If National wins ...

[elZorro]

MVT, I guess I should have stressed the words "well paid" because it looks like real wages are on the way down, not up.

The SCF figure is the net figure, they managed to find about 50% of the money that was paid out to the original lenders by the govt, under the guarantee. Allan Hubbard had strongly suggested to the govt that they take an offer on the table to limit costs to $400mill, but they knew better. So there went another $400mill lost by the taxpayers, by the sound of it.

On TV this morning, an angry building contractor who was sent yet another leaked document from a govt department, this time EQC. One of the factors behind this leaking public service will just be that some of the old hands who know how to look after all this sort of information, will have been let go. In the last 10 years or so, it has become commonplace to simply flick out an email with really important info on it, instead of mailing it. Right there is the risk of emailing, say, a speadsheet with extra tabs hidden behind it. A business owner would make sure this never happened, but his/her staff might not be so careful.

EQC runs on a 15% levy from all fire insurance and home contents/home insurance. It's limited to $100k for land, $20k for contents, and they had an AAA rating in August 2011. But from all the noise that is being made, it looks like here is another govt. department that is a bit shy of the funds needed to make good on their promises.
Here's a page from the EQC website which spells it out.

All this noise is only going to help Labour do their job in turning around public opinion. They won't even have to say much about this one, the private sector will do it for them. If I was owed $700,000 from a govt department for work I'd done at a fair price, I'd be grumpy too. He's going to have to give back at least 33% of it in taxes anyway.

I'll need to deconstruct this later, but here is some new govt spin on R&D, and they've also attempted to head off Labour's better ideas yet again. No increase in funding for Callaghan Innovation, I know what that means. Which side of the next election does National intend to give half of the staff the bad news?

http://business.scoop.co.nz/2013/03/27/increase-in-business-rd-welcomed/

[Major von Tempsky]

I carefully read the EQC beat-up in the paper today and found that EQC is not being entirely unreasonable in this case they are simply not paying for work
which contractors have started without any agreement from EQC.

I also did a straw poll at my Christchurch tennis club on Tues and found (a)no-one was worried about alleged privacy breaches (b) people were worried that the unfortunate clerk who made a simple error may be pressured into suicide, like the nurse in the UK, by media and Labour Party pressure (c) that Bryan Staples is a w*nker and should destroy the email as he has several times promised to.

[Jay]

Mr Staples was backtracking or least trying to change the subject on 7 sharp last night from the emails to how much he is owed,

[elZorro]

Not a great day for National MPs:

Telecom removes 1200 jobs by June 2013, mostly middle managers who will be on the dole:

Solid Energy gravy train mentioned by the Unions, whose members got very little of the excesses, Elder let go permanently:

EQC managed another data leak to the public, and had all of their email closed off by an embarrassed govt:

Rio Tinto/ Tiwai makes even more threatening noises and forces the govt to offer a sweetheart power pricing deal.

Insight from Pattrick Smellie. http://business.scoop.co.nz/2013/03/...-with-grandma/

Pattrick Smellie also writes on Callaghan Innovation, a bit of inside info there. But he's failed to mention the funding issue, it's only half as much as it needs to be for the current staff. That's why the ex-IRL people are grouchy.

http://www.stuff.co.nz/business/opin...needs-a-chance

Here's an older article about CI: from the policy being supplied and the funding anomaly, it seems that IRL's old function will simply disappear. CI will only liaise between the universities and the private sector, these are the parties that will do any research. They can handle that from Wellington. The blue-sky research that IRL did will stop, unless universities get funded enough to have a go at it. So what used to be the NZ-based career path for science academia for generations, has been chopped off by National. We'll read about it soon enough.

http://www.nzherald.co.nz/business/n...ectid=10848349

[Major von Tempsky]

But Telecom has nothing to do with National, and Elder must answer for himself, he made the decisions.
EZ is still having trouble coping with Board governance and the difference between 1949 and now in the economy and NZ society.

