Borrowing to save

November 7th, 2011 at 9:00 am by David Farrar

Radio NZ reports:

ACT Party leader Don Brash is dismayed that wants to borrow a lot more than National, saying it’s imprudent.

“This makes no sense at all. Why would any householder with a large borrow more money to invest in shares? No prudent householder would do that – the Government shouldn’t be doing that either.

“Personally, I think the Government should be selling the assets in the Super Fund and using it to pay off debt. Why the Government should borrow money to invest in shares is simply beyond me.”

The Green Party is also critical of Labour’s plans to borrow to feed the Super Fund, also known as the Cullen Fund. Co-leader Russel Norman believes such a move is economically irrational.

“The Cullen Fund is a repository for surpluses, so when the Government’s running surpluses it makes sense to stash money away for the future and we really applauded Labour for that.

“Whereas, when you’re running a deficit, the logic of borrowing to put into your savings doesn’t make so much sense to us.”

I’m pleased to see some economic sanity from Russel Norman on the issue of Labour’s plans to borrow to save. Norman is correct to call it irrational.

Readers should be aware that Labour’s promise to borrow for the fund perverts its original intentions, as set up by Michael Cullen. I blogged what Cullen said when it was launched:

How will the government pre-fund future New Zealand Superannuation costs if there are insufficient surpluses?

The government will make contributions to the Fund from available surpluses. Where these are insufficient for making the required contribution a reduced contribution would be made.

So what Labour are proposing with their goofynomics is not what Cullen said would happen. He never proposed borrowing money to stick into the Cullen Fund. It was explicitly a fund whose contributions would come out of surpluses.

Now Labour are proposing to borrow an additional $6.1b off China over the next three or four years and to give it to the , who will promptly invest it mainly in international sharemarkets (that is where 58% of the Fund is).

Now Europe remains on the brink of a debt crisis. If Greece goes under, this will snowball. French banks especially will be massively hit and may go under. That in term will push some US banks under, and what happened in 2008 could look mild. If this happens, expect global sharemarkets to plummet.

And the economic geniuses in Labour say this is the perfect time to borrow $6.1b and invest it mainly in international equities!!!

As Russel Norman, said it is irrational.

Yes, in theory sharemarket investments will get you a higher return than sticking money in the bank. But do you know why that is? Because they are riskier. And as individuals we may choose to take those risks, but it is not the role of the Government to borrow money on our behalf and risk it on overseas (or domestic) investments. The world’s financial markets are fragile, and there is no guarantee that the returns of the past will ever be achieved again.

The fund has now been going for eight years. That is more than a quarter of the time set aside for it to gain so much money, that it can start to subsidise superannuation from 2031. It has lost a whopping $2.8b in just five months. Over the entire eight years, it’s return has been just 0.5% higher than the average Treasury bill rate (the cost of borrowing). It’s not quite as simple as this calculation, but this means that the actual extra money available for superannuation in 2031 onwards is $2b (annual cont approx) x 0.5% = $10m/year or $80/m over 8 years. Allow some compounding and let us round that up to $100m.

Yes $100m is what eight years of the Cullen Fund has achieved, compared to the alternative of just paying off debt. Not going to make a fuck of a lot of difference to the sustainability of superannuation in 2031, will it?

National, the Greens and ACT all agree. Say no to borrowing to save under Goofynomics. We need less debt, not more.

UPDATE: The NZ Super Fund has e-mailed me to comment:

It is correct that the return on the Fund is 0.50% above Treasury Bills since inception to 30 September 2011 (or as you say about eight years).

But you have confused two calculations to arrive at your $100 million figure. The 0.50% p.a relates to the Fund’s return relative to Treasury Bills (which you do say), not to the contributions made by the Government and so should not be used to calculate the return on the Government’s contributions (which ceased in July 2009 and so did not cover the whole eight-year period in any event).

Yes the Super Fund overall has increased its contributions by more than $100m. But the point I was making was a comparison to if the contributions had been used to pay off debt.

Total contributions since inception are 14.88 billion. Our return since inception is actually 3.92 billion. Both of those figures are on our website. The 3.92 billion includes just over $2 billion in NZ tax (again, as on our website), which the Governments that received it over the life of the Fund (the bulk of which was in the last two financial years) would not have gotten otherwise. Clearly, we don’t know what the return on that $2 billion might have been had we invested it instead. The point though is that it’s a bit more than $100 million.

