Treasury pushes for asset sales as it rings alarm bells over state of Government’s finances
Treasury Secretary Iain Rennie says New Zealand isn't going to grow its way out of its fiscal deficit. Photo / Mark Mitchell
Treasury is nudging the Government to sell state assets that are underperforming or are no longer fit for purpose.
It is continuing to sound alarm bells over the Crown’s finances being on an “unsustainable” path forward.
The Crown isn’t bringing in enough revenue to keep the lights on. Debt is not only being used for capital expenditure, but to cover operating costs.
This is occurring as the books haven’t yet recovered from the period around the Covid pandemic and Cyclone Gabrielle, and costs associated with an ageing population are set to soar.
Treasury has repeatedly made the point that future governments will need to hike taxes and/or cut spending to prevent the Crown’s books from spiralling further into the red.
However, in its just-released three-yearly Investment Statement, Treasury made the case for how better management of the state’s assets and liabilities could go a long way to supporting its finances.
“We aren’t going to grow our way out of the fiscal deficit. There will be a need for ongoing changes across the balance sheet,” Treasury Secretary Iain Rennie said at an event to launch the report.
The Government owns 7% of New Zealand’s assets. Worth $571 billion, that’s equivalent to $107,000 per person.
On the other side of the ledger, it has $380b of liabilities – the bulk of which is debt. This is equivalent to $71,000 per person.
The Crown’s assets include roads, hospitals, national parks, classrooms, military equipment, financial assets held by the likes of the Super Fund, ACC and Reserve Bank, and shares in the likes of Air New Zealand and the gentailers, and entities such as KiwiRail, Kiwibank and TVNZ.
Treasury said the Government could improve the way it decided which assets to buy, how these assets were managed and how the risks associated with these assets were managed.
“Some Government assets are underperforming, poorly maintained and lack quality information. Regular reassessment of the purpose, performance and governance of the Crown’s assets would help increase the value they provide for the public or provide opportunities to reallocate capital to higher value uses,” Treasury said.
It has been getting the Government to sharpen its thinking on why it owns individual commercial entities, with the aim of improving their performance.
Treasury declined the Herald’s request to provide a detailed update on how this was going, saying the matter was under “active consideration”.
A document released under the Official Information Act in February 2024 said Treasury wanted the Government to prioritise writing “purpose statements” for low-performing entities or where the point of Crown ownership was “not at all clear”.
The following entities were on the list: Kiwibank, NZ Post, KiwiRail, NZ Railways, TVNZ, Transpower, Genesis Energy, Mercury NZ and Meridian Energy, Christchurch, Dunedin and Hawke’s Bay airports, Airways, MetService, Crown Infrastructure Partners, Quotable Value, Kordia, ECNZ, AsureQuality, Landcorp Farming and Public Trust.
The Government has since announced it would dilute its ownership of Kiwibank by welcoming up to $500 million of private capital into the state-owned bank to support its growth.
National is open to listing some shares in Kiwibank on the stock exchange after the election, meanwhile Act wants the Government to sell it entirely.
New Zealand First, Labour, the Green Party and Te Pāti Māori typically oppose the sale of state assets.
However, Kiwi Wealth was sold to Fisher Funds under former Finance Minister Grant Robertson’s watch with little public fanfare.
Treasury recognised there were costs associated with owning assets. Indeed, they need to be maintained.
It suggested a “formal capital recycling programme may be useful where Government reallocates or reinvests capital from existing assets or infrastructure projects into new opportunities or projects to meet policy objectives”.
Singapore’s Temasek investment company is an example of a “formal capital recycling programme”.
While Labour compared its proposed “Future Fund” to Temasek, the fund would achieve the complete opposite by preventing, rather than supporting, asset recycling.
Treasury said the time was right to discuss what the Crown owns and owes because the value of its balance sheet has more than doubled over the past decade.
Land values have risen a lot, and the Government has invested large sums in transport, social housing and rail infrastructure. On the other side of the ledger, debt has shot up.
The Reserve Bank’s Covid-era money printing programmes have had a material impact on the Government’s balance sheet.
Treasury said the Government having a larger balance sheet only increased the need for it to be well managed.
Furthermore, it expected the Crown’s net worth (assets minus liabilities) to decline. The Government’s expenses are expected to rise more quickly than its revenue.
“Changing policies today would benefit Kiwis in the longer run by helping maintain New Zealand’s credit rating, and offering greater choice to tackle shocks to Kiwis’ lives and the economy,” Treasury said.
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
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