AndrewR: I’m not in favour of partial sales of the power companies. But BERL’s argument against it is pretty cruddy.

First you say BERL is just using what National has proposed. Then you ignore what National has proposed, which ISNT selling off controlling interests.

If your strongest point is based on dishonesty about the proposal, forgive me if I dont give you the benefit of the doubt on your next strongest and weaker.

Thinking about it more I am convinced that your comments on the BERL report are comments on a BERL report that doesn’t exist.  The report is a critique of the government reasons (given in budget policy statement) for the partial sale of these SOEs.  Your criticism is that the full economic case for and against partial privitisation is not given by BERL.  You are trying to use oranges to condemn apples.
… And ignoring the inability of private markets to provide strategic energy planning on the way through, which is in my view the strongest point against privitising energy soes; indeed it is why they should be recombined into one.

The assumption made regarding funds being put back in other investments is merely using the what the government says is one of the reasons for the partial sales.  So it is unreasonable to criticise BERL for running an analysis based on what the government actually says it going to do.  

I think Adrian Slack answered that question here, two years ago, in a comment that motivated me to spend a month an a half reverse engineering their alcohol cost study. Something like “we bear no responsibility for our product after it’s been handed to the client.”

Given the Greens history in these things, I suspect the report will be used to generate a greater amount of misinformed opposition to asset sales, with the Greens running the line “even economists say that asset sales are bad”.

How much responsibility should BERL carry for how they KNOW the report will be (mis)used? 

I didn’t say I agreed with everything in it, that is one of the points I was relatively uncomfortable with.  I was just pointing out that the triviality of the result doesn’t make a result bad.

Dude, they said that it hurts NZ’s external debt on the basis of an assumption that foreigners can buy shares but debt would only be held domestically, while ignoring that foreign purchases also bring an up-front inflow of cash. 

I don’t disagree that the results are trivial and from the assumptions – when you assume that you are swapping an asset with a NPV of X for one with a NPV of Y where X>Y, and you assume that spending is constant, there is going to be a larger hole in the accounts.

But I have no problem with trivial models as long as the assumptions are transparent, and the model is merely showing a simplified version of something that does exist in reality.  Now, we may believe that there are missing other important “core” elements of the justification for asset sales in this release, or that they are stretching the results of a trivial model too far – but the idea that the result is trivial is not, IMO, a valid criticism. 

Do read the explicit assumptions again. They show that asset sales hurt net foreign debt by ignoring that foreigners do pay a bit for the assets in the first place, then assuming that while foreigners can buy stocks in former SOEs, the alternative of debt issuance can be constrained to domestic capital providers.

Whole thing’s question-begging.

Further, I’m pretty sure that the gap between SOE dividend rates and govt’s borrowing costs is much smaller than BERL is playing. Are the SOEs they’re putting up for mixed ownership really earning dividend rates four percentage points higher than the government’s current borrowing costs?