Our Economic future is electrification, not mass tourism, Mining, Dairy or basic exports to China
Bernard Hickey on some ideas for the electricity market…
Sam Stubbs’ four-step infrastructure plan
Simplicity CEO calls for political consensus to get funds invested
Simplicity CEO Sam Stubbs called in an Op-Ed in The Post-$$$ this morning for a four-step plan to super-charge infrastructure investment. Those steps include:
-
- The Government selling 31 percentage points of its remaining 51% shares in the listed power companies (Meridian, Mercury and Genesis) to local KiwiSaver and other funds and retail investors (not banks) to raise up to $8.5 billion to spend on infrastructure;
- The Government selling up to 80% of Kiwibank in an NZX listing, again to local funds and investors, to raise another $2 billion for infrastructure;
- Both major political parties agreeing on a long-term infrastructure plan, with a public commitment to stick to it; and,
- KiwiSaver managers should be given the regulatory green light to invest more in unlisted infrastructure assets.
Stubbs argues that KiwiSaver and other local fund managers now have $230 billion to invest, but invest much less than they should in local infrastructure and local shares because of the state’s ownership and restrictions.
The long-term nature of infrastructure projects doesn’t fit well with the short-term nature of governments. Infrastructure lasts a long time, but most governments don’t.
Sadly, our infrastructure “planning” is steeped in ideology, with the divisions obvious – trains v roads, renewables v fossil fuels, community consultation on schools, hospitals and public facilities vs rinse-and-repeat designs. On top of all that are the divisions around my city v yours, this region v that one.
The bottom line? – everyone wants more of the infrastructure they prefer, and they want the Government to fund some, most or all of it. To my mind, this makes the provision of much of our key infrastructure one part engineering, one part financing, and three parts politics. And that makes it all very stop-start.
Stubbs uses the example of the importing of tunnel boring machines to drill tunnels Waterview and the Auckland Rail Link, but which were sent back overseas because of a lack of a pipeline¹ of work.
No KiwiSaver manager owns a toll road or tunnel, and none of them has a chance to fund and own any stake in the Interislander ferries.
A recent study showed that less than 2% of KiwiSaver money is invested in any infrastructure other than shareholdings in power companies and Infratil. In Australia, the average amount invested is much higher.
Fund managers globally have no problems investing 5 to 10 times as much in unlisted infrastructure like solar farms, toll roads, and green and renewable infrastructure, as their Kiwi equivalents.
Without infrastructure investment opportunities for KiwiSaver managers, more and more of our savings will be invested overseas. Only about 35% of KiwiSaver savings are now invested in New Zealand, because there simply isn’t enough to invest in. Big ticket infrastructure is what will turn that round. It has in Australia, where about 50% of pension assets are invested locally.
In my view, this is a welcome addition to the debate. I would suggest selling all of the 51% stakes in the power companies to destroy the enormous conflict of interest currently blocking real competition reform in the electricity industry.
I’m totally against selling Kiwibank, we need to be building that up for our economic sovereignty not selling it and I’m not convinced selling our shares in the power companies is a smart move either.
The problem is extra revenue and allowing these large funds to invest domestically, which I’m open to and I think what Sam has proposed should be studied because the mining expansion under this Government won’t create the promised revenue to reinvest into our infrastructure.
TDB was pointing this out in May, that Shane Jones would desecrate our environment for a pathetic 2%…
Shane Jones is poisoning the earth, trashing due process and only looking after the interests of his donor mates for a fucking 2% pittance!
…it is more important for NZF to own the libs and start culture war bullshit than have an adult discussion about mining!
The Royalty issue is a farce and a total economic joke that has never added up!!!
Fitch Ratings analysts warned NZ last month that the next 10 years of economic growth was dangerously stunted.
This matters because it is ratings analysts like Fitch who warn the market if we are good for all the money we borrowed.
They base that on future projections of our economic cycle and their analysis is terrible.
Fitch have made clear to us that Dairy, Tourism and exports to China have waned and can not grow beyond the manner in which we have already grown them…
He told BusinessDesk that Fitch sees the drivers of growth in the decade before Covid as having “run their course”.
In other words dairy, tourism and China export growth – while continuing to be large and core components of New Zealand’s economy – can’t possibly continue on the same dramatic growth curve they did before.
…John Key’s, ‘All our cows in one Beijing paddock’ has not only been geopolitically dangerous, it’s also run its economic course.
So what now?
This Government seem to think mining, gas and oil exploration alongside weakening regulations for donors will unlock NZs next economic cycle but it can’t and won’t…
The idea that we’ll mine our way to prosperity is one of those. It may well be an industry worth promoting, but betting the house (or more specifically our clean green reputation) on it being transformational is just silly.
We mined the big accessible gold deposits in 19th and 20th centuries. The odds of finding valuable rare metals like lithium are very low. It would be great if we did but if that’s this Government’s strategy, they might as well buy Lotto tickets.
Striking oil is also a long shot and the time frames involved to find it and get it out of the ground take us well past 2030 – the date by which the International Energy Agency has forecast the world will face a “staggering” glut.
