Thursday, August 08, 2013

Corporate welfare

I accept the government's tax subsidy to Rio Tinto is corporate welfare.

Corporate welfare is bad because it's privilege for some.

The only way to reduce corporate welfare is to reduce the size of government.

One effect of the subsidy is keeping Meridian Energy economically sound.

Selling off Meridian is just a small step towards downsizing government.

So I'm supporting this dose of corporate welfare as a means to a more important end....

I think....

I'm open to changing my mind.


Anonymous said...

NZ - and its electricity market - will be far better off without the smelter. It's old, clapped out, and simply cannot compete with many newer much more efficient smelters being built in China.

The best outcome for NZ is of course full & total privatisation of Mercury Energy, and closing down the smelter. As a private company, Mercury would never enter into a contract like the smelter contract - a contract where it pretty much loses money on every megajoule it sells. Mercury's private owners would quickly see that they'd be far better off shipping everything they could generate straight up to Auckland.

What's left is a 30 Million dollar sop to a heavily unionised foreign corporation. Hate to say it, but even Helen wouldn't have paid. The current governments reputation as the most left-wing in NZ's history remains unassailed.

Kiwiwit said...

One of the problems with this issue is the NZ electricity market is so distorted by the SOE structure that owns most of it that no one can say for certain what is the true marginal cost of generating the power for Tiwai Point.

NZ should have some of the cheapest electricity in the world given that most of the generating capacity was built decades ago (and therefore should be fully-depreciated) and that its raw material is running water, but instead we have relatively high priced electricity.

The contract for electricity supply to Tiwai point is, in effect, a contract to export energy. If our electricity generation cost structures reflected true economic costs instead of the artificial and centrally-planned market we have, I am sure we would be able to sell electricity to Rio Tinto at internationally-competitive rates and reduce electricity prices to NZ consumers with "corporate welfare".