The limo issue reveals everything wrong with the Key government in microcosm: greedy, elitist, hypocritical, liars. Against the background of the failing economy, it’s one hell of a bad look. But in monetary terms, it pales in to comparison beside their decision to cancel Cullen Fund contributions, which has now cost $334 million.
Remember Bill English sitting there and telling us that canceling Cullen Fund contributions was smart because we didn’t want to be throwing good money after bad, that the Fund had lost 22% in the year to June 2009? It was always a dumb argument. Of course the Fund lost money in the financial crisis but the loses had already stopped by the time the contributions were stopped – in fact, it had made 10% in the preceding four months. The Fund had a once in a life-time chance to buy assets cheaply. The aftermath of the big crash was the worst time to stop investing in a ultra-long term fund like the Cullen Fund.
In the 19 months since the Key government canceled the contributions to the Fund, it has had returns of 37.4%. In the seven months of this year alone, it has gained $1.7 billion more than Treasury forecast.
If National had kept on contributing $150 million a month like they were meant to (and, remember, the law means this money, in fact more money, will have to be contributed later) then by now the Fund would have made an extra net return of $334 million. The contributions plus the returns would have meant we would now have $3.3 billion more salted away in government savings.
But, no. The government said we couldn’t invest in the Cullen Fund at the same time as the government is running a deficit. Apparently, you can’t invest in your country’s future with ‘borrowed money’ but you can use it to cut taxes for the rich, build holiday highways, and buy fancy limos.