Bill English has been quoted as saying the Government is considering the sale of certain state owned enterprises in its next term. Apparently the Government are currently preparing an “investment statement” that will outline what it considers possible.
Currently a significant portion of Government capital is tied up in the SOEs, around $40 billion dollars (around four times the size of the largest projected Government deficit).
SOEs perform, as a class, very poorly. Recent reports suggest that in the last financial year they returned 1.5% on equity. This is below the risk free rate of return.
Such poor allocation has real costs to the New Zealand economy. The opportunity cost of maintaining investment in such low returning assets (as a whole) effectively amounts to taxpayer resources being wasted.
It is therefore very worthwhile that the Government looks at its investments and considers whether SOEs might be better placed in the private sector’s hands.