Michael "Scorched Earth" Cullen

How to Weaken a Nation

We found ourselves laughing derisively the other day when it was rumoured that Central North Island tribe Tuwharetoa were on the verge of hiring Michael Cullen, former Finance Minister of New Zealand, as their chief negotiator with the Crown over indigenous compensation and Treaty claims. We wondered if the iwi was mad or just plain dumb.

Dr Cullen has to have earned the sobriquet of being the worst negotiator in the world--that is, if you want to avoid deals and settlements that end up costing you billions of dollars. We would rather have Forrest Gump as our lead negotiator than Dr Michael Cullen.

Let's review two disastrous deals that bear Cullen's watermark arrogance.

Firstly, the Crown's purchase of a controlling interest in Air New Zealand. It bears all the hallmarks of Cullenesque skills. It began with an obduracy against any potential owner of Air New Zealand that did not have Qantas in its name. At the time, Cullen was fixated on Qantas owning Air New Zealand because he thought it was inevitable that the two countries would grow closer together economically, and that he could be persuaded to support globalisation and free trade and internationalisation of commerce as long as it did not extend further than the Tasman Sea. Cullen was clearly in a 1970's time warp. Time had passed him by, but Cullen still had an old socialist cloth cap hanging in his closet. Apparently there was no dust on it; it was used regularly in secret rituals and always on the first of May.

He pushed and pulled to stymie a substantial investment by Singapore Airlines in Air New Zealand (which was desperate for fresh capital at the time, after its disastrous foray into (yes, you guessed it) Australia with its much vaunted purchase of Ansett--the sick man of Australian aviation. Ansett had collapsed and Air New Zealand was in a parlous condition.) Cullen wanted Qantas to invest. Qantas bosses were too smart and commercial.

So Singapore Airlines got unceremoniously jilted--which they (and Singapore) will not forget for a long time--so Cullen had to end up putting taxpayer's money at risk, forced to purchase a controlling interest in Air New Zealand. The taxpayers' investment is in the red. Cullen is responsible for a substantial loss to all of us--and it is highly questionable whether the investment will ever now generate a return which matches the cost of capital. Airlines remain one of the highest risk businesses on the planet, and Air New Zealand is a small bit player operating from one of the smallest most far-flung countries in the world.

The second example of Cullen's brilliance is his purchase of Kiwi Rail. He deliberately sidelined his own Treasury officials (he knew they would not approve or endorse his actions) and engaged in direct negotiations with Toll Holdings. Cullen the negotiator, the big commercial kahuna, cutting and thrusting at the front end of commerce, swinging the big deals. He ended up paying an exorbitant price for an asset which Toll regarded as an albatross around its neck. Now, the projected costs for the business have ballooned out to over $3bn.

The Australians could not believe their luck. They called it the "Sale of the Century." They could not believe that Cullen could be so stupid, commercially naive, and ignorant of the true costs of running a capital intensive, moribund business, relying on outmoded technology. But for Cullen--being a socialist--the cost of taxpayers capital was zero. He signed the deal for over $500m purchase cost because to him, $500 million was--literally--nothing! It was taxpayer's money and the cost of that capital was zero. Thus passes the folly and ignorance of a seventies cloth-cap socialist. Now we all have the pay the costs for such madness.

We could go on to mention Cullen's illegal interference in stopping the sale of part of Auckland International Airport to a passive Canadian pension fund investor. Well, what did you expect. Canada is way beyond the limits of the Tasman Sea. Then there is the financial scandal of the ACC. The Labour government, believing in the intrinsic superiority of a state run and owned insurance monopoly, blithely increased its coverage and services (because the cost of capital is zero, after all) and has left us with a $3 billion unfunded shortfall.

As David Farrar says, the graph is eloquent.



Cullen knew this--or at least he knew there was a significant unfunded liability to the Crown accounts--but chose, illegally, to cover it over prior to the election. A man full of arrogant guile and deception.

We will not mourn Cullen's passing from political life. He appears to have been a dishonest, deceitful, small-minded man, yet one who saw himself as a legend in his own time. "I have spent it all!" was his arrogant boast. But, worse, he has spent way beyond what the government had. Long years of the yoke of public debt have been left to us. He has done great damage to the country that will take years, if not decades to repair.

We hope Tuwharetoa have their eyes wide open.