In this issue of Focus on Finance, I talk about the mixed ownership model the Government is proposing to use in the sale of four energy companies, developments surrounding the cost of the earthquake recovery, the global outlook for finances, releasing Government data to the public - and a few important events coming up this month.
MIXED OWNERSHIP MODEL - KIWIS AT FRONT OF QUEUE
Click here to watch my latest video briefing on YouTube
Last week I announced some more details of the Government's policy to extend the mixed ownership model to the four state-owned energy companies and reduce the Government's shareholding in Air New Zealand - while retaining majority stakes. Based on the large and growing pool of New Zealand investment funds, we expect New Zealanders to own at least 85 to 90 per cent of the companies in the mixed ownership programme.
This is a win-win. New Zealand savers get to invest in good Kiwi companies and the Government frees up $5 to $7 billion to buy new assets like schools, hospitals and ultra-fast broadband, without having to borrow from overseas lenders and increase our debt. In the end we'd rather pay dividends to New Zealanders than interest on rising debt to foreigners. For more information read my media statement.
GOVT SUPPORTING CANTERBURY AS EQC LIABILITY RISES
Recently the cost of the Government's share of the Canterbury rebuild became a little clearer. The Earthquake Commission (EQC) increased its estimated Canterbury earthquakes liability by $4 billion to $7.1 billion. The new estimate followed an actuarial valuation based on actual field assessments of damage. This is a big increase in cost for EQC, but the Government is committed to rebuilding Christchurch and supporting Canterbury people by paying its share.
The increase is driven by estimated damage from the 22 February earthquake being $2.17 billion higher than previously expected and the inclusion of the June earthquakes and other aftershocks, which will cost EQC another $1.4 billion. A High Court decision last week on when EQC's cover renews is likely to increase EQC's liability even further. However, none of this will affect homeowners' claims, which EQC will continue to pay in full. And it will not delay rebuilding in Christchurch. For more info read my media statement.
The last few weeks have seen financial market turbulence in Europe and the United States, where they're suffering from high debt and low growth. I believe we should all get used to these regular outbursts of uncertainty - this is how the world will be, on and off, over the next decade as those countries' governments struggle to reduce their high debt.
This uncertainty presents risks for New Zealand, but we are relatively better placed than many other countries to manage in this new environment. We're getting on top of debt by keeping it below 30 per cent of GDP and we will be back in surplus by 2014/15. So, over the next few years, we have an opportunity to build on solid foundations for faster growth and more jobs.
For more information read my speech to the Institute of Financial Professionals New Zealand.
GOVERNMENT TO OPEN UP MORE DATA
Government agencies hold vast amounts of data - some of it with high potential value to the public and entrepreneurial businesses, who can find another use for it. We're encouraging state sector agencies to release more of their data online. To ensure that happens I've clearly set out my expectation that agencies should release all non-personal and unclassified data with high potential value for re-use.
As well as providing opportunities for businesses to create new services, releasing data increases government accountability and improves policy development by encouraging greater external analysis and community engagement. For more information read my media statement.
THINGS TO LOOK OUT FOR
- 15 September - The Reserve Bank will issue its latest Monetary Policy Statement and Official Cash Rate review.
- 21 September - Statistics New Zealand will release Balance of Payments data for the June quarter.
- 22 September - Statistics New Zealand will release Gross Domestic Product data for the June quarter.
Hon Bill English MP
Minister of Finance