John Key has announced a massive policy – that as a response to the global credit crisis, at least 40% of the NZ Super Fund be invested in New Zealand. The full policy paper is here.
New Zealanders are entitled to take a view as to where this large pool of capital,funded by taxpayers, is invested. They are entitled to decide that these resources willbe used to invest in our future growth and to underwrite our future prosperity.
At a time when credit and capital are both going to be in short supply, we would be negligent if we did not employ our own superannuation fund to grow our own economy.
National, therefore, believes that a greater proportion of the New Zealand uperannuation Fund, which belongs to all New Zealanders, should be invested in ew Zealand to grow our economy.
It is better to use more of those funds here at home to invest in our productive sector nd broaden and deepen our own capital markets. This will have both short-term and lnger-term positive impacts.
In the short term, in a world where money for investment is going to be more tightly held and more closely guarded, it will help ensure New Zealand has the investment capital we need to get out of recession and into a period of solid and sustainable growth.
In the longer term, it will give New Zealand businesses a greater opportunity to grow from a domestic base and grow under New Zealand ownership further than they would otherwise have been able to.
National go on to say that they will not direct the Fund Guardians as to what sort of companies, bonds or funds to invest in – just that the proportion in NZ should be at least 40%.
Even since the Cullen Fund was established, I have had fears that as it grows larger, politicians would want to start directing where it is invested. My problem is not the 40% in NZ target, which could well be a very good response to the credit crisis. My problem is the precedent it sets for future Governments.
We already know the Greens want to ban it from investing in almost every company on Earth. This will bolden them to try and give politicians a greater say in what specific companies can and can not be invested in. And then you don’t have it generating the returns needed for it to fund future superannuation.
So while the announcement is a bold move in response to the credit crisis, it is one which causes me some concern.
I guess I would say if ever there was a time to step away from a purist approach to the fund, then the threat of a global crisis and depression, is a good time to do so. From that point of view it makes sense investing more at home.
But long-term this may lead to more interference in the Fund, and that would be a bad thing (and National is careful to say they will not interfere apart from setting the 40% target). We don’t want MPs in charge of a $100 billion fund . Think how many donations to the Spencer Trust that would generate! This is why I have never been a supporter of having the Cullen Fund.