jamesz

A fair price for asset sales

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Matt has posted about asset sales and believes that they’re a good idea as long as the government gets a fair price. He seems to be saying that the government’s decision to sell assets should be the same as a private company’s. Only the government isn’t a private company, so the costs and benefits to be weighed are a little different.

To begin with, once the government has committed to asset sales it is politically committed to selling. That puts it at a disadvantage relative to potential buyers; one that they will be all to happy to take advantage of, as Rob Salmond has recently discussed. The fact is that government asset sales are a political manoeuvre, not a commercial decision, and that puts the government in a weak bargaining position with whoever offers to buy the assets. That’s one of the reasons why assets always seem to be sold at a low price, relative to their commercial worth.

So, if governments struggle to extract a good price for their assets, why sell them at all? The late Roger Kerr had an excellent series on his blog in which he detailed some of those reasons. The main two are that

  • Asset ownership is risky and the costs of that risk fall largely on those who depend on the government for their livelihood; and,
  • Privately owned companies tend to be run more efficiently and profitably

Read more

Matt Nolan

More on occupying Wellington

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People who read the blog will remember how vehemently opposed to the occupation of the Reserve Bank I was.  And I stick to that – every word, even the misspelt ones.

But I’m glad to see that this isn’t how the movement has evolved.  From what I can tell the focus is very much on the fact that things don’t feel right – there is injustice, and they are finding a peaceful way of expressing their distaste for it.  To me, this form of protest makes sense.  We have had a massive financial crisis, a lot of things that have happened aren’t fair – and people are suffering through no fault of their own.  Expressing that this isn’t right makes complete sense to me.

I am sure that when it comes to policy conclusions I would disagree with many of the protesters – but many of them would disagree among each other as well.  Policy conclusions are not the point of the protests.

Personally, I am not going to join the protests  – I would prefer to spend the time trying to understand what is going on with the crisis, so I can try to figure out what I believe is appropriate action.  This is part of my job, a job I love to do, and it allows me to express my feelings regarding the world.  But the idea of protesting just to show that you do not feel comfortable with what is going on in the world, and feel disenfranchised, makes sense and is part of democracy – and in this context I agree with the protesters.

Matt Nolan

Thinking straight on asset sales

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As far as I  can tell, National only has one policy at the moment [Update:  When I wrote this on Wednesday morning this felt like the case – now I see they are talking about the ETS … I will get to that another time].  That is to sell down part of the governments stake in assets, and use that money to build schools.

Now, I hope that since they have no other policies they don’t intend to really do anything during the next three years.  For the sake of it, I’ll assume this is the case.

On the note of their policy, I have to say I have no real problem with asset sales as long as:

  1. The country has a good legal system (CHECK)
  2. The country has clear and consistent competition policy (CHECK)
  3. The asset is sold for at least fair value.

So, if they are going to do this we have to make sure there is a fair price.  Excellent. [Update:  Here is a good piece from Rob Salmond on why the price issue can be a difficult one]

Now, if this was the whole policy we could end there – but it isn’t.  They then want to invest this money into schools.

Is this really the best use of the funds?  Is the rate of return on new schools high enough to justify the sale of assets?  If New Zealand had an undersupply of school space then this could make sense to me – but I was under the impression that our schooling infrastructure was actually pretty good.  As a result, why the hell are the funds being invested there?

Conclusion

So when looking at National’s policy, we have to ask:

  1. Are they going to get a fair price
  2. Are they investing the funds in the right way.

Hopefully they can achieve the first criterion, but currently it doesn’t seem that they are really willing to meet the second criterion.  If National is just going to waste the funds that come in from assets sales I would prefer them to just not do it.

jamesz

The story of this election

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Well, if it’s frustrating to see major parties wrangle over spreadsheets it’s heartening to see someone try to unravel the narrative of each party’s campaign. Bill Kaye-Blake has laid out what he sees as the story of each party’s policies. He gives a nod to Deirdre McCloskey but I think Bill probably has a career in marketing with stories like this!

For National he thinks:

the hero is Government. Read more

Matt Nolan

Question: Post-election blogger briefing?

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I have just come back from a couple of days of presentations, and I had an idea.  How would other bloggers feel about a post-election economic update at some point in early December?  I could definitely do this – as long as I can get permission from my work place, a free venue, and an interest from the blogging community in NZ.

Any thoughts?

Matt Nolan

Stats NZ is politically neutral … Labour isn’t

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Look, I have no idea why Labour feels it is necessary to run their election campaign as a bunch of muppets – but they have, and in order to keep surprising everyone with their ridiculousness they have attacked the political neutrality of Statistics New Zealand.

The complaint is that Statistics New Zealand said that their trend measure of building activity was crawling up, at the same time there was a sharp seasonally adjusted drop in consents in September.  The reason for this was that August was “strong” (relative to recent history) – so even with the decline September was a stroke higher than we have been used to, and the real “trend” measure of activity they have (and have always talked about) did increase.

Look, this isn’t just a case of Phil Twyford not being able to understand data – I mean, that is part of it it seems, but that isn’t the whole issue.  I’ll even ignore that fact that Twyford seems to think political parties run the economy – a fallacy among politicians that gives them a sense of unwarranted self importance.  The most confusing issue for me here is that anyone would think this is the best use of scarce time on the campaign trail – you can arbitrarily attack Statistics New Zealand and get zero votes (as it is such a non-issue), or you can be a competent politician and go out to try and get votes by talking to the public and showing them that you are the best option in terms of meeting their interests.

If Labour was a real opposition party, their members would be doing the second.  Hopefully they will be by next election, so that I actually feel like I have a choice when that election comes along – a competent opposition is essential for democracy … just saying.