Scoop Election 08: edited by Gordon Campbell

On Peter Dunne’s casting vote on asset sales

December 15th, 2011

As the late Roger Kerr pointed out in 2005, Peter Dunne went into the election that year advocating the 40% selldown of the government’s stake in most SOEs. So Dunne can hardly be accused of not being a consistent advocate of the partial privatisation model – he could more accurately claim that it was his idea in the first place.

Thus, the Greens are on very shaky ground in saying that Dunne doesn’t have a mandate to support the 49% selldown this year. In the end, that would turn on whether you regard Dunne’s stated opposition this year to the privatisation of water (which most people would see as opposition to the privatising of domestic water supplies) as also entailing an opposition to privatising the water used by hydro dams to generate electricity.

This year, Dunne’s strategy on assets sales was to present himself as the bulwark against the kind of total privatisation model we saw in the 1980s – which wasn’t being advocated by anyone but the Act loonies – and by contrast, to present his tacit support for the 49% selldown as (somehow) being a moderate alternative.

That campaigning position was cemented into place in his coalition agreement with the National Party. As a “moderate” position, it’s a bit like signing off to bring back hanging, but triumphantly drawing a line in the sand against drawing and quartering.

Still, Dunne is not an easy politician to pigeonhole. He’s certainly not a moderate, or a moderating force. That part of his political persona has always been bogus, and never more so than in 2002 when the television worm enabled him to appear as the Mr Reasonable alternative to those radical extremists in the Greens. At which point, Mr Reasonable brought into Parliament a gang of religious extremists under the United Future banner, and was effectively held hostage by them for the next three years, morning prayer meetings and all.

While it is tempting to write Dunne off as a mere opportunist, that’s not entirely true either. Dunne supported Sue Bradford’s s59 Bill that outlawed violence in disciplining children, and has always supported a republican future for New Zealand, when neither cause would necessarily be popular with his Karori/Khandallah support base.

However, the Greens – and belatedly Labour – are being tactically astute in focussing on him as the holder of the casting vote. It is not a moderate position to support the selldown of a 49% stake in the state’s energy companies and Air New Zealand, and foregoing the full flow of dividends from these publicly owned assets, forever. Nor is it a moderate position to collude in ramming through the first sale regardless of the state of a global economy that will play a large part in ensuring the public get the best price for the assets.

In sum, holding the line against a merely theoretical total sale, while colluding with the actual partial sell-off, is wilfully misleading if this is being presented as a moderate, centrist position. Dunne’s is being National’s flunkey on asset sales, however he tries to dress up the collusion.
Brazil oil spill (cont’d) Those still concerned about the future deep water drilling activities of the Brazilian oil giant Petrobras off East Cape – and still sceptical of the Key government’s assurances that industry best practice will be followed – may be interested in the (lack of) progress with the current oil spill caused by deep water drilling off the coast of Brazil.

Since I mentioned this spill a couple of weeks ago, the efforts in staunching it have been….highly unsuccessful as this article indicates.

Nearly a month after the start of the offshore oil spill, authorities in Brazil have not yet been able to determine the causes of the accident, how much oil was leaked at a Chevron platform, the size of the oil slick, or the extent of the environmental damage. In the midst of contradictory and scarce information, fears over the environmental risks posed by the technologically-challenging exploitation of the country’s massive “pre-salt” oil reserves – buried under thick layers of sand, rock and salt – are growing.

The most alarming warning inadvertently came from the U.S.-based Chevron itself, which operates the well where the accident occurred, at a depth of 1,200 metres in the Frade field, 370 km off the coast of Rio de Janeiro. The president of Chevron for Africa and Latin America, Ali Moshiri, told the press that “we are dealing with Mother Nature, and she is complicated,” the Agência Brasil government news agency reported.

Ah, so that’s what ‘industry best practice’ means. Wringing your hands and lamenting that Mother Nature is complicated. Thought so.


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    1. 15 Responses to “On Peter Dunne’s casting vote on asset sales”

    2. By Chris on Dec 15, 2011 | Reply

      Partial privatisation is the very definition of moderate. All over the world governments of both conservative/social democratic stripes have been selling assets (often full trade sales a la the 80s) for many years.

      Your claim that it is “not moderate” to support such a inconsequential (in terms of growth) policy just reflects your own ideological extremism and antipathy towards orthodox market economics.

      Re foregoing dividends – of course that occurs; but the point is the future dividends are capitalised up front in terms of the sale price. It’s not like money disappears. No doubt this has been pointed out to you many times.

    3. By Miriam on Dec 15, 2011 | Reply

      @Chris the privitisation of public assets is not deeemed moderate. In the current energy climate its as extreme as it gets (following the stated plan to enact a full privitisation of the publics energy assets at a later date). We have 79% renewable energy why do we NZ want to privitise (while Nato bombs Pakistan resulting in a shut down of supply lines).
      You said Its not like the money disappears from the public coffers… what economic school did you graduate from, one where the idea of market economics still exists in your over active imagination (and money should be a commodity).

    4. By Chris on Dec 15, 2011 | Reply

      Can you please provide evidence of the “stated plan to enact a full privitisation of the publics energy assets at a later date” (sic)?

      I’m sorry I’m not sure how NATO bombing Pakistan has anything to do with anything?

      If the money disappears what do you think happens to the money we get from the sale of the asset?

    5. By Joe Blow on Dec 15, 2011 | Reply

      @ Chris

      I must admit that I found the idea of only selling 49% less shocking than the whole lot, but the fear is what will happen further on down the track if the going remains tough and whether selling 49% actually makes financial sense.