[craic]

Henry Ford put a million village blacksmiths out of work. Then the telepnone develops - when did you last see a telegram boy racing around on his bicycle? Telecom, by its very nature, is going to shed workers and in a few short years will be as far from where it is now as it is currently from the old Posts and Telegraphs. One of my in-laws was an engineering student with scolarships and sponsorship from P&T and years of training overseas and on and up to the top of that tree. He was happy when it stopped being run as a Govt. department and he eventually moved to private industry. If the present govt. has any gumption, they will let Rio Tinto or whoever walk away from the smelter. You would have a chinese buyer in there overnight. Any reduction of the electricity price to keep jobs means it is just another subsidised work scheme. And Labour would be able to claim that it was their idea.

[iceman]

Actually hugh it is you that is having the problem (AGAIN!) ... The National govt appointed the board of directors from their own ranks and it is they that had the responsibility to monitor and control Elder's grand schemes.

Belg both Dr Elder and Chairman Palmer were there a long time before the Key Administration came to power. The "grand schemes" were started under and encouraged by Labour. But of course the National Government has had a responsibility to monitor SE's activities since they came to power, however realistic it is to expect Government Ministers to do that. I think we would all be better off if running such businesses was left to private enterprise !

I will be highly pi..ed off if the Government moves in with ANY kind of subsidy to Rio Tinto to keep Tiwai going. Let them walk away if they want, which they will never do. The asset is far too valuable for them to walk away from it as once they do that, it will have very little market value for later sale. Giving the smelter owners any kind of support is what I would expect from Labour, not National !

[elZorro]

I was about to post the same article Belg, this is a very tricky spot the govt has got itself into. Between now and the next election they have to square off one of the asset sales, and it needs to be a good one, to partly fix the budget deficit. They'll need Rio Tinto to agree to a deal of any kind before they can get a good price for MRP. They are going to have to act like Labour would to protect those jobs at the smelter, even though that's not the reason for the action - they literally have to protect the deal. High prices and high demand for the power that's left over are also in the govt's best interests: they get a portion of the profits, and all the GST. It's a lot of cash.

Minimum youth rates are going to be $11 an hour for the first 6 months of employment from May. This might redress the balance back towards younger staff being employed. As we figured out a while back, Labour's idea of abolishing the youth rates when there were plenty of unemployed people left who were perhaps keener to hold the jobs near the minimum pay, resulted in a striking loss of jobs by youths within a very short time. The policy itself was a good one in theory, but the response of younger staff and particularly employers looking for faster results for wages spent, meant it didn't work as intended.

Making sure that most businesses are profitable would be a better way of boosting wages, and that is not done by screwing back the economy. I've heard that competition for construction labour in the microcosm of Christchurch is resulting in almost monthly pay increases around the $25 an hour mark. That's great, as long as the end-users of the goods are paying enough for the business owners to make a profit too. $25 an hour shouldn't be the limit of the hope for an increase in provincial wage rates, but of course it is well above the miserly $13.75 minimum adult wage being set by National.

[elZorro]

More from Colin James on the asset sales.

Colin James's Otago Daily Times column for 2 April 2013

The second-term jewel has lost some sparkle
Mighty River Power pre-registrations 440,000, anti-selldown petitioners 390,000. The selldown wins. Or does it?

Two years ago the political calculus was: do the selldowns well, make a lot people feel they have won something and show most of the rest the sky hasn't fallen in and selldowns will cease to be a third-rail issue.

After the 2011 election ministers claimed a selldown "mandate": (a) they had been re-elected (even if pro-sales beat anti-sales parties by only 61-60) and (b) they were re-elected despite anti-selldown parties having made the issue No 1 in the media (except briefly for John Key's over-the-top reaction to the tea party recording).

Some political scientists agreed ministers had a mandate, that the election result trumped the persistent large majorities in opinion polls against the selldowns.

