Sunday, November 26, 2023

David Farrar: The case for further asset sales

Mark Lister writes:

During 2013 and 2014, john key's National-led Government sold just under half of Mighty River Power (now known as Mercury NZ), Meridian energy and Genesis Energy and listed them on the nzx.

A few years after that, I recall asking the chief executive from one of those companies about the biggest change he'd noticed since the sharemarket float.

Without hesitation, he said “scrutiny” because of the added pressure to manage the business sensibly, spend every dollar wisely and have a clear strategy.

There's nowhere to hide when you have an army of experienced analysts and savvy investors watching and judging your every move.

Those three companies are much better businesses today than they were 10 years ago and that's reflected in the earnings and share price growth we've seen since.

Contrary to popular belief, this success hasn't come at the expense of consumers.

According to MBIE, electricity costs per unit have increased at less than half the rate they did when these companies were in government ownership.

It has been a win-win-win. Consumers are facing smaller increases than in the past. The Government got to use the capital on more important areas and has higher dividends with 51% than they used to get with 100%, investors got to buy shares, and the companies improved with the discipline and scrutiny of being on the stock exchange.

Other assets in local or central government hands wouldn't look out of place listed on our sharemarket, including the likes of kiwibank.

We've recently seen a string of uncomfortably impressive profit announcements from the big New Zealand banks, all of which are headquartered in Melbourne or Sydney.

If Kiwibank was listed, it would have a better chance of becoming a genuine competitor to these Aussie giants, with the bulk of its earnings remaining here.

The mixed ownership model has been a huge success in New Zealand, providing the best of both worlds to the taxpayer.

It's fostered stronger businesses and broadened the range of options available to local investors, helping keep more of our investment capital within our shores.

A partial float of Kiwibank is a great idea. Landcorp also.

David Farrar runs Curia Market Research, a specialist opinion polling and research agency, and the popular Kiwiblog where this article was sourced. He previously worked in the Parliament for eight years, serving two National Party Prime Ministers and three Opposition Leaders.

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