There is a debate about whether you include the tax returns, as the argument is that if the money was (for example) used to subsidise KiwiSaver more, then those funds would also have generated more tax.

Additionally, we believe that in taking a strongly commercial approach to investing locally we produce social and economic returns for NZ over and above the financial returns on those investments (e.g. the 50% investment in Shell, the 40% investment in Kaingaroa Forest, the millions committed to locallthy-managed funds providing growth capital to small and medium size NZ businesses, the investments in high-quality dairy land etc etc.) Now of course that’s not directly relevant to meeting the future cost of NZ Superannuation – but hopefully you agree it’s more broadly positive for NZ.

I should point out that in no way am I critical of the job the Guardians have done. My own superannuation funds have taken a beating also – every month I stick $1,000 in and they lose more than that, so my fund is dropping. My argument is around whether it is sensible to borrow to invest in the Fund.

Finally, a big part of the value of the Fund is that it exists at all. It is a part of the Crown balance sheet that has one specified purpose and one only – assisting future Governments to meet the rising cost of New Zealand Superannuation. We believe that does make a difference to the sustainability of superannuation from 2031 onward.

It does, but so does paying off debt. As I said in my original post, it is a balancing of returns vs risk. The events of the last three years have reminded us that the risk is real.

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38 Responses to “Borrowing to save”

  1. Lazybum (259 comments) says:

    Maybe a Greens/National super coalition perhaps? God forbid.
    Norman speaks more sence on economic issues than Labour. Goes to show Labour’s position in the political spectrum has been blurred over the past decade or so, National now owns there right based area and the Greens the left. People do not know what they stand for, they gave up the on blue collar workers years ago to concentrate on homosexuals/unioists (not members of unions) & teachers.

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  2. Lazybum (259 comments) says:

    Q. How do you make $3bn?
    A. Invest $6bn in the Cullen Fund in the next 3 years.

    To be seen soon with the next imminent market meltdown:
    Q. Whats the difference between a banker & seagull?
    A. At least a seagull can put a deposit on a BMW – plop.

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  3. Scott Chris (5,946 comments) says:

    David Farrar says:- “Norma is correct to call it irrational.”

    Yup.

    Economically illiterate.

    It’s almost as if they’re being stupid on purpose.

    Strange.

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  4. jaba (2,092 comments) says:

    shit, I hope Cunliffe hasn’t run out of twink yet

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  5. swan (659 comments) says:

    But – isn’t the argument that we should only be putting money in during times of surplus just a false rationality?

    Borrowing to fund the super scheme vs not borrowing at all in a time of deficit is exactly the same as choosing to use a surplus to fund the super scheme vs using a surplus to pay off debt. Is it not?

    We either think the government is better having less debt than having more equities or we dont. Whether or not we are running a deficit or a surplus is irrelevant.

    On the other hand we may think there is an optimal debt to equities ratio (say as a function of GDP), and it is good to have some equities even with some debt still on the books. In this case it does not matter whether or not we are running deficits or surpluses, the policy should remain the same.

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  6. swan (659 comments) says:

    So to expand on my point.

    Labour, and Brash above, are both being rational but taking opposite view points.

    National and Norman are being irrational.

    If National were to be rational, they would be selling off the current assets of the Cullen fund to pay down debt/ avoid issuing debt. The current policy or “no more invested, but no less either” is just status quo bias.

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  7. JC (929 comments) says:

    The Cullen Fund isn’t actually a super scheme.. its a Sovereign Wealth Fund set up to absorb past over taxation. Putting the Superannuation moniker on it was simply to make it look more palatable to the public.

    The fact that Goff and co are trying to call it an asset is further evidence that they see it as a cookie jar to be raided sometime in the future and of course, a vehicle to garner more tax.

    JC

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  8. statisticallydeviant (2 comments) says:

    Micky Savage confirms Labour is intent on asset stripping SOEs:

    “mickysavage 12.2.1.1.1
    7 November 2011 at 9:20 am
    Mr Joyce says those companies, of which his Government will sell as much as 49 per cent, paid combined dividends to the Crown of about $350 million to $360 million a year.

    Not true. The figures last financial year were:

    Mighty River Power $286,000,000
    Genesis $0
    Meridian $683,644,000
    Solid Energy $54,000,000
    Air New Zealand $57,000,000

    Total: $1.08 billion”

    Meridian Annual report: $683.6 million, including a final dividend of $68.5 million for the 2010 financial year, an interim dividend for 2011 of $94.1 million and a one-off special dividend of $521 million in June 2011 paid from the proceeds of the sale of the Tekapo power stations.

