Sunday 9 September, 2012
Jessica Mutch interviews Bill English
Selling three power companies in a single year will be “a test”, Finance Minister admits, but he’s still confident of
demand from ‘Mum and Dad investors’.
English suggests “uncertainty” around the $5-7 billion sale price of state assets: “I think now people can see that
there are commercial risks that go with these assets, that we’re in a world where there’s a bit less certainty than
there was four or five years ago”.
Asset sales referendum “won’t make any difference to the government… we will be continuing with the programme”.
English picks opposition parties may struggle to get referendum numbers: “I think our political opponents are afraid
they might have trouble getting the 300,000 signatures, particularly when they are now approaching schoolchildren to try
and get those signatures.”
Despite John Key’s suggestion the 2014/15 surplus target could be revised, Bill English says it’s “on track” and 80-90%
New Zealand economy “on track” to produce 20-30,000 jobs in a year, as English predicted in July on Q+A.
Asset sales delays won’t delay spending commitments from the Future Investment Fund.
Credit ratings agencies not concerned about delay to asset sales programme “because of our commitment of seeing the
No decision on which order to sell Genesis or Meridian and no guarantee that Solid Energy will be sold at all.
Decision to delay asset says was based on concerns about Maori rights, “there wasn’t really a financial consideration
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Q + A
JESSICA MUTCH INTERVIEWS BILL ENGLISH
GREG Asset sales aren’t going ahead this year. The Government has delayed the partial sale of Mighty River Power on the back
of the Waitangi Tribunal request to negotiate with iwi. What impact will that delay have? Bill English has been in
Russia talking with other finance ministers about the global economy. On his way home, he stopped in to New York to meet
with ratings agencies Moody’s, and Standard & Poor’s. Now it’s back to domestic politics. Bill English is live with Jessica Mutch.
JESSICA Finance Minister Bill English, thank you very much for joining us this morning. I want to start big picture – are we
still on target to reach surplus by 2014-15?
BILL ENGLISH – Finance Minister
Yes, we are. We think it’s desirable to get to surplus by then to stop government debt rising, and we’ve worked quite
hard on getting government expenditure under control, delivering better public services for less money. The revenue is a
bit less certain than the expenditure. You know, how the world economy goes is going to matter, the speed of recovery in
Christchurch, the rate of inflation, so there’s always uncertainties there, but up to now we’re on track.
JESSICA John Key over the weekend didn’t rule out revising that target, so are you saying we’re 100% on track?
BILL Yeah, look, we’re on track. He was referring to the possibility, which feels quite real when you’re offshore, that, for
instance, Europe may not save— may not be able to resolve its problems, that China might slow down faster than anyone’s
expecting. Now, those are, you know, small probabilities that they could happen. If that was the case, then it’s
possible to adjust the surplus, for instance, you know, get there a year later. But within the kind of 80% or 90%
probability, that is moderate growth in New Zealand, we’re sticking to that 2014-15 surplus. We believe that’s
achievable and good for the economy.
JESSICA What about assets sales, though? We’ve heard this week that there will be a delay in Mighty River Power. What impact
will that have on us reaching our target?
BILL It won’t have any significant impact as long as we get the sales process underway next year.
JESSICA We heard that the delay in the sales process will cost between $5 million and $10 million. Can you be any more precise
BILL Look, it’s— No, it can’t be much more precise than that. There’s some delay. There’s some cost in just the
administrative processes around it. The main point here for the asset sales, though, is that we’ve got a future
investment fund. That is designed to be able to fund things such as our contribution to the rebuild of Christchurch, the
new schools and hospitals that we’re going to need around the country. So we’re on track even with the delay to get the
proceeds from the partial sale of shares to go into that fund to pay for other valuable infrastructure.
JESSICA So you’re saying that there will be a delay in the progress we’ll see with Christchurch and that will hit us in the
BILL No, there shouldn’t be a delay. We have scheduled this – the first sale – for the first quarter of next year. As those
proceeds come in, they’ll be available for further investment, and that’s roughly on schedule for what we had thought 12
JESSICA Did you have any advice on how much it would cost if you forged ahead with the sale of Mighty River Power and didn’t
have that delay?
