Parker David: Mixed Ownership Model Bill — First Reading 
Parker David: Mixed Ownership Model Bill — First Reading 
[Volume:678;Page:997] 
Hon DAVID PARKER (Labour) 
: 
 This debate should be about the economy. New Zealanders are opposed to asset sales because they know that changing who owns what already exists does nothing to change the output of the New Zealand economy. These assets already exist. They are not going to be more productive than they are now. The only way they will be more profitable than they are now is if electricity prices increase. One of the prior speakers—I think it was Tony Ryall—tried to tell us that New Zealanders will be better off as a consequence of the sale of these assets. The truth is that only around 1 percent of New Zealanders will end up owning these shares. The vast majority of the shares in these companies once sold will be owned by the 1 percent not the 99 percent. Maybe it will be 2 percent but the vast majority of these shares will be owned by the 1 percent not the 99 percent. Is it necessary? 
We had a lecture from the National Party on debt. During the term of the last Labour Government the Labour Government ran Budget surpluses that National opposed. It was difficult to do because National and others were saying: “Don’t run surpluses. Please give us tax cuts.” Instead Labour with the support of New Zealand First and the Greens ran surpluses. We reduced Government debt from 40 percent gross to 17 percent. Net debt went down to zero. As a consequence the incoming National Government inherited amongst the lowest Government debt in the world—amongst the lowest Government debt in the world. Even after the Budget deficits that the current Government is running—this year it will be around $12 billion; last year it was $18 billion—and even after the Government gets back into surplus which will be around 2014-15 and would have been under Labour too New Zealand has amongst the lowest Government debt in the developed world. Government debt is not New Zealand’s biggest problem; the growth in our economy is and this bill does nothing to improve New Zealand’s growth. New Zealanders know that. That is why they are opposed to asset sales. 
The Budget Policy Statement came out a couple of weeks ago. The Opposition parties have been very critical of both the Government and Treasury which on this issue was the lapdog of the Government for booking the proceeds of the sale of State-owned enterprises in the prior Budget and in the Pre-election Economic and Fiscal Update but not showing what happened as a consequence of loss of the ownership of half of those companies. The Budget Policy Statement does it for the first time. What does it say? This is a quote from page 7: “the forecast finance cost savings”—from the sale—“are less than the forecast forgone profits.” The Government deficit goes backwards as a consequence of selling these assets. How much? Well according to page 6 of the Budget Policy Statement the loss which includes the forgone dividends and the forgone share of retained earnings—those are the two components—is more than the interest saved. How much do they go backwards? Well in 2014 the estimated going backwards is $87 million; in 2015 $98 million. We are around $100 million per annum worse off. It is another example of why this Mixed Ownership Model Bill should be called the 1 percent bill because not only does the majority of these shares end up owned by about 1 percent of New Zealanders but that increase in the Government deficit—that is the operating balance before gains and losses—of $100 million a year is roughly 1 percent of this year’s deficit. It is a large amount of money. We are $100 million a year worse off as a consequence of the sale of these assets. The Government would be better to borrow that money for the capital expenditure and keep these assets and even in the short term New Zealanders would be better off by $100 million per annum. 
We had the Prime Minister say that none of these shares or very few of these shares would end up in overseas ownership. That was not the experience with Contact Energy not even in respect of the privately owned smaller-investor portion of the Contact Energy sale. A lot of those ended up in overseas ownership. And now in the Budget Policy Statement for the first time we have the acknowledgment: “the Government”—this is on Treasury advice—“expects New Zealand ownership of the companies will be around 85 to 90 per cent.” following the sell-down. In other words up to 30 percent of the shares—because the Government is selling only half—that are going to be sold are going to end up in overseas ownership. 
It is already clear that the Government is trying to convince New Zealanders that if the Government deficit comes down it has succeeded in managing the economy. The deficit will halve in the next year just because of the consequences of the Canterbury earthquake flowing through. That is no success of economic policy. The rest of the Government deficit will go away through a bit of austerity and a little bit of growth. But the underlying structural problems in the New Zealand economy remain and this bill does absolutely nothing to address them. The underlying structural problems in the New Zealand economy are that for decades we have exported less than the cost of our imports and our interest bill. Every year that happens you have a current account deficit and in the projections from both Treasury and the Reserve Bank every year from here to the end of the projection period New Zealand’s current account deficit gets worse. It gets worse. 
In other words despite the rhetoric of Mr English saying that the Government is rebalancing the economy it is not. Every year New Zealand has a current account deficit. According to Treasury by 2016 it will be 6.9 percent of GDP. Every year you have a current account deficit there are only two ways to bridge that gap between the cost of your imports and your interest bill and your exports. There are only two ways that it can be funded. One is by borrowing more money from overseas and the other is by selling your assets to overseas people. What was previously New Zealand - owned becomes overseas-owned. That is how you fund a current account deficit and that is what this Government has got as its plan for New Zealand because under current settings that is what happens every year to the end of the projection period—2016. If New Zealand is unlucky enough to still have a National Government then it would have been in power for 8 years and every year New Zealand would have been getting poorer. So in 2014 New Zealand gets poorer in 2015 New Zealand gets poorer and in 2016 New Zealand gets poorer. How does that show up? It shows up in increased overseas debt. It shows up in an increased proportion of our assets—our land assets our power companies—being in overseas ownership. 
This plan if you can call it that is the central plan of the Government’s economic strategy for these 3 years. It came about because the Government was being criticised for having no plan. That is what happened. This was an ideological burp from the Government during its last term of Government following the criticism which was hurting it that it had no plan for the economy. So this was its plan. This was its plan—to change who owns what already exists. 
We hear the suggestion that this is necessary so that people have got things to invest in. Investors if they want infrastructure investments of this kind can already invest in Contact Energy or TrustPower or Vector or Telecom if they want that sort of infrastructure or the Port of Tauranga. They have got plenty of alternatives. They do not need these. 
The idea that New Zealand capital markets will prosper only if we let them trade what the Government creates is such a negative view of New Zealand’s capability or the capability of New Zealand’s private enterprise. If the only way that private enterprise and capital markets in New Zealand can succeed is by selling what the Government has created what does that say about private enterprise? Well in the Labour Party we have a much more aspirational view of private enterprise. We think that private enterprise will succeed and grow the exports and grow the jobs that New Zealand needs to grow the incomes that we all need to start going forward as a nation if the Government pulls the levers that only a Government can pull but this Government refuses to. 
The briefing from Treasury to the incoming Minister said the Government had to address some of the imbalances in the economy that lead to our current account deficit lead to our rising international liabilities our overseas debt and our overseas ownership of New Zealand assets. Treasury said that one of the really important things was to address the proper investment signal in the economy so that people invest on the basis of the profitability of their investment rather than the tax-effectiveness of their investment. Part of the reason too much investment in New Zealand goes into the speculative land sector and not enough into companies that grow for people to invest in for companies to manufacture goods for the jobs and incomes that flow from that—a major part of the reason for that—is there is a tax break for the alternative. So Treasury’s advice was to tax capital income equally à la the sort of policy that Labour and the Greens as well have been advocating in terms of a capital gains tax. Pulling levers like proper tax signals proper investment policy proper savings policy and decent monetary policy is what we need. We can never sell our way to a brighter future.