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  9. insider (1,021 comments) says:

    If the logic is that the super fund will make more money than the cost of borrowing, therefore we can continue contributions, why not take that to its logical Greek conclusion – just keep borrowing and borrowing and borrowing, that way none of us will have to work because the Super Fund is basically guaranteed to make more than the interest cost. It’s like free money isn’t it?

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  10. swan (659 comments) says:

    @ statisticallydeviant

    Those figures above illustrate something quite curious and relevant to the current debate. National has effectively leveraged up the existing power assets. It did this by shuffling Tekapo from Meridian to Genesis and pocketing the proceeds, while Genesis raised money via a bond issue. But on the cullen fund front, National is saying that any leveraging is not only ‘a bad idea’ but qualitatively irrational.

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  11. big bruv (13,450 comments) says:

    “Say no to borrowing to save under Goofynomics. We need less debt, not more.”

    Yet idiots like Adolf still cheer on command for our current government who borrow one billion a month.

    Looks like (economically) another election where we can choose between Labour and Labour lite.

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  12. Manolo (13,514 comments) says:

    The situation must be pretty bad for the socialists when even the usually servile Luddites find ground for criticism.

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  13. Fisiani (976 comments) says:

    The title of this thread should be Borrowing $6,500,000,000 to gamble with pension funds.

    You cannot ever trust Labour to do what is right for New Zealand

    Their economic reckless madness is decried by every other party.

    It is the patriotic duty of every voter to Party Vote National.

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  14. Black with a Vengeance (1,608 comments) says:

    I’m inclined to think it’s the socially conscious duty of every voter to Part Vote Green

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  15. Rick Rowling (823 comments) says:

    Dividends…

    Meridian $683,644,000
    Solid Energy $54,000,000
    Air New Zealand $57,000,000

    Total: $1.08 billion”

    Meridian Annual report: $683.6 million, including a final dividend of $68.5 million for the 2010 financial year, an interim dividend for 2011 of $94.1 million and a one-off special dividend of $521 million in June 2011 paid from the proceeds of the sale of the Tekapo power stations.

    So Labour’s numbers only add up because of the proceeds of the sale of some state owned assets?

    Bwa hahahahahahahahaha

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  16. backster (2,105 comments) says:

    The figures also look shonky to me. They seem to be for two financial years and the special dividend seems to be a return of capital as a result of the sale of assets. So from the billion dollar figure you remove half of it and also the 94 mill 2011 interim div.

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  17. Manolo (13,514 comments) says:

    I’m inclined to think it’s the socially conscious duty of every mentally-deficient, gullible, brain-damaged voter to vote Green.

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  18. Scott Chris (5,946 comments) says:

    swan says:- “isn’t the argument that we should only be putting money in during times of surplus just a false rationality?”

    Not if your rationale is based on sensible risk management.

    Apart from which, the government has no business investing on our behalf when history has shown us that they are not qualified or competent enough to carry out this task.

    Also the government, by popular mandate, is only empowered to provide a safety net for those genuinely in need, albeit the bare essentials. Anything beyond that is power abuse.

    They are not empowered, for instance, to borrow money to gamble with it on our behalf.

    Only an idiot borrows money in order to gamble with it IMO.

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  19. thedavincimode (6,577 comments) says:

    insider

    “… just keep borrowing and borrowing and borrowing, that way none of us will have to work because the Super Fund is basically guaranteed to make more than the interest cost. It’s like free money isn’t it?”

    Yes. I think that’s the idea.

    Has anyone taken the time to put the fuckwit Goff’s claim of 25% returns to bed by identifying how much of that was attributable to recapture of losses immediately post the credit clag.

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  20. swan (659 comments) says:

    @ Scott Chris:

    “swan says:- “isn’t the argument that we should only be putting money in during times of surplus just a false rationality?”

    Not if your rationale is based on sensible risk management

    Apart from which, the government has no business investing on our behalf when history has shown us that they are not qualified or competent enough to carry out this task.

    Also the government, by popular mandate, is only empowered to provide a safety net for those genuinely in need, albeit the bare essentials. Anything beyond that is power abuse”

    I think you are agreeing with my point, you are just coming down on Don Brashes side of the argument. For would you not agree with the idea of a sell down of the Cullen Fund to pay back debt? National thinks that we should keep the amount in there at the moment just not put any more in – classic status quo bias.

