Friday, 11 May 2012

Russel Norman on privatisation

From the New Zealand Herald:
The Green Party has crunched numbers it claims show asset sales have already cost the country billions.

Co-Leader Russel Norman has released a table he claimed showed exactly how much revenue New Zealand lost when the Bank of New Zealand, Telecom, and Contact energy were sold by previous governments.

He said the three SOEs were sold for seven billion dollars and since their sale have paid out 21 billion dollars in dividends.

Dr Norman said that was evidence asset sales are folly.
When I see statements like this I do have to ask, How did they get their figures? Are the stated figures in real terms? Are they in present value terms? Do they take into account what the government has done with the money it got from the asset sales? For example if the government use the money to payoff debt then any dividends "lost" would have to be net of any savings in interest on repaid debt. Also are these numbers net of any taxes paid on profits earned?

Also has Russell Norman considered if there has been an increase in dividends paid, which implies greater profits, this could be because the firms are now being better run now than they were under government ownership?

Let me add that arguments like Russell Norman's miss the point. As I have said before, let the debate about privatisation in terms of efficiency not price or "lost dividends".

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