Journalists not falling for Nats’ $8 billion con-job

Written By: Eddie - Date published: 4:23 pm, June 1st, 2009 - 67 comments
Categories: bill english, john key, superannuation - Tags:

This part of Vernon Small’s article today deserves an extended quote:

“The numbers are stark. If full payments resume in 2020, contributions will have to be more than $1b a year higher than if we continued as normal now. Even then, from 2020 till 2030 the fund will be $37b smaller than it would otherwise have been (not $20b – that is only the contributions shortfall, and does not account for the loss of compound earnings).

Those who support stopping full contributions have argued that, like households, governments would be nuts to borrow to save. But in case you haven’t noticed, governments are different from households – they have longer-term focuses and the ability to adjust income. They can borrow more cheaply and make decisions on future expenditure in a way you and I never can.

There have also been some spurious arguments advanced – including by the prime minister who ought to know better (and no doubt does) – that if it is a good idea to borrow to save, why not borrow huge numbers, $50b or more?

Well, there is a big difference between borrowing prudently and reduction to absurdity. Borrowing $50b creates a risk out of all proportion to the Government’s balance sheet; borrowing $2b a year to keep the fund growing and on track till surpluses return does not.

Mr Key and Mr English must also know that the fund has been enormously successful, has suffered a bad patch along with the rest of the world in the current recession and is now growing again as markets rebound.”

The arguments for not making the contributions are nonsense. John Key and Bill English, both former bankers, know that.

On Q+A yesterday, Guyon Espiner quoted a Treasury official as calling the cancellation of contributions to the Cullen Fund a “fraud” that will cost the country $8 billion even above the cost of borrowing to make the payments. If those figures are right, and they’re Treasury’s numbers, then fraud seems to be the right word.

It’s becoming increasingly obvious that the real reason for cancelling the contributions is to fundamentally undermine the Cullen Fund and with it, the future affordability of Superannuation as we know it. It’s hard to see how Key and English are going to get away with it as an increasing number of journalists cotton on to the plan and start informing the people.

67 comments on “Journalists not falling for Nats’ $8 billion con-job ”

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SPC 1

1 June 2009 at 5:49 pm

Why? Because they declare an end to financing the scheme for their term in office, so we forget about it while they move onto a new ground zero/reality. In their new reality Super is sustained at current levels for their term in office, so no one has to fear their term in office only a new government replacing them and having to deal with their new reality.

In their new reality (life a partition separating us from the elephant in the room during their term in office), they move on to discuss financing tax reform (read top rate 30 cents). Financing “tax reform” costs more than tax cuts, so they are
deferred so they can be replaced by “tax reform”.

In 1990 they cut benefits because of the deficit – they had no choice there was a deficit. Then when back in surplus did they end the benefit cut, no they cut taxes to those in work. This time while the elephant is behind the partition, tax reform will eat up all money available for the Super Fund over the next 10 years. People are supposed to vote for this tax reform – and pay the price later (and whether they save or do not save the tax cut money they will pay a price later).

Now none of this explains why the Fund does not instead to finance its growth – it can finance this out of its own existing earnings on assets. So not only are they dishonest and devious they are also stupid.
lprent 2

1 June 2009 at 6:30 pm

Fraud is the Appropiate word. The superannuation fund was a contract entered into with the taxpayers in 1975 when National scrapped the previous fund for short term political gain. They are trying to do the same again, also for a short term gain – this time for taxcuts.

Scrap the taxcuts.
- Con 2.1
  
  1 June 2009 at 7:19 pm
  
  Quite right. I think it’s the dancing cossacks all over again.
  