    “Only an idiot borrows money in order to gamble with it IMO.”

    And by leaving funds in the Cullen Fund instead of using it to pay down debt, the government is doing just that. It is leaving the chips on red, just where it found them when it took office.

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  21. tvb (4,229 comments) says:

    Putting this in household terms. You have to borrow to meet your day to day living as well as a large liability caused through lack of insurance. On top of that you borrow more to invest in some long term savings. And you tell your bank manager you can make a profit on the investment and call that income. This is Goofynomics.

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  22. KevinH (1,142 comments) says:

    DPF says:

    “Now Europe remains on the brink of a debt crisis. If Greece goes under, this will snowball.”

    This is exactly the risk scenario that borrowing for the fund will create, and is lately referred to by John Key as “Greekonomics”.
    Labour is exhibiting reckless behaviour pursuing this type of flawed thinking and this policy illustrates that Labour has become economically illiterate, even the Greens don’t agree with them.

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  23. Black with a Vengeance (1,608 comments) says:

    i’m inclined to think it’s the socially conscious duty of every mentally-deficient, gullible, brain-damaged voter to vote Green.

    Advocating National voters to vote green Manolo…good on ya mate!!!

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  24. slijmbal (1,223 comments) says:

    Why are we not surprised? By definition Cullen’s Folly was always the equivalent of borrowing to save as we always had government debt.

    Let’s not forget the cost to the economy of taking approx $13 billion out of the economy in the 1st place.

    The basic premise of the fund is and always has been flawed – shonky economics from Labour? – of course

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  25. Scott Chris (5,946 comments) says:

    swan says:- “And by leaving funds in the Cullen Fund instead of using it to pay down debt, the government is doing just that. It is leaving the chips on red, just where it found them when it took office.”

    Yes I agree. There should be no fund IMO. Alas it appears to be popular, and unfortunately John Key doesn’t have Ron Paul’s integrity. I’m sure though, that John Key is smart enough to know better.

    Mind you, that’s why he’s in power and Ron Paul isn’t.

    Political expediency is such a poisonous necessity.

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  26. dime (9,607 comments) says:

    Mercury has a power station in chile or somewhere like that? are the left against us being able to buy power companies in other countries?

    or is it just NZ that gets to be selfish?

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  27. Put it away (2,888 comments) says:

    jesus christ, if even the greens can see your plans are economically irrational, it really is time to put the kettle on, have a sit down and rethink your life

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  28. hannity (152 comments) says:

    National says no to borrowing and saving ,but yes to borrowing for spending and tax cuts.
    No wonder Standard and Poors isnt impressed with Keys ‘fiscal incompetence.

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  29. thedavincimode (6,577 comments) says:

    dime

    Brilliant!! Maybe Mercury could sell it and pay a whopper dividend!! What would that do to the ROI?? :P

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  30. tvb (4,229 comments) says:

    Hannity Labour is ALSO borrowing for tax cuts. National is NOT promising tax cuts this election. Another example of Goofynomics from Labour.

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  31. Paulus (2,540 comments) says:

    It looks aas though the Greens have now become the leaders of the opposition, outsmarting Labour by taking the left ground from under them.
    Labour are in the middle ground not quite knowing which way to go – left, but the Greens have that, or right into National territory.
    When I look at the possible new Green MPs I am reminded that what can be seen are the first crop of PHD’s in “Sustainability”. No real jobs – mostly University Lecturers ansd Researchers.

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  32. nadir (100 comments) says:

    The Super Fund numbers are actually significantly worse than reported, due to the calculation method used, and the fact they report on a pre-tax basis.

    Here’s how the super fund reports its returns:

    Returns are measured on a ‘time weighted’ basis (monthly compounding). This is common practice when measuring investment managers’ performance against benchmarks, as it eliminates the impact of cash flows.

    But if you take the Super fund contributions from the government:

    30/06/2002 615.000
    30/06/2003 1,269.000
    30/06/2004 1,910.079
    30/06/2005 2,107.000
    30/06/2006 2,337.000
    30/06/2007 2,049.000
    30/06/2008 2,103.000
    30/06/2009 2,242.000
    30/06/2010 250.000
    30/06/2011 0.000

    Then take the market value of the fund as of 30/9/2011 = 16,634.7 billion, then solve for the internal rate of return that equates that stream of contributions with the latest reported value, you get an annualised IRR after tax of just 2.17%.

