National Party economics: make $2 billion, spend 5

Today, R0b asked a question that many people have been posing:  just how many times does the National Government think it can spend the “profits” it’s “made” by selling off viable money-making New Zealand assets?

So I had a wee dig.  Bear in mind, I’m not an economist; I’m just a citizen trying to find out where her money’s being spent.

On the other hand, I help run a household, so apparently this makes me just as qualified as the next person to determine whether the Nats are good economic managers.

Let’s start with the income.  2012 Treasury forecasts suggested a price of $6 billion for selling off 49% of Mighty River Power, Meridian, Genesis Energy and Solid Energy, and part of the publicly-owned chunk of Air New Zealand.

The proceeds of these sales go towards the “Future Investment Fund” – which isn’t really a fund, more a guideline.

Now that’s just a Treasury forecast, so put what faith in that that you wish.

What we have in hand is $1.7 billion from the sale of Mighty River Power.  (And this was at the low end of the initial $1.6-1.9b estimate of its value, so let’s add that fact to any niggles we feel about Treasury’s forecasts while we’re at it.)

Somewhere along the line this has become $2.1 billion added to the Future Investment Fund.

Now, to the spending.

National has committed from the Future Investment Fund:

Phew, that’s a mighty list of stuff!

A mighty list of stuff costing $5.26 billion dollars.  Out of $6 billion dollars we don’t even have yet.

And that’s ignoring the Government’s earlier statements about reducing our debt by $6 billion.  That’s ignoring the fact that the Future Investment Fund only funds capital expenditure, not operating expenditure.

That’s ignoring the millions in the cost of consultants and advertising already spent trying to hike up the price of Mighty River Power.

If we were a household, we’d be sticking a fancy new fridge on hire purchase while promising to put the Xbox on Trademe some time next month, honest, I reckon it’ll pull in $600, and doing nothing about the credit card debt we racked up taking the lads out for Friday night Jagerbombs.  Oh, and that new fridge?  Uses three times as much electricity, but we haven’t put aside any extra cash for the power bill.

Does this look like good economic management to you?

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4 comments

  1. Lanthanide

    Don’t know how to get to any of The Standard authors except you.

    It seems when Karol enabled commenting on the Ikaroa-Rawhiti by-election article she screwed something up, so now only peopled ‘logged in’ to the standard can post comments. I have a wordpress account but it won’t let me ‘log in’ to the standard. This explains why there’s been no comments since 7pm.

  2. Daniel

    Not all bad management, the bad parts are the usual government failing to understand money and the almost universal (i.e. every major parrty in Aus, NZ, USA, UK…) Neo-Classical Economic thinking. Terrible, awful, probably unethical Accounting practice though.
    Selling monopolies is stupid, selling profitable assets is also stupid.
    A government with it’s own sovereign fiat currency borrowing that same currency is functionally identical to an individual borrowing their own IOU’s from someone at interest instead of writing new ones and exactly as stupid and unnecessary as it sounds.
    But deficit spending by a government add to the rest of the economy and is usually a good thing depending on what they are spending it on. i.e. Waste bad, bidding up prices bad, finding uses for underutilised resources (unemployed Labour) or providing essential services or infrastructure good.
    With the downturn NZ is experiencing the government should be spending more than it’s bringing in from taxes. And unusually the spending list sounds like largely actually useful or necessary things. Sure they shouldn’t be borrowing $NZ to do it but compared to most parties of the Right and their Austerity and small government fetish this is a surprisingly sensible piece of economic management. Really surprising, actually there is probably something dodgier hiding in this. Serious pork barrelling or vote buying or insider trading or something.

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