The PM wants a ‘mature conversation’ about recycling the Crown’s assets, but public scepticism and coalition politics are standing in his way, writes Catherine McGregor in today’s extract from The Bulletin.

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Luxon reignites an age-old debate

Christopher Luxon has reopened one of New Zealand’s most politically fraught conversations. Following Treasury’s release last week of its 2025 Investment Statement – which urged the government to adopt a more “formal capital recycling programme” – the prime minister suggested it was time for a “mature” discussion about selling state assets.

As Jonathan Milne notes in Newsroom, the government these days prefers to talk about capital (or asset) “recycling” rather than privatisation. With asset recycling, the proceeds of sales are “recycled” into higher-performing or more socially useful investments, as practised by Singapore’s government wealth fund, Temasek. Luxon, drawing inspiration from that model, said it was legitimate to ask whether the government was “optimising” its holdings. “As a former business guy, you just don’t want lazy balance sheets,” he said, arguing that the Crown should ensure every dollar of its $571 billion asset base is working harder for taxpayers.

Public scepticism still runs deep

But the political challenge is immense. As The Post’s Henry Cooke points out (paywalled), asset sales have long been a third-rail issue in New Zealand politics, evoking memories of the unpopular privatisations of the 1980s and 1990s. When John Key floated similar plans in 2011, his personal popularity allowed him to weather the backlash, even as two-thirds of voters later rejected asset sales in a referendum. Luxon, by contrast, is languishing in the polls, meaning his chances of convincing the public to support a privatisation policy are low, to put it kindly  When the 2026 campaign begins, “voters might be ready for a very different debate on these matters”, Cooke writes. “It’s just hard to see Luxon as the one who will start one.”

Winston Peters’ key role

Any such debate also depends on the makeup of the next coalition. Cooke notes that “National’s only credible path to power runs through NZ First”, and that Winston Peters’ long-standing opposition to privatisation could prove fatal to the idea. Peters this week called asset recycling a “silly tawdry argument” and accused his own government of “creative accounting of the worst sort” over the suggested sale of Chorus securities held by the government, reports Luke Malpass in The Post (paywalled)

Yet, as Politik’s Richard Harman observes (paywalled), Peters has notably refused to make opposition to asset sales a bottom line in future coalition talks – something he has done for a proposed fireworks ban. Harman suggests Peters’ ambiguity may give Luxon an opening to make support for asset sales a pre-condition for any coalition deal. In that case, “New Zealand First’s only alternative to agreeing to this would be to cross the floor and enter into a coalition with their fellow asset sale opponents, Labour.” Where Cooke sees weakness, Harman sees surprising strength, describing Luxon’s handling of the issue as “uncharacteristically hardball politics” which “will encourage his party base and the business sector” at a time when many of National’s traditional supporters have been losing faith.

What economists think

Speaking to Newsroom’s Milne, economists Shamubeel Eaqub and Eric Crampton agree that if sales do happen, then asset recycling is the way to go. Eaqub says it’s obvious that the government “should not be liquidating a balance sheet for everyday things” like tax cuts or operating expenses, but instead be recycled into essential new assets. He highlights public transport, the rail network and water infrastructure as key areas where the proceeds could be spent.

That’s if anyone actually wants our assets, of course. Eaqub suggests that while the Crown might want them off its books, the underperforming TVNZ and NZ Post would struggle to attract much interest. As Eaqub says, “It’s very difficult to sell things that are not commercially viable!”