    The reported 6.01% is after fees but pre tax. If you adjust our calculation to make it pre -tax (by deducting tax paid in a year from contributions in the same year) you end up with a pre tax IRR (Super fund reports performance pre-tax) of 5.72%

    Why a difference? Timing of cashflows does make a difference – essentially the way the NZ Super Fund reports returns is akin to an equally weighted average of the monthly returns. But in reality, they get given lumps of cash to invest at different times, so the real return on capital is a weighted average of those flows. Simple example – I have $100 to invest. In Year 1 return happens to +10%, in year 2 i t happens to be -10%.

    If I invest $100 at start, my ending balance is 100 x 1.1 x 0.9 = $99, a return over the two years of-0.5% per annum.

    If I invest $50 over two years my end balance is 5 x 1.1 x 0.9 + 50 *0.9 = 94.5, a return over the two years of -2.8% per annum.

    First example is how the super fund calculates returns, second example is the actual investment experience the NZ Government (or us taxpayers) has had.

    NZSF define their benchmark as NZ T Bills +2.5% _ have you noticed how they actually report performance WITHOUT the 2.5% target? So rather than +5.51%pa, their target is actually 5.51% + 2.5% = 8.01%. So on their figures, they arent underperforming by 0.5% as claimed, they are underperforming by 3%. This distinction is important – to invest in “risky markets” you need to get paid a risk premium that compensates you for the extra risk you take. 2.5% is getting toward a sensible number for the extra return you desire given the extra risk. If the proposition is just “I’ll give you the risk free rate in return for taking extra risk” then you’d be a mug to accept that.

    But back to the numbers.

    NZSF claim 6.01% pre tax versus risk free of 5.51%. Claimed outperformance =0.50%

    I think its actually 5.72% versus a risk free of 5.51%, or a risky benchmark 8.01%. Underperformance = -2.29%.

    On an after-tax basis, I get a performance of +2.17%. If you invest in T bills and paid (conservatively) 33% tax, your risk free rate of 5.51% is an after tax of 3.69%. So an underperformance of 1.52% and that’s before you even think about a risk premium.

    Also bear in mind the $278 million of management fees “we” (the taxpayer) have paid to investment managers……..

    Another surprising aspect of the Super fund accounts is that nowhere do they seem to publish the actual cost (salaries, bonuses, rent, car parks, morning teas, travel etc) of running the Fund. I think that should be public domain information.

    To replicate your back of the envelope calculation, if we had invested the after tax contributions at a pre tax return of 5.01% (the risk free) the value of the fund would be about 608mm lower – so your 100mm should (imho) be $608 million. But if you require a rational return (say risk free +2.5%) then the Super Fund is around about 1.6 billion short. Despite what your email form the NZSF says, you can actually assume what the return would have been on the tax amounts – after all the Super Fund makes the assumption for us when they calculate their returns (hint – the returns quoted by them for every period are pre-tax).

    To summarise:

    We have borrowed 14.882 billion less 2.537 billion in tax = 12.345 billion

    Income on that money = 16.6347 billion – 12.345 billion = 4.290 billion

    Cost of borrowing (at 5.01%) = 16.026 billion ( net principal plus interest at 5.01%). So value add by the Super fund = $608 million.

    However if the Super Fund is measure by their own performance criteria (risk free +2.5% ) they have underperformed by a lot more:

    At 7.51% we’d expect the net of tax contributions to have grown to 18.284 billion. Versus the current value of the fund we are missing $1.65 billion.

    The last point I would (tediously) make, is that it is great the PR person at the Super Fund is all over your blog with a response to negative comments. I’m very surprised they cant do better than Clearly, we don’t know what the return on that $2 billion might have been had we invested it instead. The point though is that it’s a bit more than $100 million. I’ve looked at their website and spent 30 minutes doing numbers and can come up with a better estimate than they can. And lastly lastly – best estimate I can find anywhere (and again – this is really hard to find) is that that the Super Fund will reduce the cost of Super from 2029ish by less than 1% of GDP per annum. That’s not far away from a rounding error.

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  33. Mark (1,403 comments) says:

    Norman is looking very much like the leader of the left. He has positioned the Greens in a much better space by getting rid of a good number of the lunatic morris dancers and misfits and is genuinely looking for the young voter and the left. Adds a bit of rationality to the green message and seems a bit more pragmatic than they have been in the past.

