Lessons not learned from previous SOE sales

SUNDAY, JANUARY 30, 2011

Lessons not learned from previous SOE sales

The news that National is seriously considering selling up to 49 percent of shares in our state-owned enterprises shouldn't have come as any surprise. It's what this political party does, after all. But I have to shake my head at the sheer short-sightedness of such an action.

When Muldoon started off on his megalomaniacal Think Big projects, our national debt ballooned out to considerably more than it is even today. It left David Lange and Roger Douglas coming into power as the Labour government in the unenviable position where the country was days away from bankruptcy. They had no option but to sell off some of the family silverware and I remember as a young voter, hearing Roger Douglas' words, "This is going to hurt." It did too; we'd just got over a two year forced freeze in wages and rental costs for a property we owned - had gone to Aussie to try and make a way for our then young family that was not happening here at the time. Coming back four years later, New Zealand was still feeling the devastating results of a finance minister who should never have been allowed to become Prime Minister in Muldoon.

So, SOE's were sold because they had to be. Since that time, the privatisation of three examples of what were sold has been a picture of a telling failure. The Bank of New Zealand had to be bailed out hugely. Telecom took its jobs offshore and happily let go of the reputation it had built up as being the most progressive and technologically advanced telecommunications firm in the world. New Zealand Railways... well, what worked well back then is still hobbling along on crutches today.

How hard is it for people in government to understand the primary basics of SOE's? The bottom line is they provide jobs - which injects money into the local economy. This, along with the company tax rate, provides taxation for the government to include in their budget. So if you sell these things off, what happens? The profits go overseas instead of being set into the government coffers. Then the powers that be decide they need a much bigger pay increase, so to offset that, they take the vast percentage of jobs, as in Telecom's call centre, offshore to where what's little better than slave labour costs a damned sight less. So, not only do profits go offshore, the economy drops because jobs have been lost, the taxation drops because the money is no longer here - yet Government expenditure goes up because, strangely enough, we now have more people without work.

What happens then is that other employers look at the large pool of unemployed we now have and know perfectly well they can keep wages down because demand is far exceeding supply. And our politicians say they want to see a wage parity with Australia? How do they think that is going to happen is they keep doing things like this?

To me, all this is basic Household Budget 101. Selling off our SOE's should never happen and the reasons for it are glaringly obvious.

Instead of continuing to borrow $250 million a week as they currently are - and selling our SOE's isn't going to change that, but it will drop our international credit rating because we no longer have the assets to back it up - they need to seriously look at changing the way we spend money. The welfare system needs a major overhaul; we are one of the few countries in the world that actively encourages a paid baby-factory mentality.

I'll be blogging on the subject shortly, but suffice to say, it shouldn't take a committee years to work out how to change the system so that money is saved and those savings spent where they should be.

All I can say is John Key is an ex-banker. That should have alerted voters to what was possible way back then.