Even people who oppose the sale of state-owned assets on political or economic grounds will admit to considering investing themselves.
Adam Speakman, a 24-year-old software developer, is one such potential investor. Speakman thinks the sales are a bad idea for the country overall, but says since he is going to invest his money somewhere anyway, he will put his doubts aside and invest in assets.
“If you have money it looks like it should be a good investment.”
Speakman intends to invest around $4000 to $5000 in Mighty River Power and will look into other companies after his first investment.
The big question, however, is how many New Zealanders have the money to invest in these assets. Are they the “mum and dad” investors, or is there another group?
Bernard Hickey, business commentator and editor of finance website interest.co.nz, opposes the Government’s partial privatisation policy from an economic perspective.
But he says it may surprise people that there is a lot of money tied up in term deposits in New Zealand ($110 billion) which means mum and dad investors can theoretically afford to invest.
Purchasing shares from asset sales would be an alternative to putting your money in a term deposit or other investment, he says.
The bonus scheme offered by the Government for investors could encourage people to invest, but it depends on the details.
Hickey says bonus schemes have worked in markets such as the sale of Queensland Rail and other assets in Australia.
He says people are still hesitant about investing in the stock market after the 1987 crash and some believe the New Zealand market has never recovered.
“New Zealanders tend to be conservative in their investing habits. They prefer safe investments with a regular return such as bonds and term deposits.”
Hickey says the Government believes these assets – the power companies in particular – will have strong positions in the market with high-paying dividends, which will attract investors.
He says investment funds such as KiwiSaver and NZ Superannuation are “awash in cash” that needs to be put somewhere, and these lower-risk investments are a good place to start.
“Investing in assets can be beneficial,” says Hickey. If the value of the shares increases, then a resale would result in a gain from this investment.
Yearly dividends received by investors are also a benefit, along with the capital gain when the price of shares rises.
The risk is the price of the shares may fall or the company may not pay dividends, says Hickey.
The Government has argued that by selling shares in these assets they can use the money to reduce public debt.
But Unite union campaign organiser Joe Carolan questions this logic. “This Government has given huge tax cuts to the rich, which means there is an artificial funding crisis created.”
Carolan says people commonly oppose asset sales because it is a “loss of power from the people and democracy toward corporations and private capital.”
“The wealthy elite have never had it so good – that’s why there is so much anger behind these sales.”
Carolan does not believe mum and dad investors are the ones who will invest. “I am a dad and I don’t have a spare $1000 in the bank to invest in assets.”
He says the public already pays for these assets through taxes and bills. Those who invest in assets are enriching themselves off the back of public assets, which have been built up by all of us, he says.
“Once you privatise it ceases to become a public service. It becomes a commodity, only there to make a profit. Prices will start to rocket.”
Hickey points out the Government’s other argument for privatisation: by listing companies on the stock market activity will be boosted which will encourage more mum and dad investors to use it.
Hickey adds that opposition parties say there is no financial gain in selling these assets as the companies already pay good dividends.
“A Price Waterhouse Cooper survey said these assets returned 16 per cent on average in the last 10 years. The value rose and there were cash returns.”
Hickey says it would make financial sense for the Government to sell these assets if they were poor performers. But they are generating strong cash returns, so overall the taxpayer and Government would be worse off.
He says the public knew about National’s intention to sell assets during the election and still voted them in. “The public decided to go ahead.”
Carolan acknowledges this isn’t just about National.
“Labour sold our assets in the 80s. Even though they defend state-owned enterprises, [Labour] still makes these SOEs work for a profit system, not for the public good.”