Goldsmith Paul: Mixed Ownership Model Bill — Second Reading 
Text is incorporated into the Bound Volume 
Goldsmith Paul: Mixed Ownership Model Bill — Second Reading 
[Sitting date: 14 June 2012. Volume:680;Page:3009. Text is incorporated into the Bound Volume.] 
PAUL GOLDSMITH (National) 
: 
 I was half expecting the Opposition parties to be talking about the Mixed Ownership Model Bill but Dr Russel Norman devoted half his speech to tax policy which seems to suggest that maybe they have moved on to the next thing. I can understand that this bill has generated a lot of passion and I accept that there are many people who would prefer that the Government retained full ownership of all our assets. It is a natural urge to want to hold on to things and to resist change. My sense however is that most people realise that the proposal here is a modest one—that of selling only minority stakes in these companies. They know that this Government is retaining majority control and that mixed ownership will free up billions of dollars for investment elsewhere. They understand that Governments cannot keep piling on debt forever. They see the pickle that many European Governments have got themselves into and support the Government’s determination to avoid that problem here in New Zealand.  
Britain right now is adopting drastic measures reducing the Public Service by 700000 workers. Is that what we want to be doing? Certainly not. People probably would not know but Treasury’s forecast in 2008 when National came into Government predicted Government debt rising to 60 percent of GDP by 2026.  
Dr David Clark 
: Because there was a National Government coming.  
PAUL GOLDSMITH 
: This was before National came into Government. We heard Mr Parker saying that the Labour Government reduced debt. Well yes it did but it left this country pregnant with Government spending promises and plans over the next couple of decades that would have taken us up to a debt of 60 percent of GDP by 2026. People did know that that Government spending was unsustainable and they support this Government’s determination to bring our books back to surplus. Today Treasury’s forecast for Government debt in 2026 is zero. People know that this Prime Minister flagged the policy that we are talking about in this bill loudly and clearly before the election and since and they trust this Government’s economic competence.  
 In the meantime there is a group that has been implacably opposed to this bill. We have heard plenty from them over the past few months and it is true— 
Hon Maurice Williamson 
: Luminaries like Sue Bradford. 
PAUL GOLDSMITH 
: Yes. At the extensive select committee process the Finance and Expenditure Committee heard primarily from the opponents. Fortunately we do not weigh submissions by the kilo. But how do you balance a hundred submissions basically saying the same thing with one submission from the New Zealand Chambers of Commerce and Industry Inc. for example which represents 24000 businesses around the country? 
Hon Member 
: How many? 
PAUL GOLDSMITH 
: It is 24000 and you listen to all of them. Just dealing with some of the recurring themes that we have heard from some of the critics such as why you would sell something that is— 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Order! The member has referred to “you” twice now. 
PAUL GOLDSMITH 
: Quite right. My apologies Mr Speaker. We have heard a number of times the question of why one would sell something that is returning 10 percent or 18 percent to reduce borrowing of 4 percent—or some variation of the same theme. The Greens have been pushing this line the hardest. The Business and Economic Research Ltd report they refer to talks about a dividend yield on mixed-ownership companies of 8 percent and a cost of Government debt of 4 percent. Well that is quite wrong. Actually if you look at the historic facts the dividend yield has been about 4 percent not 8 percent and the interest rate the Government has borrowed on has been 5.4 percent. So that does put a very different light on things.  
Russel Norman and Mr Parker miss the point entirely. You would not hear Mr Parker encouraging people to go out and borrow $100000 from the bank in order to invest in shares even though they hope that the shares might return higher than they are paying in interest. Nobody would do that because they correctly factor in risk. A company that an individual might invest in might send a better return but it might not. It might actually lose money. The one thing they know about bank borrowing is that you have to pay it regardless of the return you have got on the investment and that is what interest and investment are all about.  
The other thing that has been striking through this process has been the element of well frankly xenophobia in the Opposition particularly focusing on not wanting to be selling things to foreigners not wanting the Chinese involved—we have heard that—and wanting to turn ourselves inward as a country. I stand for an open economy. This country has been built on foreign investment. We do not have to be afraid of it. This Government has made it very clear that there are very strict limits about who can buy numbers of shares and they will be majority New Zealand - owned. I do not think we need to be anti-foreigner in our attitude. Of course the Opposition has to accept that if it wants to maintain capital investment in the economy without passing this bill it will have to borrow more from overseas. It always strikes me as odd that it does not regard that as a problem but having investment from overseas is an issue.  
The alternative would be to borrow a lot more debt on fragile and volatile foreign markets at a time when other countries are struggling under too much debt. We have just seen in the Monetary Policy Statement today that there is a risk of a severe deterioration in the European area. This could cause bank failures across Europe and in the worst case scenario international funding markets could become prohibitively expensive. So there is no guarantee that the cheap money that we can have access to today will be available tomorrow and that reinforces I think the logic of reducing our borrowing requirements. That is why this Government is being prudent in the way it is going about these activities.  
There has also been some concern raised about removing this bill from the jurisdiction of the Official Information Act and the Ombudsmen Act. Doing so is entirely consistent with the way that Air New Zealand was arranged by the Labour Government not so long ago. We must remember that these will be listed companies with substantial private ownership. They will be operating in a fully competitive market. They will have electricity and gas complaints commissioners providing an independent outlook for complaints and all of these companies will be subject to the New Zealand stock market’s continuous disclosure regime.  
Finally another thing one minority report we have had from the select committee process states that on average privately owned electricity companies charge 12 percent more for electricity than publicly owned ones. Well when we drill down to the figures what do we find? We find that that may have been the case in February 2012 but if we look at August 2010—it depends when you take your little snapshot—Contact Energy was actually the lowest-priced retailer. That is the funny thing about markets. Things bob up and down—sometimes one has got a special on; sometimes somebody else has got a special on. You cannot take a little snapshot at one moment and claim great things from it. That is not a robust way of working out how prices are generated.  
In response to some criticism of the processes it is worth reminding us that we went through a thorough select committee process through the past weeks. The bill’s first reading was on 8 March and off it went to the Finance and Expenditure Committee. There were 1490 submissions 124 of which we heard in Wellington Auckland and Christchurch. I listened to all of them. They were listened to with respect. There were lots of questions asked and Treasury provided plenty of information on all the requests that we heard. So where did we get to? This is a very significant piece of legislation and part of the National Government’s plan to deliver strong and enduring economic growth. It will reduce our requirement for international debt.  
In the meantime one of the primary benefits of this bill is that it will deepen New Zealand’s capital markets strengthening our ownership culture. It is a policy that will boost New Zealand’s stock market. It is a policy that will broaden the pool of investments for New Zealanders. A primary benefit as far as I can see in the mixed-ownership model is that it will bring disciplines of private sector ownership to these companies. The market test generated by the stock market and the signal provided by the share price as to what is happening to the value of the company or its return on capital is likely to be more transparent and more accurate than any system in place to monitor a purely State-owned enterprise.  
I have every expectation that these companies will thrive on the basis of this bill. They will generate wealth for all New Zealanders and produce electricity—and all the other things that these companies are producing—in a more efficient manner. As a result we will have less debt and we will have a stronger economy overall. This is one piece of a very effective National Government policy to bring this country through to a brighter future. I recommend this bill to the House. Thank you very much.