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Wednesday, 22 April 2009

Govt Should Not Be In The Business Of Business


ACT New Zealand Finance Spokesman Sir Roger Douglas today urged the National Government to first set out clear goals about what it hopes to achieve before considering a bailout of Fisher & Paykel or any other private company.

"So far, the only known advice that Prime Minister John Key has sought is that received from a phonecall to Fisher & Paykel's managing director," Sir Roger said.

"National is considering bailing out Fisher and Paykel without any financial data or independent advice on the implications - how will Fisher & Paykel raise the required finance now, when any rational investor will fear the company will be nationalised?<

"With its accounts already in deficit, the Government can't afford to prop up businesses. More spending means more borrowing and higher taxes. No one is willing to mortgage their children's future, so why can National do it through borrow and spend policies?"Talk about attaching conditions to a potential bailout, like requirements that jobs stay in New Zealand, is worrying. Government should not be in the business of business - we tried that before and it failed. Companies must be competitive and innovative; gove

"The approach to bailouts is similar to the Government's approach to the 'jobs summit' - the plan is ill thought-out and lacks logic, and the only goal seems to be how to retain the number of jobs we currently have. The real issue is about growing job opportunities.

"The only way to encourage job creation is by lowering the compliance costs associated with employing people. Those costs increased 60 percentage points under Labour, and National seems unwilling to get rid of these barriers to employment.

"We must look beyond the short term. While bailouts and jobs summits may reduce fears now, we will regret it when we start repaying the debt we are amassing. Only by lifting our sights, setting goals, and developing policies to achieve those goals can we lift

ENDS

5 comments:

Rusty Kane said...

Bailouts of private companies by the government is no different than giving welfare to the unemployed. It is supposed to be a temporary helping hand up, but in reality it soon becomes a huge burden on the welfare state. Curating a dependency mind set with a large inefficient state own bureaucracy management department to administer and manage it. It well also curate national debt for todays and future generations. Like all welfare it will soon be abused and its costs will spiral out of control. The mentality of digging holes to fill them up again to curate work is not the answer. Roger is right companies must be competitive and innovative without being dependent on government handouts, or we will all loose in the long run.

Rusty Kane.

Steve Baron said...

While I have to agree with a lot of what you say Rusty, very few things are ever black & white. Taking F&P as an example, I would assume they are a very good and profitable NZ business that is well run (I'm only assuming that!). It would appear that they are an unfortunate victim of the world economy that given a helping hand will soon return to profitability, creating employment and paying taxes. I don't expect they have been greedy and foolish like many of the banks which the US government has bailed out. So perhaps they are the exception to the rule when it comes to bailouts. But I can't answer that as only those with in-depth knowledge can make a sensible decision on it. However I do believe Rusty makes some valid points and the dependency mind set he refers to must be exterminated from the NZ brain. Studies have shown that the USA government would have been better off financially if it had paid steel workers $500,000 each and made redundant because it has cost them much more to keep these people in jobs. One would hope the NZ government would consider these possibilities when making a judgement.

Will Fourie said...

I don't agree with any bailout for F&P.

1. They were in the process of moving plants overseas not too long ago.
2. If foreign currency debt was a sizable risk, then they should have done the prudent thing and hedged it!
3. Its only a whiteware factory people! Its hardly a 'critical mass' who's failure would cause systematic problems in NZ.

...just my thoughts...

Steve Baron said...

But they have been a successful business for a long time and will still pay a lot of tax for many years to come even if they are based overseas. It would be a shame to see them go out of business because of one big economic glitch. I don't think the problem has been currency hedging. The problem is that sales have fallen through the floor given such difficult times.

Dominic Baron said...

I swallowed the Roger Douglas and Milton Friedman mirage for a time. But reality has blown it away. The sale of state assets such as railways and electricity were simply stupid in hindsight. A very useful antidote to the Friedmanite mirage is Naomi Klein's book "The Shock Doctrine". Recommended reading for all of us.