Selling them what they already own
Not having had parents who invested in the stock market, I’ll have to take on faith John Key’s claim that ‘‘ mum and dad investors’’ will get the main benefits from opening state assets to partial privatisation.
Who knows – maybe there are ordinary ‘‘mums and dads’’ who really do have a stockbroker on their speed dial. Certainly, Key has claimed that his privatisation plans will benefit Kiwi battlers, first and foremost. He will face an uphill battle convincing the public on this issue.
His plans extend to opening up certain state-owned energy companies to private investment, and selling off some of the state’s stake in Air New Zealand, while still keeping a majority share. Many voters will struggle to see how opening energy companies to shareholder pressure for greater profits will result in reduced power prices.
Similarly, many will query whether those mythical ‘‘ mum and dad investors’’ will be the real winners, given that the nation’s mums and dads already own the state assets concerned, and are thus being invited to re-purchase a stake in their own possessions.
The existing evidence is that many small investors will sell fast to virtually the first buyer offering them a profit – and currently, those buyers are likely to be cashed-up Australians looking for easy pickings. For that reason, the partial privatisation plans appear more likely to become a mechanism for enabling wealthy Australian and Asian investors to gain even greater control of the New Zealand economy.
If so, as Greens co-leader Russel Norman has pointed out, the siphoning of the subsequent profits offshore will serve only to further undermine the current account deficit and (ultimately) raise the cost of borrowing.
In the process, New Zealand Inc stands to lose critical mass to manage its resources.
On the upside, the Key Government is not proposing the sort of outright sales that proved so disastrous in the late 1980s and early 1990s. By keeping a majority share, taxpayers should continue to reap some rewards from any enhanced performance by the assets in question.
Partial sales should also – in theory at least – prevent the sort of virtual corporate monopolies that emerged in the 1990s, and which felt free to block competition and innovation and gouge their customers for the benefit of their shareholders.
At the very least, the Government’s new stance on privatisation will create a clear point of difference between the two major parties in this year’s election.
Key has already said as much – and the public has ample historical reason to be gun-shy about the process, and deeply sceptical.
It may take all of Key’s considerable charm to persuade voters that they have nothing to fear from privatisation this time around.
Gordon Campbell is an experienced political journalist and columnist who has written for The Listener and Scoop.