This was nice theory built on outdated reverence for representative democracy and parliamentary supremacy at a time when the means for, and interest in, wider citizen participation in decisions, or at least in the argument leading up to decisions, is growing.

The mandate National actually has, with its two on-life-support single-MP parties, is to govern. (The Maori party, in its public statements, is now more an opposition than a governing party.)

Included in the mandate to govern is a mandate to change things according to the tenor and direction indicated in the government's first-term behaviour and in its campaign positioning, to the extent voters took that positioning on board.

That direction, tenor and campaign positioning included fiscal caution and a deregulatory, pro-private-enterprise programme. Selldowns are in both those streams.

So if the government had sold down Mighty River pronto and not made mistakes or muddled its message, the politics likely would have settled into acceptance of such selldowns.

But ministers took a while to sort the detail and enact the empowering legislation and mucked it up by not transferring from the State-owned Enterprises Act the section binding the Crown to abide by Treaty of Waitangi principles. They reversed on that but by then the fuss had revived the Maori Council which went to the Waitangi Tribunal and the courts.

Meantime, the persuasiveness of three arguments for selldowns eroded: that they would replace costly debt as a way of funding capital projects; that they would lift efficiency and so lower or contain electricity prices; and that they would help contain net debt below a magical point of the 30 per cent of GDP above which the rating agencies (those barefaced contributors to the global financial crisis) would throw the book at Bill English.

The tradeoff between dividends and debt interest is marginal at best and maybe negative over time in a low-interest environment. The efficiency gains are marginal, because there is competition and the electricity SOEs operate commercially anyway. The 30 per cent figure lost its magic as rich countries zoomed far above it and the finance markets declared New Zealand a desirable place to park shekels, thereby driving the dollar into the stratosphere.

Moreover, the selldowns don't add capital to the enterprises. That can happen only if the government puts more in or lets the private shareholding climb above 50 per cent.

The only argument that still holds much water is that the selldowns deepen the sharemarket and might encourage some not-so-well-off households into shares and lift their savings ratio. That is a plus but at a paltry $2500 a person a limited plus. And households are shopping again and raising house mortgages, not on the pre-2008 level of wildly outspending earnings but also not demonstrating a strong new savings habit.

Meantime, the Supreme Court has etched on tablets of stone ministers' pledges to negotiate water rights with iwi in good faith. As a result, if iwi think ministers don't so negotiate, expect more court actions. That might have affect share prices over time.

Next, note that Air New Zealand and Solid Energy are off the selldown list, at least this term, and Meridian can be got on it only with a taxpayer subsidy to Rio Tinto. Later this decade Tiwai Point might shut anyway, which would cut the price of electricity and so the yield on, and price of, Mighty River and Genesis Energy shares.

In that event, the shares might lose their sheen. If those still holding them then felt aggrieved, that might be a new line of disapproval of selldowns.

And later this year comes the citizens-initiated referendum. There is a strong probability a majority will vote against selldowns. That won't stop the first sale but what will it say about the second? (What if, as in Switzerland and many United States states, such a vote forced government action?)

The selldowns seemed so straightforward, a jewel in the government's second term. But from November 2011 to April 2013 the sparkle has dimmed: 440,000 to 390,000 might turn out to be the sort of win ministers have when they are not having a win.





-- Colin James, Synapsis Ltd, P O Box 9494, Wellington 6141
Ph (64)-4-384 7030, Mobile (64)-21-438 434, Fax (64)-4-384 9175
Webpage http://www.ColinJames.co.nz

[Major von Tempsky]

Oh! The nostalgia! Colin James? I remember him when he was writing the same sort of article in the media in the 1960s when I was a teenager.
Is he dribbling? Is he on life support?
Jonathan Hunt used to say behind his hand "Psst! Don't criticise him, he's secretly on our side!"
And so he was...and is...like Rod Oram....