Who will win the 2011 election?

[shrub]

...perhaps an encouraging sign of intelligent life.

You scare me. You have put up a post that demonstrates independent thought and analysis of the situation, and worst of all a longer term perspective. Are you lost or something? Do you not know this is KB?

[Quasievil]

I heard/saw/read somehere that some outfit did a poll when they asked folk who were supporters of either Nats or the Labs ,that if they were uninclined to vote for thier traditional party ,which other party would they vote for....
58% Nats & over 80% of Labs would vote for , yes you quessed it 'cause we all have a little common sense somewhere deep down inside us....

THE GREENS

What I found surprising was apart from the initial announcement Ive heard nothing more on it.To me that is the most telling shift in political thinking in a wee while...

HAHAHAHA they barely get 5% !!

common sense and the greens in the same comment BRILLIANT !!

[oldrider]

Compost THE GREENS ...

Practical organics in action!

[rainman]

they barely get 5% !!

Well, like I said, intelligent life is hard to come by in these parts.....

[BMWST?]

HAHAHAHA they barely get 5% !!

common sense and the greens in the same comment BRILLIANT !!

6.4 in the last poll more than three times as the next minor party.I predict ACT are gone and so is NZ first

[Winston001]

.

To me the issue swings on asset sales.

So, dispassionately, what does this policy achieve? There are three approaches that might be advanced in favour of the proposal:

1) Selling the SOEs (or some of them, whatever) will bring in foreign investment.

2) But, Mr Key might say, this is a way for "Kiwi mums and dads" to own shares, which is good, mmmkay?

2a) If the SOEs are running well, making money and likely to grow (like, say, energy companies), then the contribution they make reduces the requirement to raise taxes or cut services, both of which actions hit ordinary Kiwi mums and dads.

3) But, say the ACToids, "the state should not pick winners"/"...

So, having looked at this with an open mind...

Lovely post and a shame to cut it up.

So anyway, I am not happy about the proposed 49% sales.

Nevertheless you ask why such a step might be necessary? The answer is the NZ government owes a crippling amount of debt. Currently we pay $370 million per week. That's a lot of hay for a small nation. All we have to do is look at the P.I.G.S. of Europe, and now Italy as well, to see the problems.

Even the behemoth the United States is faltering under crippling public debt. Sometimes you have to make hard decisions - something the Americans have yet to confront.

Imagine owning a bike rental business and also having a $100k overdraft. The rental business is good in the summer but earning $100k to pay off the bank (which wants to take your home) is going to take 14 years. Expenses, running costs, tax etc, it takes a long time to pay debt off.

So you sadly look at your fleet of machines and start selling. Eventually the debt is under control, time passes, and you move into off-road adventures which is cheaper and a winner.

The decision is simple and nothing more than a prudent person would do to protect their family.

[Winston001]

2a) If the SOEs are running well, making money and likely to grow (like, say, energy companies), then the contribution they make reduces the requirement to raise taxes or cut services

Ah yes, the old "energy companies are cash cows" theorem. We wish.

Contact Energy was privatised by the govt in 1999 to the NZ public at $3.15 a share.


Here we are 12 years later. Contact Energy's share price ten minutes ago....?

$5.03

That represents a mighty $1.87 increase in value for 12 years.

Maybe selling part of Meridian et al wil prove to be a smart move.

[rainman]

Nevertheless you ask why such a step might be necessary? The answer is the NZ government owes a crippling amount of debt.

Not really. I understand the problem, even if National tends to overstate the borrowing and the reasons behind it - we aren't living within our means, and going into turbulent times with a load of debt is a bad idea. But I asked why asset sales were a good response to this, which is a different thing entirely.

That said our government debt levels are nowhere near the levels held by the European problem children, and our private debt is high mainly because we owe it all to the organisations we flogged off overseas in the 80s, such as the Aussie banks. Our trade balance is also part of the problem - we have a weak manufacturing sector partly because we sold off all of the industries that would have supported the growth of a better one. So arguing that we have to privatise more to fix up a problem partly created by the last round of privatisation is surely a bit silly.

Imagine owning a bike rental business and also having a $100k overdraft. The rental business is good in the summer but earning $100k to pay off the bank (which wants to take your home) is going to take 14 years. Expenses, running costs, tax etc, it takes a long time to pay debt off.

So you sadly look at your fleet of machines and start selling. Eventually the debt is under control, time passes, and you move into off-road adventures which is cheaper and a winner.

But at the same time you lose some of your income source from being able to rent the bikes, so find it harder to service the debt, and go broke. It's like burning the floorboards to heat your house: selling assets to service consumption is dumb. Optimising the return on your assets, and changing the portfolio you hold to maximise return, that can be smart - but not what's on offer here, and honestly well beyond the capability of the current lot.

