Budget 2012: Asset sale cash 'should go on infrastructure'

Finance Minister Bill English. Photo / Mark Mitchell

The Government risks not making the most of asset sale proceeds, instead of spending them on innovative infrastructure projects, says Deloitte energy and infrastructure head Paul Callow.

Proceeds from the partial privatisation of energy companies and Air New Zealand will go to the Future Investment Fund. The Budget forecasts $558.8 million will be available in the 2012-13 year and with the largest single amount - $250 million - going to struggling KiwiRail.

"I thought this fund was about doing something different, future investment rather than propping dying business," said Callow who supports the SOE partial privatisation process.

The remainder of the fund would be spent on health funding, a new advanced technology institute, school upgrades and other capital investments.

Finance Minister Bill English also confirmed that asset sales proceeds would be the source of any new capital for KiwiBank, which the Budget documents identify as a new fiscal risk.

Read all of nzherald.co.nz's Budget coverage here.

The subsidiary of the increasingly unprofitable NZ Post state-owned enterprise does not expect to be able to tap its parent for necessary new capital.

Callow said tagging the proceeds in this way doesn't fool anyone.

"Money is money and the fact that the Government has just sold a stake in an SOE simply means it has more to spend or needs to borrow less," he said.

While the Government's explanation of why it is undertaking the mixed ownership model had been handled poorly, the proof of the pudding will depend very much on what the Government does with the proceeds. Irrigation, water infrastructure and social housing should be areas the Government should be using the fund for, he said.

"The message about asset sales has been very confused. There was an opportunity to say something new."

- Additional reporting: BusinessDesk