn.

What does that say about an IPO where only one in for of those who pre-registered actually handed over their money? National can be relieved the Clerk of the House doesn't have to sift through the Mighty River Power pre-registrations to see how many of those were invalid investors.

Beyond the political point-scoring, the facts are rather kinder to both sides, however. National will be disappointed it couldn't muster more investor interest, but it has attracted new investors to the market, it's achieved a solid price and made sure, crucially, that 86.5 percent of shares will be in New Zealand hands (51 percent of that owned by the government). It has hit its marks.

Meanwhile the Greens and Labour have done better than most of our citizen initiated referenda on their first go round and it's hard to imagine they won't be able to muster the extra signatures required. They will get their referendum.

But two points underlying this debate need a bit more discussion.

First, National has been quick to blame Labour and the Greens for the share price being $2.50, rather than the $2.70 or thereabouts it might have hoped for. There has been talk of economic sabotage. But imagine if they had not announced their policy before the float. Imagine if they had waited and announced it early next year, perhaps after even Meridian and Genesis had been sold. That would have been hugely irresponsible and investors would have been furious to have bought shares unawares of such a massive potential risk. Really, what else were they to do?

Yes, there was a political advantage in the timing of the announcement, but it was also the only responsible thing those parties could do. Indeed, you could argue they took a hit to announce when they did, giving National an excuse for a lower share price when concern around Tiwai Pt, for example, was already putting the jitters amongst some investors. It also allows National to bag the left as poor financial managers – a line that will be key to their 2014 campaign.

Second, this week the food-in-schools campaign has been in the news. It's the sort of programme National is quick to oppose on ideological grounds. The government should not intervene, it says. It's the parents' responsibility, it says, and it's unhelpful to change the incentives. Families should care for their own, not rely on government.

Yet when it comes to the partial sale of state assets, one of the key lines used is that it will help boost the NZX. Our capital markets are weak, National says, and need a boost.

But why is it OK to intervene in markets, but not in families? Why did Steven Joyce announce $4 million to help business promotion at the America's Cup this week, while his party refuses to help struggling families eat better?

Surely if National is true to its principles, our capital markets should be able to stand on their own, as the market dictates. It's surely up to the business community to provide IPOs and entrepreneurs to offer investors new opportunities, not for the government to prop up our capital markets or do the heavy lifting on the market's behalf. In other words, isn't this share float, in part, simply a form of market welfare?

Comments (14)

by Ross on May 09, 2013
Ross

National will be disappointed it couldn't muster more investor interest, but it has attracted new investors to the market

How many new investors? Given that only 3% of the population has invested and that most people probably couldn't afford to invest, I suspect many (most?) of those who invested are actually not new investors.

 

by Stephen on May 09, 2013
Stephen

All interventions are equal. But some are more equal than others.

 

by Matthew Percival on May 09, 2013
Matthew Percival

Labour/Greens had plenty of time since the last election to announce an alternate electricity policy. Why wait until the final hour to make the announcement? Heck it wasn't like their announcement contained 18 months worth of highly thought out detail. It was a broad based "we're going to nationalise the wholesale electricity market". 

I see a new study has highlighted sleep deprivation as a significant cause of lowering the achievement of school pupils http://www.bbc.co.uk/news/business-22209818. I look forward to the Mana party releasing a compulsory sleepdrop medication policy for decile 1 and 2 schools. Perhaps we could even have the sleep police go around households in South Auckland to ensure school pupils are asleep at an appropriate hour?

by Tim Watkin on May 09, 2013
Tim Watkin

Ross, my memory is that I heard Bill English on radio claiming a significant chunk of new investors had stepped up for these shares, but I confess I now can't find that said elsewhere. Anyone know the facts on that?

English says MRP now has 113,000 New Zealand shareholders - presumably that's the retail investors rather than the many of us who probably now 'won' shares via our KiwiSavr funds. But as you say most of those would probably already be investors.

Interesting to note that the retail investors make up only 27% of the shareholders. Hardly lots of mums and dads, huh?

by Ross on May 09, 2013
Ross

Labour/Greens had plenty of time since the last election to announce an alternate electricity policy.

I suggest you write to David Shearer and Russell Norman and advise them of an appropriate timeline of release of their policies. Maybe you could offer to write their policies for them while you're at it.

It was a broad based "we're going to nationalise the wholesale electricity market".

