A Lange summer spent re-thinking asset sales

There are altenatives to selling off the SOEs, so why not look at some other options?

My summertime reading has included David Lange’s autobiography My Life. Yep I know, it’s a few years old now, but being written on his deathbed made it candid. It’s a great insight into the man, running the country and at times is hilarious. We also find that David and his mum hated each other and that he felt his obesity would prevent him from marrying, although he actually married twice.

Lange also revealed a few untruths. Lange says his Government told a PR fib about the Rainbow Warrior. He revealed that the much vaunted ‘arbitration’ with the French was a fabrication; his Government accepted the French offer from the start, although Lange and MFAT did manage to stop the French spies spending their sentence on an island with a Club Med.

But the other fib was about asset sales, he says. Lange reckoned the late 1980s sell-offs, like Telecom and NZ Rail, were not necessary to help pay off debt.

I suggest this is the same little porky we’re being told now. We have to stop ourselves heading down the same backward track as Greece – that’s  the Government mantra. Bill English in one of his best ‘yeah right’ moments also told us he would spend that money on new schools and the like.  But today, Government jobs are disappearing like crazy.

The partial asset sales planned by National should generate on average about $2 billion per SOE, says energy analyst Alan Jenkins. (He estimates their total value at $12 billion). Now the Cullen Fund, as reported in a tiny story in the New Zealand Herald pages, has reached a tad under $18 billion. It’s largely in international shares – which are easy to flick off, although a partial sell off would no doubt require a legislative change. But who would miss six billion dollars out of the fund?  

I don’t’ really think the Government should start cashing in the Cullen Fund yet – and neither do I believe in selling off power companies in an energy-short world. That’s because, I suggest, New Zealand’s economy, with very high terms of trade, is not quite as bad as the Minister of Finance suggests. Bill English has, as suggested on a recent Katherine Ryan panel, an incredible ability to dish out bad news. The asset sell-offs case is 90% spin.

New Zealand nevertheless is in an economic crisis. Today’s youth unemployment is tragic, the earthquake has hit the tax take for a six and the domestic economy is in the doldrums. Ongoing tremors have delayed work on rebuilding Christchurch. We’re lucky the two previous governments both ran surpluses, which paid off the debt racked up by Rob Muldoon and Norman Kirk.

Treasury says the value of the Government debt, mid-last year was close to forecast at $41.5 billion or 21.3 per cent of GDP. That’s slightly more than double the value of the $18 billion Cullen fund.

Economist Brian Easton suggests the Government should introduce an earthquake tax – worth 3 percent of everyone’s income.  It would be a temporary tax – say for three or four years, until the recovery finally kicks in. I suggest the percentage should be slightly higher for higher income earners, (say above $100,000 salary) and I doubt if most people would mind paying it. It should raise about the same as an SOE sell-off would.

An earthquake tax is better than borrowing more money or flogging off our best assets.

Statement of interest:  Lawrence once worked as a press secretary for Mike Moore