We should sell poor investments

Stuff reports:

The Government has no plans to sell Landcorp despite it being labelled by Deputy Prime Minister Bill English as a “poor investment”.

The government-owned farming company was grappling with a significant drop in its revenue against increasing debt levels caused by the fall in milk price, English told farmers at the DairyNZ Farmers’ Forum at Mystery Creek.

“It’s a very low returning asset, so you have $1 billion tied up in that organisation and it pays taxpayers very little, in some years nothing so it’s a poor investment. However, we’re committed to keeping it.

Why? NZ has thousands of dairy farms owned by farmers. Why does the taxpayer need to own scores also?

Landcorp made a net operating loss of $8.9 million for the half year ending December and its half year revenues were $108.8m, down from $115.1m. The state owned enterprise blamed the fall in revenue on 22 per cent contraction in milk revenue.

Landcorp expected to report a net operating loss of between $8m and $12m for the 2015-16 year, below that of the previous year where a net operating profit of $4.9m was achieved. The report blamed the fall in milk prices as the reason for the loss.

There is a huge opportunity cost having $1 billion tied up in Land Corp. If that was released one could use it to pay for say $1 billion of new schools or hospitals. Alternatively reduce interest payments by $60 million a year or so freeing up that money for health or education spending.