3 News business editor Michael Wilson joined Firstline this morning to discuss the effect of the US market slump on New Zealand, and whether part-privatisation will be beneficial for the economy.
US markets have fallen after the economy showed zero job growth in August and unemployment remained at 9.1 percent, which Mr Wilson says has put sharemarkets “back on that doom and gloom machine”.
Falls in US and European markets have been “quite solid”, he says, with the Dow down 2.3 percent and drops of up to 3.6 percent in France and Germany.
The New Zealand markets are likely to dip around one percent today, Mr Wilson says, but shouldn’t fall as dramatically as those overseas - thanks in part to a strong profit reporting season.
“Most of our companies have done quite well in the environment, and so that's underpinned our market to some degree,” he says.
US President Barack Obama will make a speech on Thursday about job creation.
Labour leader Phil Goff has attacked part-privatisation of state-owned assets, saying they will cost the Government $900 million in revenue – a figure Mr Wilson says Prime Minister John Key has “absolutely pooh-poohed”.
Mr Key says the assets “haven't been delivering the Crown huge dividends” and privatisation will decrease the Government’s interest payments to overseas lenders.
“We might be paying dividends to New Zealanders in the form of the shares that they may now own, but that means we're not making interest payments to foreigners who would be lending us money… for new assets we want to build,” he said.
Part-privatisation will have a positive effect overall, Mr Wilson says, because it will broaden New Zealand markets.
“Our sharemarket is so thin – and we really need some good, top quality assets instead of people going and investing in finance companies as they used to,” he says.
“Maybe it's a better thing that there are a lot more of these solid assets available.”
Concerns have been raised that New Zealanders won’t invest and the shares will be bought by foreign buyers, but Mr Wilson says Kiwis will buy if the price is right.
“It's all going to come down to pricing, and that's going to be the key,” he says.
“I think that everyone should have a go... they're going to have to pitch it at such a level that it's really attractive to the average person.
He says “the great majority of these sales” could be kept in New Zealand if superannuation funds, KiwiSaver funds and iwi invest heavily.
Watch the video for the full interview
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