      I’ve heard this spiel countless times about the sale price amounting to the future dividends but that’s only if the sale price we get for them now is a good one and how can a sale price now amount to the hypothetically endless dividends that can be made from a renewable energy source on into the furture? How far into the future does the sale price of today buy us? A hundred years? You sound like you’ve got it all figured out so you explain it to me.

      And what if the government is forced to buy back the 49% share if the demands of private shareholders produce bad management? Kiwirail was fully privatised but it cost too much to buy back after private enterprise ran it into the ground. Those future private shareholders of our power companies are going to want to see results or the share price will hit the floor. It’s a whole different pressure from the current management model we have at the moment, which appears to be working quite well…

      I think Gordon’s point is that there isn’t much difference between Dunne and the National party on this issue so to sell himself as the saviour of our assets is kind of lame when in reality he’s assisting National to partially privatise the state assets. It’s misleading… Bascially Dunne is a plonker that is only in Parliament because the Nats put him there in order to get another seat…

    6. By Joe Blow on Dec 15, 2011 | Reply

      @ Chris

      This is interesting:

      SOEs on the block – Herald graphic

      Our power companies have combined earnings of $505 million a year so it would take more than thirteen-and-a-half years to earn $7 billion dollars. That doesn’t sound like the sale price will cover all future dividend earnings at all and that’s assuming that the government is going to manage to partially sell them for $7 billion…

      What a crock!

    7. By Miriam on Dec 15, 2011 | Reply

      Chris I’m genuinely sorry that you do not understand that global conditions in the energy market effect NZ.
      I am amused by your last comment, but not with your rampant support of the privatisation of NZ’s energy assets.
      Its a loose loose situation for the public Chris, so when in the future we are paying out dividends do you suggest we just think of the Queen.
      I think you are the extremist as you have no reason for repeating past mistakes with all the data that has been provided( granted the public may still be in the dark thanks to the Ombudsmans decision to withhold relevant info).

    8. By jack on Dec 15, 2011 | Reply

      I prefer to see the dividends come in as it stands.. where the money will go up front will “disappear” and we the taxpayer who it belongs to will never see where it went. We will be back to square one when Key quietly friters it away to his mates.

    9. By jenny penny on Dec 16, 2011 | Reply

      hi chris,

      what is even more interesting in that article referred to by joe blow is that the figures don’t even stack up.

      combined earnings of $505m a year, more than 13/half years to earn 7 billion.

      ok, but then where does the combined 2011 dividend to government of $849.1 million (from only four of the five enterprises) fit in to the equation? at that rate the dividends alone would bring in $11462.8 million in 13/half years and one assumes the total earnings are not paid out in dividends. at the same rate the dividends “capitalised up front” represents only a bit more than eight years of continued earnings. then factor in an unknown extra amount when genesis starts paying dividends again and its even shorter.

      after that its all complete loss.

      and if mighty river is the first to go, that’s the one that paid $684 million this year in dividends. so we get rid of the best earner first.

    10. By Phil on Dec 16, 2011 | Reply

      You left out the most important point – the price attained at sale. You are moving into smoke and mirrors as you can’t make those claims if you don’t know the sale price. I’m sure you have to be aware of this.

    11. By M on Dec 16, 2011 | Reply

      Peter Dunne does not have the mandate at all, considering the guy only got 13,000 odd votes, he shouldn’t have a mandate for anything!
      This seat in particular needs to go, it obviously represents such a small proportion of voters it’s almost as if it were created for Peter Dunne when MMP was introduced!

      If you take 4 million people in NZ divided by 121 seats you get 33,000 votes required. Peter Dunne is 20,000 votes short of a mandate!

    12. By Helen on Dec 16, 2011 | Reply

      Maybe this will help – Brian Gaynor, 25 Sept 1999: How Asset Sales Went Wrong

    13. By Joe Blow on Dec 16, 2011 | Reply

      @ Helen

      Yeah, and now the Australian government’s Future Fund only owns 10.9% of Telstra. It worked so well they couldn’t stop!,future-fund-dumps-24-billion-of-telstra-shares.aspx

      I get your point though. The partial sharemarket float is obviously better than the trade sale method of privatisation, but how would either of these methods of privatisation have compared to retaining the assets? I guess we’ll never know…

    14. By Joe Blow on Dec 16, 2011 | Reply

      @ jenny penny

      I think “earnings” is accountant speak for average net earnings or something like that. I’m assuming the people behind the graphic have worked out the actual average net earnings of all of the companies combined. There is likely some kind of formula lay people like myself don’t understand behind their figure for the annual earnings.

      It looks like 2011 has been a good year…

    15. By Elyse on Dec 19, 2011 | Reply

      Given the stealth and speed with which South Canterbury Finance and Mediaworks were bailed out by this government, it’s safe to assume that the money from asset sales would also be spent in secrecy. There will be a bit of window dressing – announcements of a couple of school improvements – to keep everyone in the feelgood mood. This will dim the volume on the sucking sound of our profits, resources and taxpayer funded investments exiting NZ.
      And given that Goldman Sachs were already in negotiations with
      the government before the election, also safe to assume that the majority of the shares will not be owned by Kiwi Mums, Dads, uncles, aunts, whatever. It’s a con.

    16. By Keith on Dec 19, 2011 | Reply

      you state “…when neither cause would necessarily be popular with his Karori/Khandallah support base.”. You are wrong as Karori is not part of the Ohariu electorate, it is in Wellington Central. Try to be accurate when making your outlandish comments. Ohariu voters voted for Dunne as an electorate MP, not on the issue of partial asset sales. So to lumber him with that responsibility is just plain wrong.

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