29 Jan 2011

Treasury makes stronger case for partial privatisation

6:29 pm on 29 January 2011

In initial advice the Treasury provided to the Government on state asset sales, it says partial privatisation will be an easier sell for the New Zealand public.

The Government is exploring the benefits of partial share sales of four state-owned energy companies and reducing its shareholding in Air New Zealand.

It argues that partial asset sales will help to raise capital, reduce government debt and stabilise economy.

Critics say it is counter-productive as New Zealand loses ongoing dividends and key assets will end up in foreign hands.

Treasury advice given in December last year said there were economic benefits to asset sales.

However, it says given public opposition, partial privatisation is more likely to be an acceptable policy position.

Finance Minister Bill English says the partial sale of state assets will reduce the Government's dependance on foreign lenders.

Mr English says New Zealand is one of the most indebted countries in the world, owing about $170 billion overseas.

He told Morning Report lenders want to see the country move away from borrowing and spending, towards saving and reducing debt.

Partial asset sale not the solution - Labour

The Labour Party says the partial sale of state assets is not a solution for the country's economic ills.

Labour's finance spokesperson David Cunliffe says retaining 51% of state companies does not guarantee the Government control, because the rights of minority share holders are protected by law.

Mr Cunliffe says flogging off state-owned power companies will result in higher electricity prices and profits for rich traders.

The state's sale of Telecom in the 1980s has shown that competition cannot be relied upon to keep prices down for consumers, he says.