A $60 million corporate welfare cheque for Golden Bay Cement is fixing a symptom but not the disease.
It's taxpayer money. It's not a loan – it's free money. Owner Fletcher Building has agreed, in return, to keep the thing open till 2040 and invest $150 million, phased over time.
No doubt cement is important for building the country, but so was refined oil. We offshored that. So is milled timber, which we let go. So is food production, which we're letting fall over too.
This is the problem with welfare: once you start handing it out, everyone wants a piece of the pie.
Fletcher Building is a conglomerate, listed both here and on the ASX.
Their results are due out next month, which will now be watched very closely.
Last week, the company increased its earnings guidance and turned a $45 million profit in the half year to December.
Sure, it's not been without its problems, and we've kept you updated on their restructures and legacy problems and the general state of construction.
The only reason the Government is doing this, in my view, is because unlike the other examples of paper mills and Wattie's, this one's caused not just by the price of labour and energy going north.
It's the ETS.
Fletcher buys credits to emit carbon while making its cement. This cost made the Northland plant unviable. A dead man walking.
You can import cheap cement from offshore where they don't pay for emissions.
Which makes them a cheaper option, and we get undercut.
The Government reckons they went with a bailout rather than changing the ETS rules because they didn't want companies lining up for handouts.
But that's exactly what will happen anyway. Any plant at risk of closure paying for emissions is now fair game.
This might look like a single smallish payment to a single business, but it's actually a blank cheque they've signed, and with the election round the corner, the sky's the limit.
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