Mike's Minute: Rio Tinto playing the politicians like fiddles

Author
Mike Hosking,
Publish Date
Wed, 30 Sep 2020, 10:50AM

Mike's Minute: Rio Tinto playing the politicians like fiddles

Author
Mike Hosking,
Publish Date
Wed, 30 Sep 2020, 10:50AM

Tell you who one of the biggest winners is this election, Rio Tinto. You reckon they worked all this to a plan?

The smelter was too expensive, they are closing it down unless the government write a cheque. The Labour Party, emboldened by the National Party, told them not one more cent. National told them not one more cent, after giving them $30 million.

When they came back Ardern said no. And she was not for turning, until, of course, she was.

It is a lesson, as far as I can work out, in a few things. Being big helps, pure economics doesn’t always work in regional New Zealand, and whatever it is you do, if you can be big in a small place the government will always pay the bills. All you need is a large workforce of locals who become reliant on you and a government that doesn't want to see a town or region decimated, especially not in election year.

New Zealand First, I think, was first out of the blocks with the plan. National came second, and Labour fell on its sword just the other day. They're all essentially offering the same thing, and they're all essentially making the same mistake.

Part of Rio Tinto's problem is the price of aluminium, which isn't the governments fault, but they have chosen to make it their problem. Part of it is the power companies are so reliant on a single client, so when the client looked like they were leaving they didn’t have the ability to shift the power north.

There is nothing wrong with Tiwai getting a good power deal. Big players get good deals on all sorts of things. Bulk buys discounts. But beyond that, we are now talking about manipulating the system.

Transpower is a monopoly, so they're now dragged in on transmission prices. Labour wants them to "help." What's that mean? Apart from manipulate the price, cost, or deal to favour Tiwai.

So, the question is, what's the cost of seeing a region damaged by an exit versus the cost of subsidising a business to have them stay? And the tricky bit is, once you're down the rabbit hole, can you ever extract yourself? No. Do you set a dangerous precedent? Yes.

And who's the big winner? The company that played the government like a fiddle.

;