And in a business you can look at your incomes and expenditure and decide the operation isn't sustainable no matter how much you try to lift incomes or cut expenses, and go broke. Countries can't really do that.

The decision is simple and nothing more than a prudent person would do to protect their family.

The decision is usually not simple at all.
The organisation I'm employed by has over time held certain property assets, and decided to sell some of these to fund operating costs. Some of those transactions can optimistically be described as 'hard decisions' that needed to be taken, but most were of questionable benefit in the long term, that left the organisation in a weaker position. A lot depends on how much you sell for, and what you use the cash on.

Also, as I pointed out before: if this is such a shit hot idea, how come it didn't work in the 80s?

Ah yes, the old "energy companies are cash cows" theorem. We wish.
..
That represents a mighty $1.87 increase in value for 12 years.

Two things:
1) the NZ stock market has grown pathetically slowly for years. You may want to read this rather good article. Covers some of my other bugbears too).
2) energy, in case you hadn't noticed, is going to be a bit of an important commodity in the coming years. May just be an opportunity to do better than we've done to date with these assets. Maybe the alternatives will get more expensive. It's a tricky business case, to be sure.

If you still think we should sell these because they are poor performers, then you're implicitly talking about remixing the portfolio. What are the better assets we could hold that will deliver better returns/lower costs?

If you're saying we should sell them because we should not hold assets (or certain classes of assets) per se, then what's your reasoning there? No ideology, please, let's have some facts.

[BMWST?]

No ideology, please, let's have some facts.

sell them but NOT to overseas investors.We must find a way to keep SOME of the family silver!

[rainman]

sell them but NOT to overseas investors.We must find a way to keep SOME of the family silver!

How's that work though?

• Does nothing to our balance of payments, and it's redistributive to the wealthy, who frankly, have enough already. The poor won't be buying them, that's for sure.
• Would also be pretty hard to enforce and a dumb idea - "you can buy these shares as long as you only sell them to a Kiwi" would a) lower the sale price, and b) keep lawyers, regulators and the like busy, while achieving nothing significant. We'd still be in the same net debt position.
• Also, even if you could enforce NZ ownership, we already own them. Why steal them and sell them back to us?
• Why sell only the assets, and leave the liabilities (the other form of theft) with the poor taxpayer? How is that remotely moral? Privatise the gains, socialise the losses is one big way capitalism screws us all over.

If we have an overseas debt problem, the solution is:
1) stop borrowing, a.k.a. live within our means. Where this falls over is we don't have a good sense of common purpose, national identity, and solidarity. We're all induhviduals, y'know. So we disagree fervently as to what should be cut and who should pay.
2) start earning more and pay off our debts This means build industries, raise employment, get cracking. Also means put up some tariffs and trade controls, set up tax and employment policy to get everyone working, and a few other unpalatable things (to both left and right). The market has not, and will not, sort(ed) this out.

This all might be sumarised as "grow up and be a bit more self-reliant".

National, with it's "leave it to the market" is like a teenager, with a bit of a "meh, life is sweet, couldn't be arsed, I'm all right Jack" attitude.
Labour is thinking a bit harder, but is maybe like the slightly creepy crazy uncle who has lots of ideas, but only some of them are worth anything, and not all of them are worked out all the way to the end.
The Greens are like your grandma, you know she's right (and she is), but you hate being told you're wrong so you rebel. (And sometimes she does say some crazy shit).

If the choice is Nat/Lab, and it largely is, Lab is the better bet as they have job creation and the like closer to their DNA. Perhaps with a bit of support from grandma, they could do OK?

[Winston001]

Not really. I understand the problem, even if National tends to overstate the borrowing and the reasons behind it - we aren't living within our means, and going into turbulent times with a load of debt is a bad idea. But I asked why asset sales were a good response to this, which is a different thing entirely.

Yes, and I provided a dispassionate explanation. Whether I agree with it is a different matter.

That said our government debt levels are nowhere near the levels held by the European problem children, and our private debt is high mainly because we owe it all to the organisations we flogged off overseas in the 80s, such as the Aussie banks.

One bank: the BNZ. Exaggeration is unnecessary.

Our trade balance is also part of the problem - we have a weak manufacturing sector partly because we sold off all of the industries that would have supported the growth of a better one. So arguing that we have to privatise more to fix up a problem partly created by the last round of privatisation is surely a bit silly.

Again, this is opinion and exaggeration. I struggle to think of anything privatised by the govt which would otherwise have developed into a high tech high value manufacturing industry. Railways...? Puhleessee

But at the same time you lose some of your income source from being able to rent the bikes, so find it harder to service the debt, and go broke.

NO. The reason to sell the rental bikes is that the money gained repays the $100k overdraft. No ongoing interest. Reduce debt = reduced commitment.

You can then concentrate on earning alternative income without the $100k debt pressure. People do this when up against a wall of debt.