  Interest rates are low and investment assets are going cheap? What better time to borrow and invest? But wait! Won’t it end up with the fund owning all the farms and businesses in the country? “And you know what that’s called”.
Robert Winter 3

1 June 2009 at 7:14 pm

Apart from being a new face, a good worker of the Koru Club crowd and the possessor of a disarming “Gosh, I’m new to this politics game but you can trust me” grin, Mr. Key’s strength is, we are told, his technical understanding of things financial. Before the election, the sycophantic on the Right openly slavered at the wizardry of the new-found, US-honed wunderkind. If it is so, then Mr Key must be fully aware of both the performance of the Fund, and the implications of Budget decisions for both the Fund and NZ’s future generations.I do not doubt, either, that Treasury officials (more than one) also understand these consequences. The decision may have pragmatic aspects (e.g. to allow taxcuts), but it also indicates that the Social Contract carries little weight in an ideological framework which privileges the individual and rejects the social. This leopard has changed no spots. Those elements of Labour’s social agenda that have survived this budget will be on the block in the next ‘tougher’ budgets. Meanwhile, let’s soften up people for the privatisation of the Ports of Auckland……..
deemac 4

1 June 2009 at 7:54 pm

as someone else pointed out, even homeowners paying a mortgage are sensible if they put money into a savings account or pension fund – the idea that you can’t save for the future if you have a debt is rubbish
tsmithfield 5

1 June 2009 at 8:43 pm

deemac

“as someone else pointed out, even homeowners paying a mortgage are sensible if they put money into a savings account or pension fund – the idea that you can’t save for the future if you have a debt is rubbish”

The big difference in this analogy is that the house-owner is investing their own money and taking direct responsibility for the risk.

What you are expecting the government to do is to commit other people to debt without their consent and invest the money borrowed on their behalf overseas in an investment fund that has currently lost billions.

It is important to remember that the projected 8b profit from Treasury is just a possibility, not a certainty. A whole range of scenarios are possible. It is also possible that the whole thing could go pear-shaped and most of the investment is lost. I can imagine if the government actually did what you want, and the investment crashed and burned, the very same critics on this site would be chiding the government for having made the decision to borrow and invest.
- aj 5.1
  
  1 June 2009 at 9:12 pm
  
  It is equally valid to say the government has committed ALL current and future taxpayers to debt in order to fund tax cuts that deliver mostly to the top 10% of earners, those who are in least need of more money and who are in the best postion to fund their own retirements. Immoral.
- SPC 5.2
  
  1 June 2009 at 10:03 pm
  
  tsmithfield
  
  The Fund has enough income from its $12.5 billion of investments to finance the holding cost of borrowing $6-7B. This at no risk to the government and taxpayer.
  
  Most businesses having invested this much capital would finance further expansion via borrowing. Lenders see no risk in such financial management where debt is only a 1/3rd of assets, so borrowing is cheap.
  
  FFS dividend returns on Telecom are 10% – much higher than the cost of borrowing.
felix 6

1 June 2009 at 9:03 pm

Anyone know how much has the fund made in total, ever?
- Matthew Hooton 6.1
  
  2 June 2009 at 4:38 pm
  
  See http://www.nzsuperfund.co.nz
  
  Fund Highlights:
  Commenced investing September 2003 with $2.4bn cash
  Total assets (at 30 April 2009):$12.5 bn
  Rate of return since inception of 3.26% p.a. against risk free rate of 6.73% p.a.
tsmithfield 7

1 June 2009 at 9:18 pm

Its return since inception is 3.26%. However, when that return is compared against what could have been obtained risk-free compared to investing the money in 90 day bills the return is negative 3.47 percent. That is, the government would have done much better had the Cullen fund been invested in 90 day bills for the period.

http://www.nzsuperfund.co.nz/index.asp?pageID=2145855927

Given that Treasury is projecting a 6 percent return and 90 day bills have been giving a similar rate over the 5 years or so, I think that my position is quite justified. Why put the money at risk if the same rate can be earned risk-free on 90 day bills?

If the money is borrowed and the interest cost is added on, then the Cullen fund in its current form is even more unviable.
- SPC 7.1
  
  1 June 2009 at 9:56 pm
  
  To seriously compare the historic rate of return after one of the largest falls in stockmarket history is moronic – so I will assume you are just acting as an apologist for the Nats rather than simply playing dumb.
  
