Editorial: Mums and dads want their share

A few years back, the idea of a shareholding democracy held considerable sway. A key part of the concept involved mum-and-dad investors owning stakes in fully or partly privatised utility companies, and benefiting from the steady income and long-term returns of these shareholdings. British and Australian experience had proved it a strong way to encourage saving and wean investment away from an unhealthy emphasis on housing. Contact Energy and Auckland Airport demonstrated that the concept appealed to New Zealanders.

Now, the strong sharemarket debut of the energy network company Vector has reinforced the point. The float of a 24.9 per cent stake by its owner, the Auckland Energy Consumer Trust, has brought in 47,000 new Vector shareholders. About two-thirds of these sprang from the 290,000 power users in Auckland City, Manukau City and parts of Papakura, who were given preferential rights.

Yet despite the public appetite, which again surpassed expectations, this offering was made only after a bitter political battle. Its proponents had to overcome ill-considered antagonism of the sort that recently produced a reversal of the practice when Auckland Regional Holdings bought out the minority shareholders of Ports of Auckland.

Such resistance has ensured that what this country boasts in terms of a shareholding democracy is fragmented and frail. That is unfortunate. New Zealanders, despite the legacy of the 1987 crash and more recent misfortunes, such as the Access Brokerage collapse, clearly harbour a desire to invest in the sharemarket. The more so when the shareholding incorporates a utility's privileges and security. If the opportunity is right, they are not so obsessed with the housing market as to want to make it their only investment port of call.

It is important for the economy that the opportunity is provided. Investment in housing is non-productive; a culture of share ownership provides the grist for company expansion (the rationale for Vector's float), thereby creating jobs and economic growth. New Zealand has a poor level of public capital-raising, compared with comparable countries. A dearth of reasonably sized infrastructure stocks such as Vector on the sharemarket is one of the reasons.

The stock exchange has made significant strides since Mark Weldon became the chief executive, particularly in terms of innovation and aligning itself with best overseas practice. But his best efforts have been hampered by the limited range of investment opportunities, a situation exacerbated by an ongoing drain. Since the start of this year, eight companies have been lost, including former publisher INL, transport group Owens and, of course, Ports of Auckland. Charting the trend is made worse by comparisons with the Australian exchange.

It would be highly unfortunate if the pattern is not reversed. The oversubscription for Vector has demonstrated, once again, the public hankering for strong investment possibilities. Those who became first-time shareholders through Contact and Auckland Airport have done very well. Those taking the same step with Vector should have a steadier but no less satisfactory experience.

All of which raises questions about why there are not more utility part-privatisations along Vector lines. Mum-and-dad investors benefit, the economy expands, the stock exchange thrives, and companies garner funding for expansion. The concept of a shareholding democracy has been allowed to slumber. Hopefully, the Vector float will spark a reawakening.