The Labour and Greens policy in nothing short of economic vandalism. Business is reacting, and it isn’t good. With policies like these there is nothing stopping Labour and the Greens coming after you if they think you are making what they think are “super-profits”.
What is stopping Labour and the Greens from now moving to nationalise Fonterra because milk and cheese is too highly priced? What about nationalising Progressive and Foodstuffs to create a national food buying agency because fruit and vegetables are too highly priced. (They had an election policy that complained about pricing on fruit and veg), and what about banking, petrol stations? Is Telecom set to be re-nationalised because internet band-width is too expensive?
Once you go down this path there is literally nothing that you can’t just decided is making too much money and so should be brought under state control.
Meanwhile mum and dad investors are already seeing value destroyed in their investments:
The share price of the country’s largest listed electricity generator-retailer, Contact Energy, has taken a 3 percent knock after the joint announcement by the Labour and Green parties of a radical rewind from electricity reforms of the last 25 years.
If sustained, that indicates the Labour-Green policy is the latest of a string of political decisions and commercial circumstances that can be expected to drive down the issue price of shares in the partial privatisation of Mighty River Power.
“The risk premium for investment in New Zealand would go through the roof,” says one investment banker, who declined to be named.
Business NZ isn’t happy:
Lobbyist Business New Zealand describes the proposals as “economic vandalism”, while Economic Development Minister Steven Joyce told Parliament during question time that it amounted to a “back to the 70s” policy which would lead to higher prices, power blackouts and higher costs to taxpayers.
“A state-controlled sector as envisaged by Labour would drive out private investment,” BusinessNZ head Phil O’Reilly says. “Why would the private sector invest in generators when the state can determine the prices they can charge, while subsidising state-owned competitors?
“The private sector power companies would have to seriously consider their future in the market. Those who have invested heavily would basically find their profits confiscated.”
I don’t think Labour and the Greens have thought this through.