BILL Well, it wasn’t so much how much it would cost. It was whether— The advice was focused on whether we could meet all the
legal requirements of, say, the High Court if we’re taken to court.
JESSICA But you must have had some kind of approximate cost around that. What was the advice there?
BILL Well, no, there wasn’t really a cost. The decision the Government made to delay is focused on a very— quite a narrow
point. The Waitangi Tribunal made quite a detailed proposition about how to cater to the interests of Maori
shareholders. Once these companies are floated, we are going out to consult on that to ensure that we meet all the
requirements for consultation. So there wasn’t really a financial consideration involved.
JESSICA Back to the finances of it, though. $5 billion to $7 billion – are we still on track to reach that target?
BILL Well, it’s a pretty wide range – $5 billion to $7 billion – and some of the issues that have come up since this process
started indicate why there would be uncertainty about exactly what you would get.
JESSICA So are we aiming more for the five billion now, then?
BILL Well, no, look, we haven’t changed the estimate. It’s still five to seven billion. I mean, that is a range of, you know,
40% variation. And I think now people can see that there are commercial risks that go with these assets, that we’re in a
world where there’s a bit less certainty than there was four or five years ago.
JESSICA You’ve been travelling overseas. You’ve been in New York talking to ratings agencies. Has there been any concern around
this delay of asset sales? Will that hurt us in any way?
BILL No, there hasn’t been, although the rating agencies have kept making the same point they’ve made for a number of years
about debt. Because New Zealand has very high household debt – among the highest in the developed world – they want to
see government with low levels of debt and—
JESSICA And wasn’t asset sales the answer to this?
BILL Well, it’s part of the answer. It will keep us below a threshold of 30% of GDP, which is highly desirable and it’s
necessary to offset the fact that we’ve got such high private-sector debt.
JESSICA Did you raise the delay in asset sales with the ratings agencies when you met?
BILL Yes, it was discussed, but they didn’t see it as really significant.
JESSICA Why not?
BILL Oh, well, because of our commitment of seeing the process through and the Government’s commitment to keeping debt below
30% of GDP and getting to surplus. So that’s a package of, you know, quite tight fiscal discipline. The asset sales are
part of it, but only part of it, and the rating agencies are pretty supportive of our direction.
JESSICA We’ve been given an indication this week that Genesis and Meridian will be sold off at the end of next year and the
beginning of 2014. Doesn’t that effectively mean that we’re going to have three quite big similar assets on the block
within the space of about a year, and what are the implications of that?
BILL Well, we always said it was a three- to four-year programme, and the indications have been that the energy companies
would be at the front of the queue, so there was always going to be a number of significant floats over, you know, one
to two years.
JESSICA Aren’t you worried there will be a glut, though?
BILL Well, that’s, you know— that is— You know, we’ll be tested as we go along. We believe that there will be quite strong
demand from New Zealanders for these shares. If you look, for instance, at bank deposits – bank deposits have been
growing by 8% to 10% a year now for about three years, so a lot of New Zealanders are putting their money in the bank.
And as time goes on, they’ll be looking for opportunities to put that money somewhere else where it might earn a bit
more. And that’s the kind of pool of demand that will be available.
JESSICA You sound like you are concerned about this issue, though. Are you worried?
BILL No, we’re not concerned about it. Look, nothing has changed about the programme.
JESSICA Except for the timeframe being shortened.
BILL Well, the timeframe’s been delayed by, you know, three months. But to get five to seven billion was always going to—
always going to be about getting the demand of a wide range of New Zealanders who want to participate in share ownership
in investments that they think are going to be effective for them.
JESSICA What happens, though, when we get to that third energy company within a space of about 12 months? Isn’t there going to
be investor fatigue, and do we have enough ‘Mum and Dad’ investors to buy up?
BILL Well, we’re confident that the demand will be there, and, you know, we’ll test that as we go to the market. As we’ve
said, we’ll always take into account market conditions in making a decision about whether to go ahead with the float.
JESSICA What will be first – Meridian or Genesis?
