Will the asset sale shortfall need topping up?
Just how will the Government claw back the $2 billion of extra revenue it was hoping to pick up from its asset sell-down programme? The upcoming Budget is likely to give a good indication, as the Government remains resolute in its resolve to return to surplus in 2015.
But, let’s just recap on the environment ahead of last year’s Budget. At that time the Government had sold down its 49% share in Mighty River Power and the shares were trading at $2.57, ahead of their listing price of $2.50. Meridian was being readied for sale, and as the biggest of the three power companies, expectations were high.
That was about as good as it got. While the Government’s rhetoric was that power companies should be like those on the Monopoly Board – steady performers, predictable but unglamorous and ideal for small investors – Labour and Greens had other ideas.
Their concerted attack on the asset sales programme is estimated to have cost taxpayers $500 million from the asset sales programmes (MRP $200 million, Meridian $200 million and $100m for Genesis).
And then there was Solid Energy. It was known to have some problems, but certainly not to the scale of the $330 million loss announced for the 2013 year, and the subsequent abandonment of its proposed sale programme.
So what was looking like a couple of “good earners” to feed the Government’s Future Investment Fund, which is earmarked for major capital investment projects such as the redevelopment of Christchurch and Burwood hospitals, came up as a dry well.
So how will the Government claw this money back in the Budget? Maybe it doesn’t need to. In fact, much has already been done via the economic building blocks put in place over the last few years.
The New Zealand economy, both in comparison with our own historic levels and compared against the rest of the world, is humming. As a direct consequence, the tax take will reflect that growth. Actual figures are not matching Treasury predictions as yet but are significantly ahead of last year. However, in this type of scenario, whatever the scale, there is a lag. Households and companies invariably have a certain amount of ‘tidying up’ to do on their finances before the ripples of that improvement start to spread outward.
As we approach the election, the Government needs to make sure it does not get ambushed on any front in the way it was by the Greens and Labour over asset sales. If National rules alone, much of the doubt over energy policies will be removed and the true value of MRP, Meridian and Genesis will come through, proving a windfall for both investors and the Government and another step forward in the march to balance the books in 2015.