Assets: are they a liability?

The deed has been done. The Mixed Ownership Model Bill has been passed and partial state asset sales can now go ahead.

John Key and his Government, perfectly capable of flip flops in the face of obvious widespread public opposition, have decided to tough this one out.

The former New York money dealer is gambling that the scaremongering will prove to lack substance, that the sales will go relatively smoothly and that other issues will dominate the next election in two years' time.

Polls and focus groups have shown a majority of New Zealanders oppose, or at least are uneasy, about the partial asset sales.

Labour recognised public sentiment before the last election and played up National's policy in its attempt to win power. If anything, disapproval has grown since then.

No doubt those opposed include many National voters.

It seems probable, too, that the petition against sales will in due course easily gain the 300,000 valid signatures required to prompt a citizens' initiated referendum.

The subsequent poll, coming well after the third quarter of this year when Mighty River Power's sale will have begun, can be expected to embarrass the Government both through its result and the surrounding publicity.

The results of these non-binding referendums, however, have a history of being ignored, notably the overwhelming "smacking" vote.

Those who are against asset sales have had the advantage of being able to push straightforward messages.

In any day and age, and especially in the modern world of flitting attention spans, that is advantageous.

Thus the cries of flogging off the nation's silver, of foreigners buying up New Zealand, of soaring power prices, of losing dividends, of benefits to the rich at the expense of the poor, of selling what the public already owns.

There are counters to many of these points, which are easily lost in the clash of views.

Analysts are, in fact, saying there are New Zealanders with spare cash - the financial company investment option, for example, has disappeared - who will be keen on buying shares in solid energy companies.

Thousands of small investors bought Contact Energy shares in 1999, and large numbers have retained them.

There is also a view that foreigners, unable to buy a majority stake, will be less interested than local KiwiSaver and other fund managers. The complications around potential Maori claims could well also put foreign interests off.

The retail energy market is now much more competitive and consumers have shown they will punish companies and force them into line.

And while National will lose part of its dividend stream, it argues the sales will slow the growth of national debt and therefore lessen interest payments flowing offshore.

There are also arguments, open to dispute, about whether the disciplines of private ownership are more likely to sharpen performance.

Naturally, Labour, the Greens, New Zealand First et al will continue to use the unpopularity of asset sales as a stick with which to beat the Government.

Naturally, they highlight any feasible assertion to show up the Government.

Nonetheless, despite the breadth of opposition, the depth of public antipathy is harder to gauge. It is questionable how many, outside the hard core, care enough to make it a decisive election issue in 2014. After all,

National was completely open about the partial sales before the last election and almost half the electorate voted for it.

It could well be that National is regretting buying this particular fight, and what seemed like a good idea has become a liability.

But National is committed to at least proceed with some of the sales because the billions in income are essential to its spending commitments and because it has gone out on a long, long limb.

Much will depend now on how the float is managed and how successful it is.

A Facebook-like first day price fall would be a disaster.

But so, too, would a float that is vastly oversubscribed because that would show the taxpayer failed to reap appropriate benefits.

In both these cases the assets would have become an electoral liability.

If, though, all goes relatively well, much of the sting is likely to go out of the issue and the electorate will move on.

Clearly, the stakes are high for the Government - financially and politically.


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