    He certainly has looked far more assured and credible than Goff has in this election campaign. The Greens will continue to hurt labour I expect.

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  34. thedavincimode (6,577 comments) says:

    nadir

    Thanks for the effort. Now try and get it on the front page of the Herald/Dominion ;)

    The fuckwit Goff does indeed appear to have pulled the 25% out of his arse. Presumably all recovered losses from the melt down. Gosh, is that a lie?

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  35. bka (135 comments) says:

    nadir, would you say that it is early days to extrapolate a return for the fund? If you did the same calculations for June 2011 you and DPF would have vastly different results (much better) , to say nothing of June 2009 (much much worse). This suggests to me that there is too much volatility in recent figures to make a prediction about things in 2031, other than assuming that capitalism will work much as it has in the past, and outstrip risk free return in the long run. Volatility is an expression of risk, but that is reduced by investing over time.
    That means the situation now is more about the potential missed opportunity of investing when things may be cheaper vs the other competing demands we have and the risk of getting into trouble in the short term.

    Also DPF, if it is illogical to borrow to save, does that also apply to the govt subsidy into Kiwisaver, with a falling market?

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  36. nadir (100 comments) says:

    bka- yes that’s absolutely a fair point re volatility. Hindsight makes investing dead easy. Personally I think we are in for a period of much lower returns – not the 8-10% per annum we have had since the 1960s. I think the points I am making are that:
    1. It is stupid to borrow money to invest in a scheme like the Cullen Fund. Norway runs a very good sovereign wealth scheme – they fund it from oil revenue. Singapore also run schemes (bit dodgy on some of the governance issues there) but they fund it out of surpluses and for a large chunk of it have individual accounts for taxpayers. Australia – bunged proceeds from privatisations in there etc. The way we do it is both intellectually and economically dishonest.

    2. The Super Fund is clearly quite sensitive about their lack of performance because of the way they present returns and keep admin costs top secret. I challenge anyone to look at their accounts and discover what has been paid for the following three categories: Salaries, bonuses, travel.

    3. Most managers describe an expense ratio for the fund. NZ Super should. I actually think their’s will be quite modest and defensible.

    4. Borrowing to fund kiwisaver subsidies is a bit more defensible to my mind – there’s a behavioural/educational objective there too. Individuals need to take responsibility for their own savings – the goverenment cannot be relied upon to fund the retirement of current pensioners, let alone 40 somethings like me or (laughs out loud at the stupidity iof this expectation) the retirement of my children. If encouraging people to save long term, away from residential property, helps then that’s a good thing. But it has to be individual accounts otherwise people expect the government to do all the work for them.

    5. Volatility isn’t really an expression of risk, and especially when not looked at in conjunction with an investors reisk preference. To me, risk is the probability that I won’t get my capital plus expected return back. As an example of how dumb portfolio theory assumptions can be, a 3 year return profile of -10%, -10%, -10% has no volatility and is therefore “better” than a return profile of -5%, +10%, -5%. I know which one I’d rather have!

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  37. SPC (5,472 comments) says:

    Treasury advised the National government to continue contributions to the Cullen Fund even though they would be borrrowed. This based on the reasonable expectation that the long term return would be above the rate of borrowing.

    The ability to borrow to finance investment is usually limited to tying this to an asset – mortgaging – but governments are able to borrow in a more general way and to determine their use of the money as they choose – while they have a good credit rating. The latter qualification is what limits government in their spending or investment level decision-making.

    In the current world finance credit rating market (and our debt growing higher than forecast) this is now higher risk and so an alternative should be considered.

    With hindsight, Cullen’s logic in determining on making contributions into the Fund from surpluses was short-term thinking (because he had surpluses to use at the time). There should have been a plan to move from surpluses to dedicated contributions into the Fund from employees and employers – rather than Kiwi Saver.

    From where we are now, the best option is to limit focus on Kiwi Saver – just 2% from employees and employers into Kiwi Saver, and move towards 2% from employees and employers into the Fund. This would allow debt free build up of the Fund to ensure the viability of tax paid super.

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  38. nadir (100 comments) says:

    SPC -seriously? Why would you suggest payments from individuals as a percentage of their salary get paid into a fund where the payout is the same irrespective of payments. You think that’s a fair and sensible policy? Thats called tax, not superannuation contributions.

    If you want to change peoples savings behaviour incentivise them to save within kiwisaver where the individual owns the process and choices.

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