Will Trafford talks to Business reporter Jamie Gray about Rio Tinto's plans to close Tiwai Point aluminium smelter.
COMMENT:
News that Rio Tinto is, after years of warnings, set to depart New Zealand, is a classic case of the boy who cried wolf.
The story is a cautionary tale that if you falsely raise the alarm enough times, when you really are serious, no one will listen.
Timeand again the smelter has turned up to Wellington seeking concessions. It famously extracted a cheque for $30 million after making threats that could have derailed the former National Government's bid to sell off stakes in three state-owned electricity companies.
After that happened, Bill English said publicly that it was a one-time-only offer and to not come back. When Rio Tinto came back in 2017, it was laughed out of the room.
Within hours of the Australian mining giant announcing it was undertaking a strategic review of its New Zealand operations, Meridian chief executive Neal Barclay cast doubt over whether the process was genuine.
On the one hand, Barclay reasoned, Rio Tinto was making bold claims about reducing carbon from its operations, while on the other, it was threatening to close a smelter powered entirely from renewable energy.
Energy Minister Megan Woods was even quicker off the mark - back then at least - announcing that the position of the coalition was the same as it had been under National: that there would be no taxpayer bailout.
Thus, the Tiwai Point smelter appears set to close in a little more than 12 months. It is hard to overstate the impact its departure will have on the economy of Southland, which has a population of just over 100,000.
Directly, the smelter employs about 1000 people and Rio Tinto claims it indirectly "creates" another 1600 jobs.
It is possible that the latter figure is a generous assessment of the smelter's impact, but there is little doubt that Thursday's announcement will have left thousands of families across the province reeling.
Many people are likely to have their lives changed. Many will be likely to pack up and leave.
To an extent, the Government should be congratulated for sticking to its guns. The smelter is certainly going to leave Southland, eventually.
Rio Tinto - and other smelter operators - naturally try to play governments off against each other to try to extract concessions.
But then again, why should the Government play hardball here when it is so generous with money elsewhere?
The people of Southland must wonder what it is that is so important about Wellington's film industry.
Shane Jones' $3 billion provincial growth fund has a mandate to spend money on practically anything, with little evidence of "growth" required, yet even then it will not get the money out the door.
That spending was acceptable even before Covid-19. Now, the Government has set aside tens of billions of dollars to respond, meaning the normal rules simply do not apply.
All up, the response could be more than $50b, although there is an alarming lack of detail so far.
Having been promised billions for "shovel ready" infrastructure projects, only a handful have been announced, with ministers expected to tour the country announcing more as they go, which looks suspiciously like using emergency funds for election-campaign photo opportunities.
The wage subsidy has been extended through until September, giving money not to New Zealand's most promising companies, but to the ones hit the hardest by Covid.
Rio Tinto said it plans to close the Tiwai Point aluminium smelter in August 2021. Photo / Supplied
As understandable as this is at a political level, it has put the economy in a type of stasis, protecting many businesses that we know will fall over eventually.
When the Government got around to talking about Tiwai on Thursday afternoon, Finance Minister Grant Robertson talked up the prospects of the Southland economy, saying it was a province with natural advantages.
But his ideas for helping the region recover was simply a smorgasbord of cliches, about adding value to the primary sector, smart technology and opportunities in manufacturing.
All these opportunities are real but they would be just as real with or without the smelter.
Apparently the smelter had made it clear that it did not want direct subsidies, rather a change to its transmission and electricity pricing to give it a sustainable future.
But money talks. Given Robertson has at his disposal a virtual firehose of borrowed money to prop up the economy, it is impossible to believe that a deal could not have been reached to keep the smelter operating here for at least a few more years.
Considering how much the Government is expecting to borrow and spend as it seeks re-election, it is unlikely that it would be the worst use of taxpayer money we will see in the coming months.
