There could be a dozen companies that have approached the current government asking for financial support due to the economic downturn over the last three years, Finance Minister Bill English says.
Government only intervened in failing companies that it considered posed large-scale, systemic risks to New Zealand if they had been allowed to go under, English said.
Appearing on TV1's Q&A, English was answering questions on the government's allowance for Mediaworks to defer a NZ$43 million licence payment, along with a NZ$1.7 billion bailout for South Canterbury Finance under the retail deposit guarantee scheme last year, and last week's bailout for insurer AMI, which early estimates show could cost the government up to NZ$1 billion.
“The companies that have had any kind of support from the government are a fraction of those that have approached the government over the time that we’ve been in government," English told interviewer Guyon Espiner.
"From very early on we had a number of companies approaching us for support," English said.
"It could be a dozen, if I went back and added them all up," he said.
'Must be too big to fail'
Government followed "some pretty straightforward principals" for whether it would intervene in private companies.
"Which is, we should not get involved at all if there’s any kind of commercial solution that’s available, [and] that they’d have to represent some kind of large-scale, systemic risk to New Zealand for it be considered at all," English said.
"And you’ll remember the discussion about Fisher & Paykel early on, which was fairly high profile," he said.
Government had been driven by not over-reacting to the recession while helping the country through it, protecting the vulnerable and maintaining jobs where it was possible, English said.
'Not our style to be hands-off'
"I think the government’s been pretty pragmatic. If anything, people would have expected that we would be completely hands-off," English said.
"That’s not John Key’s style, that’s not the National Government’s style. Where there’s a strong case we’ve taken some action, but we do clearly want to get out of this situation. As the economy picks up [is] where this is going to happen,” he said.
'Nothing more to add'
Meanwhile, in response to further questions on the names of the companies that approached the government, and what type of companies they were, a spokesman for Bill English told interest.co.nz they had nothing to add to what the Finance Minister said on Q&A.
(Updates with response from English's office)
3 Comments
With AMI, they say they have ample to meet current commitments such as the earthquakes, but need a capital injection for future funding/stability. Why doesn't the government simply allow policy holders to go elsewhere for future needs and for AMI to fold once it has made itscurrent commitments?
Future should be "easy" to cover just get re-insurance...the problem is the cost of that...but this isnt unique to AMI going forward....
and yes I think the Govn could have stepped in, the problem is, if they do the Govn is way more certain to take losses up front.....and by up front I mean in an election year and with teh ratings agencies breathing down our necks and a probable downgrade which will put up mortgages...it looks bad and will feel bad. By going down this path the Govn hopes to avoid a bill at least until or hopefully comfortably after re-election....this is becasue the costs to AMI will take 2, 3 or more years to unfold....so if they stay viable as a business there is still income to collect off policyholders which is extra to pay for the ChCh bill.
The Govn cant stop the policyholders moving, right now there is supposdedly adequate re-insurance within AMI til June so there isnt an immediate reason to run...after all how do we know the competition is in that much better shape?
regards
The unanswered question: Are AMI premiums still under cutting the market...if so then the whole sector is a sham. All that is being protected are the fat salaries of the bosses who decided they could win market share by not paying for re insurance....what a bloody farce English.
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