By Bernard Hickey
Prime Minister John Key has announced cabinet decided today to go ahead with the stock market float of Genesis Energy "within the next month or so," and that it would be the last float of a state asset, either in this term or the next.
Finance Minister Bill English would announce the details in a speech in Auckland on Wednesday, Key said at his weekly post-cabinet news conference in Wellington.
He also said the Genesis float would be the last of the Mixed Ownership Model and that the current National Government and the next one would not be floating any more state owned assets.
"It will be the last share offer in the Government's programme, which has so far raised around NZ$4 billion, which is money we're investing in new public assets without having to borrow more," Key said.
"Genesis will be the last state owned enterprise to be floated by the National-led Government. Just as we did before the last election, we're making our position on share sales clear clear to New Zealanders before we go to the polls later this year. This Government has been absolutely open and transparent about making committments to New Zealanders and then sticking to them," Key said.
"The Government won't be selling any more shares in SOEs or mixed ownership companies either this term or after the election. In other words, this will be the end of the share offer programme," he said.
The Goverment had achieved what it wanted with the sales of 49% stakes in Mighty River Power and Meridian Energy and the sell-down of its stake in Air New Zealand to 51%, and "we're now returning to a business as usual approach when it comes to SOEs.
These companies would still be able to buy and sell assets themselves and enter into joint ventures, as they had in the past, he said.
'Not much left to sell'
"The truth is there aren't a lot of other assets that would fit in the category that was appealing to take to the market or were of a size that would warrant being in the programme," Key said.
Electricity network owner Transpower was big enough and attractive enough, but was a monopoly and therefore inappropriate to sell.
"We're trying to be clear. We had a programme. We were very clear about that before the 2011 election. We've honoured that, but equally we want to make sure that people are clear and arn't mis-informed by our political opponents that somehow there's going to be further asset sales or mixed ownership companies -- that's not going to be the case," he said.
Key rejected a suggestion that Kiwibank could be sold. He said it had not paid a dividend since its creation and had absorbed NZ$850 million of capital.
"I just don't think it would warrant a whole new programme for one particular thing. The government might be able to put more resources in to Kiwibank to allow it to grow. That's always a topic of conversation. I just don't think we would need to take it to the market," he said.
Key said Treasury advice had been that any delay was unlikely to make much of a difference to the price the Government received.
Minimum wage hike
Elsewhere Key announced a 3.6% increase in the minimum wage to NZ$14.25 per hour from NZ$13.75 from April 1, which made New Zealand's minimum wage the highest in the OECD as a percentage of average wages at around 50%. The starting out and trading minimum wage woul rise to NZ$11.40 from NZ$11 to keep it at around 80% of the adult minimum wage.
The increase would directly affect around 109,000 workers out of a total workforce of around two million, with 60% of these being aged 16-24.
Key said the decision struck the right balance between increasing wages for those on the lowest incomes and hurting employment growth.
He rejected a description of the wage increase as "stingy," saying the 3.6% increase compared with price inflation of around 1.6% and wage increases of around 2.9%.
National had lifted the minimum wage every year it had been in power since 2008, increasing it from NZ$12 per hour to NZ$14.25 per hour.
New Zealand's minimum wage was around 50% of the average wage, while the comparable percentage was 44% in Australia, 40% in Canada, 39% in Britain and 27% in the United States.
"We're trying to balance the capacity of businesses to pay a bit more and for people to earn enough to live, but on the other side of the coin, against the impact on jobs," he said.
He added that many of those on the minimum wage would also be receiving government assistance such as Working For Families or accommodation supplements.
Key said the impact on jobs numbers from the move to NZ$14.25/hour was "relatively negligible," whereas a move to NZ$14.50 an hour would have cost 2,300 jobs, according to the official advice.
He said around 54,000 were currently on the NZ$13.75 minimum wage, but a further 55,000 were on wages in between NZ$13.75 and NZ$14.25 and would therefore be covered by the increase.
"I think it's always important for employers to take on board the need of their employees and to share the spoils if the economy's doing better. (If) they can afford to pay a bit more then we would actively encourage them to do that. We want New Zealanders to move up the payscale, but it's really important we allow employers to do that by building greater efficiency and productivity in the economy."
Interest rate risk?
Key said he didn't believe the increase in the minimum wage would put enormous pressure on the Reserve Bank.
"I think it will fit in broadly where most economists and the Reserve Bank would expect wages to be going," he said.
Political reaction
Labour's Associate Spokeswoman for Labour Darien Fenton said the Government had missed an opportunity to pass on a bigger increase.
“Today was the perfect time for John Key to send a message that in his ‘rock star’ economy, the low paid can expect a fair share. He didn’t. Instead he’s singing from the same old National songbook and some 200,000 Kiwi workers will still be taking home less than $15 an hour," Fenton said.
Labour would lift the minimum wage to NZ$15 an hour in its first 100 days in Government, she said.
(Updated with more details, quotes, reaction and minimum wage announcement)
2 Comments
Sell, sell, sell ...
Got to pay for all those Labour policies still in action: Working for Families, Student Loans Interest Free for 250 months, Kiwisaver gifts, IRDs new IT systems, Auckland Infrastructure, Iwi settlements, ... oh whoops this is National the party that supports small business, enterprise & farmers (or does it only support the large global corporates now, while keeping the peasants appeased?)
Have posted this elsewhere, but seems relevant here also.
Have amused myself by correlating the current account deficit to GDP effects of exchange rate movements, and found that there was an 89% correlation between 2000 and 2008, having lagged the effects on the current account by a year. Similarly from 2010 to 2013, there was a 95% correlation. 2009 after the GFC, was an outlier, in being consistent with the effect, but extreme in reducing the current account deficit.
Given that over time you would expect a current account deficit to reduce an exchange rate, you can only conclude that the exchange rate increase is causing the current account deficit. Or more particularly, the capital flows encouraged in, cause the exchange rate increase, which then causes the deficit. To put it in scale, the deficit is currently roughly $10 billion, or $200 million a week, or $30 million per day, that our government's passive approach to the exchange rate and capital flows is encouraging.
Given Key and English will presumably make another free gift of 30% of the float of Genesis offshore (because if you accept the causation between capital flows, exchange rates and current account, then a totally free gift it is), then just possibly their announcement yesterday has already had an effect on the exchange rate. The correlation suggests a 1% change in the exchange rate has an approximately 0.1% effect on the current account; or $200 million. Just possibly Key and English's expectations of foreign money in for Genesis.
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