Auckland International Airport - A dreadful decision
The dramatic decision to change the Overseas Investment regime during the takeover offer for Auckland International Airport is a frightening reminder of the Robert Muldoon era. In the mid-1960s, when Muldoon was a minister in the Holyoake Government, he made an overnight decision that forced a major UK bank to cancel contracts to purchase a major stake in National Mortgage and Agency Company on the NZX. National Mortgage merged with Wright Stevenson in 1972 and now forms the basis of the NZX listed company PGG Wrightson. Muldoon’s National Mortgage decision, and his subsequent rule by press releases while Prime Minister, were very poorly received by the investment community. Finance Minister Dr Michael Cullen’s press release on Auckland Airport has had a similar response. New Zealand is a heavily indebted country and doesn’t have the luxury of upsetting overseas investors and lenders. New Zealand – International Assets & Liabilities ($ billion) September 2007 September 2002 International assets - Equity 55.1 25.7 - Debt 74.4 60.1 Total 129.5 85.8 International liabilities - Equity 72.9 49.9 - Debt 207.7 134.7 Total 280.6 184.6 Deficit (151.1) (98.8) Deficit as a % of GDP 88.3% 73.7% We are almost totally dependent on international investors and lenders to finance our lifestyle and if we lose their confidence they may stop funding us or demand much higher interest rates on their New Zealand loans. Cullen’s decision will have a negative impact on the country’s reputation during a major international credit crunch. This is not a smart move as indebted countries are best advised to avoid upsetting their funders when credit conditions are tight. The investment community will be even more enraged if the Canada Pension Plan Investment Board acquires 40% of the airport and more than 50% of the shares vote in favour of the offer but the acquisition is then overturned by the Government. Brian Gaynor, 4 March 2008
Our overseas borrowings have risen from $134.7 billion to $207.7 billion since September 2002 and the international deficit - the difference between assets and liabilities - has surged from $98.8 billion to $151.1 billion.