Also, as I pointed out before: if this is such a shit hot idea, how come it didn't work in the 80s?

?? Who says it didn't? NZ is a far better place today than when it was Fortress New Zealand under Rob Muldoon.

2) energy, in case you hadn't noticed, is going to be a bit of an important commodity in the coming years. May just be an opportunity to do better than we've done to date with these assets. Maybe the alternatives will get more expensive. It's a tricky business case, to be sure.

What are the better assets we could hold that will deliver better returns/lower costs?

Just to repeat - counterarguments to advance discussion do not necessarily reflect the writers personal opinion.

Energy assets do have the seductive attraction of "national interest" although the existence of Contact hasn't done any harm. Its not as though overseas shareholders can take the hydro dams away.

The better assets? People. Educated, motivated, positive people supported by small business programs and infrastructure. If we can encourage individuals to try their ideas out, the whole nation will be lifted.

[rainman]

Yes, and I provided a dispassionate explanation.

Sorry, musta missed it,. All I saw was the bit where you said we had to do this because of the debt. I'll phrase this another way: we have a (small) debt problem. What's the best way to fix it?

One bank: the BNZ. Exaggeration is unnecessary.

Again, this is opinion and exaggeration. I struggle to think of anything privatised by the govt which would otherwise have developed into a high tech high value manufacturing industry.

It's less about what might have directly developed into a high value industry and more about sustaining an industrial ecosystem based on more than a pasture and consumption economy. You seem to think we have a big debt problem. Why do you think this is so?

The reason to sell the rental bikes is that the money gained repays the $100k overdraft. No ongoing interest. Reduce debt = reduced commitment.

You can then concentrate on earning alternative income without the $100k debt pressure. People do this when up against a wall of debt.

So if you can sell all of your assets and get rid of all of your debt, you should do this? (Rhetorical question). We'd have no economy then.
How do you decide what is an appropriate level of assets to keen to sustain your business?
How does this apply to a country, which is not a business?

The problem is not the assets though - it's the debt. So, three questions:
1) how bad is the debt problem really?
2) how much of it do we have to fix, and how soon?
3) what's the best way to fix it?

?? Who says it didn't? NZ is a far better place today than when it was Fortress New Zealand under Rob Muldoon.

By what measures? I think this is not as clear an issue as some think. And will the circumstances that lead you to prefer today to then still prevail in the future?

The better assets? People. Educated, motivated, positive people supported by small business programs and infrastructure. If we can encourage individuals to try their ideas out, the whole nation will be lifted.

So, what should we do to get this right? Support people into work, start training programmes, reward diligent effort through a sensible tax system, support R&D, protect and nurture new industries.... or sell some shit, pay some debt, and hope for the best?

[Quasievil]

Well Boys its been a great Debate, I would love to stay involved but sadly Im having to shoot up to Cairns for the week, so enjoy
I will look forward to seeing how this eventually concludes to the obvious truth in that ACT is the way forward for us all.

While Im diving the great barrier my thoughts will be with you

While drinking a cold beer in 27 deg my thoughts will be with you.

hehehe

(yeah I know cunt eh)

[Winston001]

Sorry, musta missed it,. All I saw was the bit where you said we had to do this because of the debt. I'll phrase this another way: we have a (small) debt problem. What's the best way to fix it?

Ok, sometimes the short simple answers are all there is to it. I've live my life growing up with Scottish Presbyterian (Calvinist) ethics. Never go into debt but when you do, repay it. Its worked for me: and my children will benefit.

[rainman]

Ok, sometimes the short simple answers are all there is to it. I've live my life growing up with Scottish Presbyterian (Calvinist) ethics. Never go into debt but when you do, repay it.

Fascinating and admirable though your family circumstances are, I fail to see the relevance of your post to the point in hand. (Also, your truism doesn't make sense. If you NEVER go into debt then there is no "when you do". Are you saying "go into debt cautiously and behave with honour?". Well, duh). You don't say how much debt is OK, what terms are acceptable, how long you should hold it for, if you can ever default, how this differs for governments and households, or frankly, anything very useful to the current topic at all.

To recap: the problem at hand is: if the COUNTRY has a debt problem (and it's not clear that it does), then what should the COUNTRY do to address this? Simplifying slightly, as that is all we're being offered, should we:
a) sell some of our assets to foreigners* to pay down debt,
b) adopt the competing package of measures as discussed in the CGT thread, or
c) something else?

We get to vote on the alternatives later in the year, such that they are.

I contend a) is immoral economic vandalism for reasons advanced earlier, and that we should hold our noses if necessary and take option b), the lesser of two evils. It is not apparent that c) exists, given our political system, but feel free to explain that I've missed something other than protest voting.

In return you want to tell me about your Scots ancestry and values. Do you see why I have concerns about our ability to make intelligent decisions on November 26th?

* Let's not kid ourselves, that is the actual option.