Bernard Hickey lays into National‘s plan for a partial sale of some power generation SOEs and Air New Zealand. Actually, he lays into John Key – which makes me wonder if he hasn’t been hanging around too many lefties and contracted Key Derangement Syndrome. He says:
“In total, the four SOEs potentially up for sale generated total dividends last financial year of NZ$732.5 million and shareholder (government) equity stood at NZ$9.642 billion. This implies a combined (and very raw) dividend yield of 7.6% last year.”
While this is true, I think Hickey is confusing shareholder equity and the value of the company in a partial sell-down. For instance Meridian has about $5 billion of government equity but has a book value of $8.2 billion. Should that be a realistic value (and that is by no means certain), then that is the real amount upon which the government should be calculating dividend, because that is the amount of money they would receive in a total sale.
The total (optimistic) book value of all four assets is $16 billion; producing a real yield of a much more anaemic 4.6% – well under the current 5.5% at which the government is currently borrowing. It appears, then, that National’s plan has more merit than Hickey would have us believe.
The rest of Hickey’s article appears quite sound and worth a read. Amusingly, the Idiot at No Right Turn has linked to this article in a post berating National’s proposed asset sales. He appears not to have noticed that virtually everything else in Hickey’s article is complete anathema to Socialists. Except, perhaps, raising taxes.
Hickey mentions removing the elephant(s) in the room – Working For Families, Student Loans, Health and Welfare. I estimate that you could free up somewhere near $5 billion by eliminating Working For Families and Free Student Loans. More than enough to make Mr. Goff’s tax free zone $30,000, instead of a paltry $5,000, and still have change for some extra hip replacements. It would be worth it just to hear the apoplexy of Labour MPs.