Brian Fallow: Ideology and tribalism behind questionable policy

John Key speaks to the media after delivering his State of the Nation address. Photo / Getty Images

Here are some reasons to be unimpressed by the Government's plan to partially privatise state-owned enterprises:

* There isn't all that much family silver left in the cabinet.

It does little or nothing to deal with the genuine problem of woeful national savings and a perilously high reliance on foreign capital and credit.

* And it only partially addresses popular concerns based on the experience of previous privatisations when a stock exchange listing proved to be a kind of low-rent motel on the road from state ownership to foreign ownership.

Accounts the Government released in December valued its holdings in the three state-owed electricity generators, Solid Energy and Air New Zealand at just under $16 billion.

Given the pledge that the Crown would retain majority stakes and assuming (unsafely) that the market would concur in those valuations, that suggests that, at most, $7.8 billion could be raised by a selldown.

Not a trifling sum, but less than a quarter of the $33 billion the Crown plans to spend in the next five years.

The Prime Minister says that between KiwiSaver and other managed funds, iwi, "mum and dad" investors and the Government's own investment vehicles such as the Cullen Fund, there is plenty of NZ capital looking for quality assets to invest in. They would be at the head of the queue.

No doubt. But, once sold, it would be difficult - and problematic in light of free-trade agreements - to prevent their new owners from selling them on to foreign investors.

And he would be asking voters to trust that a government prepared to sell down would not later sell out altogether.

To the extent that these shares end up in foreign hands, they would increase the country's net foreign liabilities of $162 billion, which he rightly points out is way too high for comfort in these debt-averse times.

He says it would give Kiwi investors something other than property to invest in.

But there is little chance of another destructive property boom at the moment, so stretched have house prices and household debt levels become, relative to incomes, after the last one.

More likely it would be at the expense of bank deposits and leave the banks needing to raise more of their funding overseas, increasing the country's foreign debt.

All in all, it is as ideological and tribal as the tax policy Labour announced on Tuesday.