It was nothing of the sort, but nothing like some hyperbole to strengthen one's argument.

by Ross on May 09, 2013
Ross

Interesting to note that the retail investors make up only 27% of the shareholders. Hardly lots of mums and dads, huh?

Not sure I follow you, Tim.

by nommopilot on May 10, 2013
nommopilot

hey, some great points there Matthew.  Perhaps someone should suggest to National that they pass a law under urgency requiring all other political parties to declare all of their policies at least 900 days in advance of the next election.

and you're right about the sleep deprivation thing.  If a government can't fix every single little challenge that a struggling student may have to achieving at school, why, they stould do absolutely nothing at all!

by Matthew Percival on May 10, 2013
Matthew Percival

@nommopilot Any time between the last election and pre-registration would have sufficed for the policy announcement.

If the food programme was targetted and had some consequences for the parents I'd be more inclined to support it. At the moment a farmer who doesn't feed his stock is a criminal but a parent who doesn't feed their child is a hard luck story.

by nommopilot on May 10, 2013
nommopilot

"Any time between the last election and pre-registration would have sufficed for the policy announcement."

I don't really have a problem with their timing.  If you do, like I said:  lobby for a law change.  If the rest of the public don't like it they'll probably vote with their, um, votes.

"At the moment a farmer who doesn't feed his stock is a criminal but a parent who doesn't feed their child is a hard luck story."

Sure, because we never hear any hard-luck stories from farmers (except when there's a drought, or the dollar is too high, or emission reduction schemes might increase their costs, or they're asked to fence their streams, or they want the taxpayer to fund their irrigation schemes, or...). 

Tell me, of the (approximate) 200k+ children going to school without enough food in their bellies, what percentage do you think are due to malicious or lazy parents not feeding their kids, as opposed to parents who cannot afford to do so because they earn hardly anything and the costs of living are constantly outpacing any increase in incomes.

And for all the Peter Dunnes out there arguing for this 'targeted approach' is there any actual concrete proposal?  a bill actually drafted?  no.  it's all just an excuse to procrastinate and not even debate the Mana party bill.  Why not send the bill to select committee and look at adding targeting into it?

As for consequences for the parents:  Is the stigma of being unable to adequately provide for your loved ones not enough of a consequence?  Maybe we could reduce their incomes a bit more, or evict them as well?

by Tim Watkin on May 10, 2013
Tim Watkin

Ross, National said Mum and Dad investors would be at the front of the queue. Now I know the unspoken assumption was that many of those would be 'Mum and Dads with KiwiSaver accounts', but you'd think that if Mum and Dads were at the head of the queue and gagging for shares, they would have got more than a quarter of the shares.

 

by Tim Watkin on May 10, 2013
Tim Watkin

And to answer the earlier question, I see the Herald reporting that of the 113,000 buyers, 77,000 or 68% has previously never had a Common Shareholder Number. So they'd be pretty happy to get that many new people into the markets. While it's sad for the hundreds of thousands of us who no longer own 49%, we do want more New Zealanders buying shares and hopefully those 77,000 will look around to buy more. Better shares than a rental property!

by Tim Watkin on May 10, 2013
Tim Watkin

Matthew the farmer comparison doesn't work. In fact it's the opposite! Think of all the feed from other farmers that has been sent to those hit by drought this year. Think of the emergency money the government instantly gives out once a drought is declared.

How wonderful if other people rallied round to help kids when they don't get fed enough. Oh, that's right they do, they're called Foodbanks. And guess what? Some kids still don't get fed enough. So wouldn't it be great if we went further and ensured that, like the cows, no family ever went without. And wouldn't it be great if every time a child was hungry the government instantly came to the party with emergency money or food? Oh hang on, that's more or less what Harawira's proposing. So what's your point again? 

Where do you stand on some welfare payments being made in food vouchers? I imagine you might be a fan? Well, what's the difference? Except this is an extra and simply meets the immediate need, rather than make assumptions about the family.

by nommopilot on May 10, 2013
nommopilot

"...rather than make assumptions about the family."

Come on, Tim, it's no fun if you can't get all judgey...

by nommopilot on May 10, 2013
nommopilot

"At the moment a farmer who doesn't feed his stock is a criminal but a parent who doesn't feed their child is a hard luck story."

Also, farmers have the options of putting down or selling stock (s)he can't afford to feed.  Not so much with the childrens...

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