If Kiwis ever wanted to be a rich oil-producing nation (and a large percentage don’t) we’ve missed that boat.
…if we are to play to our advantages, we need to play to the one that will provide the most impact to all of us.
Cheap, 100% renewable electricity!
This needs to be our focus and if Sam Stubbs ideas can generate this outcome they are worth looking at…
When we look at what gave New Zealand a competitive advantage in the 20th, cheap electric power is near the top of the list.
The dairy industry was built on the ability to turn liquid milk into powder more efficiently than our competitors.
The next wave of global economic growth will involve electricity and lots of it.
Artificial intelligence is incredibly power-hungry. One Chat-GPT search uses 10 times the power of a Google search.
Throw electrical vehicles on top of that and it becomes obvious – only countries with access to a cheap, stable power supply will have a competitive advantage in the years ahead.
There has been plenty of talk about the potential for New Zealand to be a world leader in data centres. To do that we’ll need more and ideally cheaper power.
Collectively, data centres will consume about 200 megawatts (MW) of electricity at peak usage – roughly the amount required to power some 200,000 homes. The average demand in Auckland is about 1700MW. That has been forecast to rise to 500MW of consumption over the next five years based on current plans.
…solar panels on every public building.
Local wind turbine generation.
Windfarms.
Electric public transport.
More Hydro.
Tidal generation investment.
This needs to be our way forward. Not more Dairy and more cheap basic exports to China and Tourism.
Cheap sustainable electricity is our competitive edge, we need to urgently focus on that now!
Shane is in the pocket of Mining, he is gaining Fast Track Power for his donors, not for NZ.
We need better ideas than the ones currently being pushed.
Fair points, but one of the things I like about my KiwiSaver is that a large proportion of the funds are invested offshore, thus spreading the ‘nation risk’.
How we took electricity for granted! At your finger tips, just a flick of the switch. Now in the combined face of new electricity-dependent technologies, massive infrastructure needs and the ever increasing demand for (renewable) energy, electricity has never been so crucial. I heard it once joked that we need not fear AI, just pull out the plug. A bit flippant but it serves to highlight the role electricity will play in the future and the vulnerabilities such dependency presents.
But yes MB, huge opportunities for energy independence and potentially economic prosperity. Far better than being dependent on imported fossil fuels, a potential issue in the long term.
What happened to ‘The Knowledge Wave’?
Did we just give up on it?
+100%. Not many people know that Australia has 10x as much arable (cropping etc, first class) land per capita as New Zealand, and even
Argentina, which bet the farm on rurally-sourced prosperity and lost, nearly eight times as much. All talk of a “land of milk and honey” in NZ is a dangerous delusion, admittedly credible enough when 2 million Kiwis lived on the sheep’s back in the 1950s but definitely not today. The one exception to that observation is our incredible abundance of potential clean energy per capita. That we should be developing wind and solar as fast as possible and converting our hydro to a backup is a no-brainer and it is incredibly unfortunate that nobody in mainstream politics, the Greens included, is leading this charge: in part because the Greens apparently remain committed to the Nambassa-era ideal of, you know, “degrowth”. I conclude with this video showing that we can have our cake and eat it too, if we are as smart as the Swedes: https://www.youtube.com/watch?v=vWDMI8PDIuY.
If NZ becomes a member of AUKUS it will probably be gradually sucked into a militarization modus similar to the one presently ongoing in the EU/NATO member states. Step by step economic interests are streamlined within the overall context and the needs of US-MIC expansion in the Pacific region.
“In an inflationary world, a toll bridge (like company) would be a great thing to own because you’ve laid out the capital costs. You built it in old dollars and you don’t have to keep replacing it.”
Warren Buffett
That’s why companies and fund managers want infrastructure monopolies (dams, rail lines, roads) and that’s why the people shouldn’t sell them or give them away. They are a good investment and an unprofitable sale long term.
If the government needs new infrastructure it can fund it at a lower cost than private companies.
Isn’t the point of sovereign wealth funds (Cullen and kiwisavers) to extract profit from overseas economies and bring it back here?
How about electrification of the main railway line? Oh, no, even that little there was is no more. We are laughing stock of the railway world.
But rest assured, someone will come up with battery powered cargo train for “unique NZ conditions”, prepare a fancy video presentation and milk a fortune out of gullible and/or greedy lot. Media will celebrate “Kiwi ingenuity”. Such project might even reach a proof of concept stage. PoC prototype will not have any space left for cargo, it will carry only batteries. It will also be too heavy for the 5 Billion dollar battery electric Cook Strait ferry.
I could stub my toe on this one. If we give up Kiwibank holdings and put them into a good national investment that is resource based, the next thing the gummint or some grifter will manage to sell the resource offshore in some way or another.
These people at the top are taught how to squeeze money out of anything. They had poor people selling their blood back in 20th century and some of it tainted with whatever disease was going round then. The appropriate folk tale is the one of Rumplestilteskin who aided the poor person at a cost, and the cost was later giving up your most loved thing. They were not simple in the past, they didn’t have as many alternative stories in film and tv etc separating them from reality.