National's privatization propaganda | The Jackal

15 Dec 2011

National's privatization propaganda

Today, Bill English and Tony Ryall, announced the Next steps in the mixed ownership programme:

“The Government has previously set a number of tests – including retaining majority Government control and significant participation by New Zealand investors who will be at the front of the queue for shares. The Treasury confirms these tests can be met.

They're lying. National has refused to release pertinent information about the asset sales to ONE News, who in August called in the Ombudsmen to investigate. On 22 November TVNZ reported:

Finally this morning, ONE News found out that despite claims that up to 90% of these assets will remain in New Zealand hands, the Treasury has not provided the Government with any detailed analysis on that aspect of the asset sales policy.
The response to the ONE News complaint reveals the Government has received very little official advice to back up some of its major claims about the asset sales programme.

For Nick Smith and Tony Ryall to again claim Treasury has confirmed that assets will remain in Kiwi hands is complete and unadulterated bullshit! So there is no real benefit for New Zealander's.

Even the International Journal of Contemporary Business Studies recently released study concludes (PDF), that privatisation is not necessarily beneficial:

We can’t say that privatization itself is good or bad. So many issues like macroeconomic stability, strengthening the financial system, liberalization, improved governance and deregulation which serve as an important base for its success especially in low-income countries, are served as prerequisite for successful privatization. This will generate a facilitating environment in which the private sector can effectively work. Nevertheless if we study in broader spectrum the role of the government is more critical and important after privatization because it has to serve as a regulator and this is more imperative and subtle.

National haven't announced any proper regulatory regime because to do so will push down potential profits. Absence of government control is shown to be hard to later introduce and will come at the expense of long term returns to the general public in the form of competition.

Here's what the International Monetary Fund's Fiscal and Macroeconomic Impact of Privatization paper (PDF) states:

Firms with monopoly power that are likely to be regulated only lightly should sell for a better price than those that will be more heavily regulated. However, artificially inflating the sale price by precommitting to a lax regulatory regime would lead to a higher price at sale at the expense of potentially large efficiency costs in the rest of the economy and lower social returns over time. Moreover, countries have sometimes found it difficult to implement adequate regulatory restrictions not put in place before the firms were sold.

Despite this fact, English and Ryall continue with their propaganda:

“The alternative is a lot more debt, which would need to be borrowed on nervous global financial markets at a time when many other countries are struggling with too much debt.

If the Minister of Finance was worried about more debt, why did he continue to borrow when it was not necessary? On June 9, Trevor Mallard asked Bill English a number of pertinent questions in the House of Representatives:

Hon TREVOR MALLARD (Labour) to the Minister of Finance: Does he believe that the Government should take a cautious approach to borrowing in light of “uncertainty and volatility in financial markets”?
Hon BILL ENGLISH (Minister of Finance) : Yes. That is why we are committed to reducing our borrowing over the next 4 years.
Hon Trevor Mallard: Why is he then speculating on the fixed interest market by borrowing $100 million a week more than necessary?
Hon BILL ENGLISH: It has been on the advice of the Debt Management Office. Because conditions are favourable up until the end of this month, the Government is borrowing more than is strictly necessary for its cash requirements. This means that over the next couple of years we will be borrowing less than is strictly necessary, and in the current international environment I think that is a good thing.
Hon Trevor Mallard: Why is Treasury’s best estimate of the effect on the exchange rate and on jobs of this excessive borrowing?
Hon BILL ENGLISH: It has not given a specific estimate of that. The member may well know that Treasury is generally opposed to almost any borrowing whatsoever.

The OECD’s Statistical Annex (PDF) predicts New Zealand’s General government gross financial liabilities as a percentage of GDP to grow to 50% by 2013. That's an increase from $17 billion when National took over to an $80 billion mountain of debt by 2013.

Obviously New Zealand's dubious award for growing inequality the fastest of all OECD countries isn't enough for National... so expect them to implement further austerity measures once our assets are sold.