The Capital Markets Taskforce report is out. It’s not pretty – they show that New Zealanders have little confidence in capital markets, and so they naturally put their money into bricks and mortar. The problem with that is New Zealand needs to export more if we’re to grow the wealth cake, and we can’t export houses. We’ll never catch up with Australia if we carry on only investing in property. Something needs to be done to energise our capital markets – fixing the regulatory regime (i.e. Giving the Securities Commission some teeth by removing NZX’s regulatory functions) is one good recommendation, while floating the State Owned Enterprises (SOEs) is another.

But true to form, the Government has rejected the idea of floats for SOEs to give our capital markets a kick along, and give mum and dad investors a chance to put their money into robust investments (and for those worried about those evil foreigners with their efficient business practices and world-class business standards, under this model the Government would still have controlling shares, for now). Granted, National promised to the electorate not to sell anything off for its first term in office, as Commerce Minister Simon Power points out. But that doesn’t mean this idea should be rejected outright. National can easily put the policy forward in 2011 – it won’t lose them the election on current polling. They’ve just got the have the balls to do it.

The task force points out that New Zealand taxpayers’ have $25 billion tied up in all sorts of investments in the SOEs – a post and parcels service, a railway company, a bank, a communications company, a television company, a coal miner, four electricity generators, an airline and all of their related businesses, etc. One of them, Air New Zealand, is already a listed company on the share market, a model that works very well.

The report shows that compared to the rest of the OECD, New Zealand has a high proportion of state-asset ownership – near to 90%; nearly as much as Australia:

State Owned Enterprises, ownership by country.

Interestingly, almost all of the northern European countries (you know the ones like Finland, the ones that get lefties all excited) have a lower proportion of SOE ownership than New Zealand. The critical thing is that most of these countries out perform New Zealand in terms of wealth, wage rates and standards of living.

…in Papua New Guinea. The Financial Times reports Exxon Mobil are investing in the development of PNG’s huge natural gas deposits, which will provide the government with a steady stream of royalties over the next 30 years.

A very good example of why Gerry Brownlee is on the right path undertaking a stock take of New Zealand’s natural resources.