  The rate of return prior to the market fall was higher than in cash investments/bonds/bills etc and the return in a few years will again be higher than was obtainable in that way. Why well because cash was cheap 2002-2004 and is cheap now (it’s just hard to get it if you don’t have it, or are not able to borrow because of a poor credit rating).
  
  It is disingenuous to relate a past high rate of bills when the OCR was high with future returns available now with the OCR at 2.5%. At such low rates the stockmarkets recover because of higher dividend yields which is why those with cash get back into stocks while they are better value as they are and will remain for a few years.
  
  In a few years when our Fund is outperforming bills over the period of the Fund – people will count the money lost by the 2009 decision of National – it should alone cost them the 2011 election – but then there is Auckland as well so it will be hard to prove.
  - The Baron 7.1.1
    
    2 June 2009 at 3:14 pm
    
    My god, do you work for BlueChip? You’re running counter to all kinds of conventional financial wisdom right there!
    
    – Ignore the historic returns that are inconvenient for you
    – Assume that everything is going to bounce right back to the way it was before (if not better!)
    – Make outrageous claims about future returns to justify borrowing other people’s money to fund investments.
    
    This is EXACTLY the sort of thinking that cost Ma’s and Pa’s their retirement savings when the finance company boom went bust (side dig – what the FUCK did Dalzeil do about that one – now that is a crime).
    
    Come on man, think – to invest now is a collosal punt. To do so with BORROWING is even more of a punt. I’m not prepared to take that risk.
felix 8

1 June 2009 at 9:49 pm

And how much is that in pubes?

Sorry, I mean in dollars.
- the sprout 8.1
  
  1 June 2009 at 9:53 pm
  
  that’d be a gross of pube duvets (winter weight) at least.
tsmithfield 9

1 June 2009 at 10:13 pm

SPC “To seriously compare the historic rate of return after one of the largest falls in stockmarket history is moronic – so I will assume you are just acting as an apologist for the Nats rather than simply playing dumb.”

Yes, I know all this. However, that does not alter the fact that Treasury are predicting 6% return which is what risk-free 90 day bills are yielding. If we go by Treasury predictions then borrowing to invest on world equities is plain stupid.
felix 10

1 June 2009 at 10:34 pm

So t, why do you and others keep saying the fund has “lost billions”?

Clearly that’s not true. The fund has made billions.

You can argue that there could have been different investment decisions which could have made more billions, but saying the fund has “lost billions” is just straight bullshit, isn’t it?

Also I’m working in dollars now, not pubes.
SPC 11

1 June 2009 at 10:40 pm

If the cost of borrowing is 4-5% (there is no risk in lending to a Fund up to a 1/3 of the Fund value – especially after a market correction), then a guarantee of 6% is a profit. The reason one can borrow at a lower cost than local bills is that for outsiders investing here in bills is the risk of currency change (hedging costs, which is why they need such a high rate 6% or so) – whereas a Fund investing around the world can avoid hedging cost by having a diversified portfolio around the world (and cashing up from 2027/2030 where the assets are best valued as to currency exchange at the time).

So why not?

One can argue that after borrowing 6-7B and investing in stocks and taking the profits available over the next few years the Fund should then bring some of the profits back into local bills (which they failed to do last time – lesson learnt I hope).

