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A question of optics

Published in Insights, The New Zealand Initiative’s newsletter, 23 March 2018

Few countries run as much on informal relationships as New Zealand. It is both due to our small size and our aversion to hierarchies.

But that makes it even more important to adhere to good governance practices. Which is why Shane Jones’ spat with Air New Zealand is so damaging.

In any other country, a rogue Minister commenting on the board and management of the national airline would be a minor annoyance. In New Zealand, our small scale and informal nature can turn such comments into a sovereign risk issue.

As the Minister in charge of regional economic development, Jones will have views on Air New Zealand’s planned route closures. Frankly, if he did not he would not be doing his job. Party-political motivations may have played a role as well.

But as the Crown is the majority shareholder in the national flag carrier and its regulator, the Minister still must weigh his words more carefully. Calling for changes on the board and scolding its chief executive were steps too far, as Prime Minister Jacinda Ardern rightly clarified.

It was reassuring that Finance Minister Grant Robertson, who holds the Crown’s shares, was quick to intervene, too. When I interviewed him at the Russell Investments conference on Thursday he made it clear that Air New Zealand’s chair, board and management had his full trust and support.

But the damage had been done, and Jones even defied such public rebukes by continuing his campaign.

Incidentally, that did not stop him from enjoying the airline’s hospitality at the invite-only dinner with Barack Obama on Thursday (and, at least by my impression, he seemed to have a good evening).

Of course, Jones’ comments could only ever become such a big problem because of Air New Zealand’s mixed public-private ownership model. In today’s Herald, Matthew Hooton suggests removing the political interference from such companies by transferring their shares to the Super Fund. It is a proposal worth debating.

So at the end of this extraordinary week, international investors may look at New Zealand with more suspicion. Changes in foreign direct investment rules and immigration policy have caused some concern in the global investment business community. The last thing New Zealand needed was a question mark around government interference with listed companies.

The Prime Minister and the Minister of Finance found the right words in response to Minister Jones. Now they must stick to them. This is about New Zealand’s international reputation as a place to do business.

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