BILL Well, that decision hasn’t been made. We know the very first one’s going to be Mighty River Power, and then there will
be a judgement made before too long about what follows on behind it.
JESSICA What about Solid and Air New Zealand?
BILL Well, I think it’s become, you know, apparent with Solid Energy they’re not in any— they’re not in a state where you
could put them on the stock market. So they’ve got some significant issues now to deal with, particularly because the
world coal price has kept on dropping. In the case of Air New Zealand, I mean, that’s a well-respected, well-run
company. It would be relatively easy to sell down more of it, and, you know, we’ll consider that as we’ve dealt with
these energy company floats.
JESSICA You gave yourself a five-year window. Do you think you’ll need that? Given you’re still in government, do you think
you’ll need that to sell Solid?
BILL Look, I wouldn’t want to prejudge it. What we know is that right now it’s not in the shape where you could put it on the
market. There’s a lot of issues that need to be sorted out there. The company is getting on with that job, and they’ve
got time before we would need to make a decision about that.
JESSICA You say that the public are coming around to the idea of asset sales. Why not just wait for the referendum to get that
mandate to prove to the public that you have support?
BILL Look, the referendum is a political stunt by our political opponents, including using paid parliamentary—
JESSICA If they can get 310,000 signatures, though, is it really a stunt?
BILL Well, look, it’s politically motivated, we know that. The mandate the Government has comes from the fact that the
beginning of last year, we announced the sales programme, it was a central feature of the election campaign, we became
elected, and now we’ve got on with doing what we said we would do. So I don’t think there’s any question—
JESSICA So if you say you have the mandate— If you say you have the mandate, why not just wait for a referendum to prove it to
BILL Well, we have a mandate, and we’re getting on with doing it.
JESSICA What are you so afraid of with the referendum?
BILL Well, we’re not afraid of anything. I think our political opponents are afraid they might have trouble getting the
300,000 signatures, particularly when they are now approaching schoolchildren to try and get those signatures, which, of
course, won’t be valid. We’re just getting on with the job. We campaigned we’d be absolutely transparent about this, got
elected. We were elected to deal with the economy and the country as we find it, and we’re getting on according to our
best judgement to promote a growing economy, in this case to help New Zealanders rebuild their savings and to keep our
government debt levels down.
JESSICA The group that’s coordinating the referendum say they may very well have the numbers before the end of the year and
they’re very confident that they’ll have it before the sale of Mighty River Power. It seems like it may be an
inevitability. What do you make of that?
BILL Well, it won’t make any difference to the Government. We campaigned openly on the policy. We got elected. There’s larger
issues than the political desires of our opponents. You know, we’ve got to get an economy that’s growing, that’s
providing jobs, that’s providing opportunities for New Zealanders growing savings, which is very positive for New
Zealand. So we will be continuing with the programme.
JESSICA Just as a final question, I’d like to ask you about the jobs issue. When you were here interviewed by Q+A on the 1st of
July, you promised 20,000 to 30,000 jobs in a year. Where are you at with that?
BILL Well, look, it’s not so much politicians promising jobs. If we could just promise them, we’d promise 200,000 jobs. The
fact is it’s businesses who make the decisions to invest a bit more, hire a new person, pay a bit more because their
product can sell for more. And so those numbers are forecast for what this economy will create, and it’s been something
like 50,000 new jobs in the last couple of years. At any given time, such as this last week, you’re going to have
businesses that are under pressure for various reasons, and that’s very difficult for people who lose their jobs, for
instance in the coal mine on the West Coast or in the smelter down in Invercargill. You know, it’s challenging.
JESSICA That was what you promised, though, Minister, when you were on the show last week— sorry, on July 1st. Are you on track?
BILL Well, the economy is on track to produce that kind of number of new jobs, and that is because at the same time as the
sum businesses who were affected, for instance, by the downturn in the world coal price, there are other businesses who
are doing quite well and they are hiring people. And on balance, this economy is creating new jobs.
JESSICA And that’s a nice place to leave it. Thank you very much, Bill English, Finance Minister, for joining us this morning.
BILL Thank you, Jessica.