Partial privatisation

Auckland's Professor Tim Hazledine and I argued partial SOE privatisation on Radio New Zealand's Morning Report Wednesday morning, with minor unintentional contributions from a rather vocal Eleanor.


Tim and I are likely around 90% in agreement. We both think partial privatisation a bit of a nonsense; you get little of the potential efficiency benefits of full privatisation but add downside risk. I don't think it will wind up making a ton of difference; Tim puts more weight on the potential downside outcomes. I think we'd both agree that there's more potential downside risk than upside; he'd have the left tail fatter than I would. I think we both agreed that the "foreigners might buy shares" wasn't much of an issue.

Even if we're considering full privatisation, New Zealand's power companies would be reasonably far down on my list. You can make a defensible case that New Zealand's electricity system is one of the world's least screwed up; mucking about with it is risky. The likely equilibrium isn't a private system but rather a regulated cartel industry with more downside risk than upside. Seamus's worries aren't crazy. If I got to choose between DoC selling off half its estate at auction and full privatization of the energy companies, I'd pick the former.