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Eric Crampton has done a lot of good work on replacement models for 3 waters. Read about it here https://www.newsroom.co.nz/on-water-reform-national-and-act-are-sailing-on-same-course

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Kia Ora Dave

Great article!

One little nuance I would add in under the heading “Everyone faces weak incentives for long-term investment”.

There is a class of investors who, if given the opportunity, will self-select into owning regulated utilities. Pension funds and others who welcome the regularity of a regulated return do in fact have the incentive to favour long-term investments. There are looking to invest in long-term assets that match their long-term liabilities.

In New Zealand, we have seen offshore pension funds investing in regulated utilities: First State acquired Vector’s and Maui Development Corporation’s gas assets, QIC and AMP have stakes in PowerCo and Canadian pension funds now own a lot of local cell phone towers.

Ngā mihi.

Peter Wilson,NZIER

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author

Thanks Peter. A great point! People (including me sometimes) tend to overlook the fact that capital markets are matching markets as much as they are spot markets. Cheers, Dave

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