Treasury warned against flood of asset sales

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Source: Green Party – Press Release/Statement:

Headline: Treasury warned against flood of asset sales



Asset sales were always a bad idea, but National’s reckless rush has turned them into a complete failure

Treasury warned the National Government that it shouldn’t attempt to sell assets in quick succession because there would be insufficient demand and the revenue to the Crown would be reduced, Green Party Co-leader Dr Russel Norman said today.

Treasury papers from the March 2011 at beginning of the asset sales process warn the Government that the domestic sharemarket could not absorb more than $2 billion a year from government share sales, which “suggests keeping offerings in any 12-month period below $3 billion” to ensure a good price and secure majority New Zealand ownership. Treasury also pointed out that flooding the market with electricity companies would reduce sale prices and suggested a “3-5 year programme” of sales.

National has so far sold two electricity companies within six months for $3.6 billion, $1.3 billion less than expected, and has indicated that it could force through two more sales within a year of the Mighty River float.

“Asset sales were always a bad idea, but National’s reckless rush has turned them into a complete failure,” said Dr Norman.

“By flooding the market with electricity companies, against the advice of Treasury, National has reduced the revenue the Crown received from the sales. The lacklustre prices and the pathetically low levels of participation by ordinary Kiwis in the floats shows that National has completely mismanaged the asset sales process.

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“Pushing ahead with the sale of Genesis and Air New Zealand in the coming months hard on the heels of the failed Mighty River and Meridian sales would be completely irresponsible.

“National has rushed through the asset sales against all common sense because it has an ideological fixation on privatisation and it knows that it’s going to lose the next election.

“The coming referendum will be Kiwis’ chance to send a message, loud and clear, to John Key and National: stop the asset sales madness,” said Dr Norman.

Additional information:

Treasury Report on Extending the Mixed Ownership Model (pages 7, 9, 11 contain relevant passages)

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