Editorial: Port row gives clue to asset sales solution

Striking Ports of Auckland workers, with their families in support. Photo / Natalie Slade

Commentaries on the Auckland waterfront dispute are making some telling comparisons between the performance of the wholly council-owned Ports of Auckland Ltd and its partially privatised rival the Port of Tauranga. Similar comparisons have been made by the Productivity Commission in its recently released draft report on New Zealand's international freight transport services.

The commission, mindful of the unpopularity of asset sales, has not recommended outright privatisation of ports. It has suggested instead that councils consider separating the business of seaports from the land they occupy. The implication is clear. The property could be kept in public ownership but the business could operate under scrutiny of private shareholders.

This is an idea that just might solve the vexed issue of asset sales more generally, including some of those the Government proposes to partially privatise over the next three years. Strictly speaking, the Government is entitled to claim it has a mandate for the sales. It put a precise proposal to the general election in November and it won.

But not even the most ardent National supporter would claim the party had convinced a majority of the public of the merits of "flogging off our assets", as the Labour Party called it. A Herald-Digipoll survey last year found 62.6 per cent of its sample opposed to the Government's intention and polls taken closer to the election suggested opinion had not changed. Clearly a crucial number of those uncomfortable with the idea of floating even a minority stake in state companies supported National despite the policy.

Longstanding public opposition to privatisation appears to be mainly motivated by a fear that property might pass into foreign hands. The public and its representatives appear to be much less interested in the business beyond the profits it generates for the public purse, which are often lower than private shareholders would demand.

The public interest might be much better served, therefore, by floating shares in the business and retaining its site in public ownership. Land rent would be a more reliable source of public income than the often low earnings of companies under public ownership. This is particularly true of sea ports where few besides Tauranga's are covering their cost of capital.

It might be recalled that when the former Auckland Regional Council took the port off the sharemarket with its 100 per cent buy-out in 2005, it did so mainly to acquire waterfront land for public purposes. Thanks to the buy-out, the city has the Wynyard Quarter development and Queens Wharf.

Northland Port already has separate companies owning the site and running the port. Land occupied by ports is of course foreshore and seabed. The long wrangle over Maori customary rights has underlined the principle of public ownership of the coast. It would be perfectly fitting for regional councils to continue to own their ports but lease the wharves and associated infrastructure to a competitive private port company.

A similar arrangement could be considered for the three electricity generating companies still in state ownership and for airports, though obviously not for Air New Zealand. Meridian, Genesis and Mighty River Power, and privately owned Contact for that matter, could rightfully be charged a lease of lake-beds and any public land they use.

Persistent opposition to asset sales reflects a public sense of collective property ownership that has to be respected. But the value of having economic activities subject to sharemarket scrutiny should also be recognised. Competitive companies often prefer to lease property, public sentiment could be content to be the landlord.