The second-term jewel has lost some sparkle

Mighty River Power pre-registrations 440,000, anti-selldown petitioners 390,000. The selldown wins. Or does it?

Two years ago the political calculus was: do the selldowns well, make a lot people feel they have won something and show most of the rest the sky hasn’t fallen in and selldowns will cease to be a third-rail issue.

After the 2011 election ministers claimed a selldown “mandate”: (a) they had been re-elected (even if pro-sales beat anti-sales parties by only 61-60) and (b) they were re-elected despite anti-selldown parties having made the issue No 1 in the media (except briefly for John Key’s over-the-top reaction to the tea party recording).

Some political scientists agreed ministers had a mandate, that the election result trumped the persistent large majorities in opinion polls against the selldowns.

This was nice theory built on outdated reverence for representative democracy and parliamentary supremacy at a time when the means for, and interest in, wider citizen participation in decisions, or at least in the argument leading up to decisions, is growing.

The mandate National actually has, with its two on-life-support single-MP parties, is to govern. (The Maori party, in its public statements, is now more an opposition than a governing party.)

Included in the mandate to govern is a mandate to change things according to the tenor and direction indicated in the government’s first-term behaviour and in its campaign positioning, to the extent voters took that positioning on board.

That direction, tenor and campaign positioning included fiscal caution and a deregulatory, pro-private-enterprise programme. Selldowns are in both those streams.

So if the government had sold down Mighty River pronto and not made mistakes or muddled its message, the politics likely would have settled into acceptance of such selldowns.

But ministers took a while to sort the detail and enact the empowering legislation and mucked it up by not transferring from the State-owned Enterprises Act the section binding the Crown to abide by Treaty of Waitangi principles. They reversed on that but by then the fuss had revived the Maori Council which went to the Waitangi Tribunal and the courts.

Meantime, the persuasiveness of three arguments for selldowns eroded: that they would replace costly debt as a way of funding capital projects; that they would lift efficiency and so lower or contain electricity prices; and that they would help contain net debt below a magical point of the 30 per cent of GDP above which the rating agencies (those barefaced contributors to the global financial crisis) would throw the book at Bill English.

The tradeoff between dividends and debt interest is marginal at best and maybe negative over time in a low-interest environment. The efficiency gains are marginal, because there is competition and the electricity SOEs operate commercially anyway. The 30 per cent figure lost its magic as rich countries zoomed far above it and the finance markets declared New Zealand a desirable place to park shekels, thereby driving the dollar into the stratosphere.

Moreover, the selldowns don’t add capital to the enterprises. That can happen only if the government puts more in or lets the private shareholding climb above 50 per cent.

The only argument that still holds much water is that the selldowns deepen the sharemarket and might encourage some not-so-well-off households into shares and lift their savings ratio. That is a plus but at a paltry $2500 a person a limited plus. And households are shopping again and raising house mortgages, not on the pre-2008 level of wildly outspending earnings but also not demonstrating a strong new savings habit.

Meantime, the Supreme Court has etched on tablets of stone ministers’ pledges to negotiate water rights with iwi in good faith. As a result, if iwi think ministers don’t so negotiate, expect more court actions. That might affect share prices over time.

Next, note that Air New Zealand and Solid Energy are off the selldown list, at least this term, and Meridian can be got on it only with a taxpayer subsidy to Rio Tinto. Later this decade Tiwai Point might shut anyway, which would cut the price of electricity and so the yield on, and price of, Mighty River and Genesis Energy shares.

In that event, the shares might lose their sheen. If those still holding them then felt aggrieved, that might be a new line of disapproval of selldowns.

And later this year comes the citizens-initiated referendum. There is a strong probability a majority will vote against selldowns. That won’t stop the first sale but what will it say about the second? (What if, as in Switzerland and many United States states, such a vote forced government action?)

The selldowns seemed so straightforward, a jewel in the government’s second term. But from November 2011 to April 2013 the sparkle has dimmed: 440,000 to 390,000 might turn out to be the sort of win ministers have when they are not having a win.