Other points

Treasury has to be conservative as to such forecasts
Is that 6% return after tax and the bill return before tax?
Adrian 12

1 June 2009 at 11:10 pm

The point that is being missed here is that we are in the shit, and have been since 1975, because every other country’s super fund owns huge swathes of NZ and repatriates profits and dividends thus creating a large part of the balance of payments problem. The ‘Cullen’ Fund was at least a start down the track we needed to go. Key and English’s mates couldn’t make their usual kickbacks on the money that the fund invested because it was so efficiently run. ( the cheapest in the world, I think). As they only have eyes on the commissions on the potentially 30 to 80 billion of our money at the expense of ordinary NZers, these bastards are evil.
- Zaphod Beeblebrox 12.1
  
  2 June 2009 at 10:09 pm
  
  Yep, that is the nub of the issue.
  You only need to compare Australian super with what we have here. The billions invested in super in Australia provide a ready reserve of capital for investing in Australian companies and provides a pool of the savings would otherwise be spent on imported goods or borrowed from O/S, which is great for reducing the current account deficit.
  For NZ the equation is clear-the more we save (and super is just another form of this), the less we pay in interest.
  The bad side of super in Australia, is the amount of money creamed of by advisors and the funds management industry, something the wage earner has no choice in. The beauty of the Cullen fund is that we don’t have to pay millions for these services. Lets hope we can keep it that way- though i don’t hold out much hope that we can keep their greedy fingers off our money.
OhPlease 13

1 June 2009 at 11:26 pm

I guess NACT have to sell hard the idea that NZ has a debt crisis in order to soften us for PPP. The only benefit of PPP is that it takes debt off the Government books. Even though it does so with an accounting trick, its is often viewed by imbeciles as a solution to investingt when Governments are indebted. Watch this space for a PPP proposal coming to a road near you (or in the case of Waterview) a tunnel under you!
tsmithfield 14

2 June 2009 at 7:09 am

SPC “then a guarantee of 6% is a profit.”

There are no guarantees. The 90 day bill rate might not perform as well in the future.
The Treasury projections are a guess. What is certain is that we will have to pay back the money we borrow with interest.

Felix “So t, why do you and others keep saying the fund has “lost billions’?”

Well, it lost money compared to what would have been gained by investing in a risk-free investment. It also lost billions compared to its highest level. The only gain it made was a slight gain against the principle invested. Of course there is a fairly obvious reason for this. But could you guarantee that such a scenario could not repeat in the foreseeable future, especially considering factors such as peak oil etc?
- Draco T Bastard 14.1
  
  2 June 2009 at 11:37 am
  
  So, it made money against the principal. ie, it didn’t lose any. You can’t lose what you didn’t have.
- felix 14.2
  
  2 June 2009 at 11:55 am
  
  So when you say the fund “lost billions”, that was the opposite of what actually happened, yes?
  
  The opposite of the truth, or in layman’s terms, bullshit.
  
  I suggest that the fund could also be said to have “lost billions of pubes”.
  
  I say this because had the principle been invested in pubes, we would now have billions of pubes. As of today, the fund owns no pubes, therefore it can be said to have lost billions of pubes.
  
  My reasoning is identical to yours, no?
vto 15

2 June 2009 at 8:58 am

Maybe Gareth Morgan’s onto it when he suggests that the Cullen Fund be abandoned and Kiwisaver made compulsory. Maybe that’s the aim.

And such a manouevre has merit imo.
- Kevin Welsh 15.1
  
  2 June 2009 at 9:05 am
  
  NANNY STATE!!!!
  
  Just kidding, but the idea has some merit. The less influence the government has on super the better I like it. Set something in stone and leave it. Give people some certainty.
- Daveski 15.2
  
  2 June 2009 at 9:28 am
  
  Indeed. It would force a political decision based on what’s best for the country, as opposed to what’s best for each political party.
tsmithfield 16

2 June 2009 at 9:22 am

vto “Maybe Gareth Morgan’s onto it when he suggests that the Cullen Fund be abandoned and Kiwisaver made compulsory. Maybe that’s the aim.

And such a manouevre has merit imo.”

I would prefer this sort of option. Clearly something needs to be done about superannuation. Making Kiwisaver compulsory at least would give people the choice of where they invested their money.
- vto 16.1
  
  2 June 2009 at 9:41 am
  
  The problem with any super owned and controlled by govt is that it is owned and controlled by govt. And we all know the sorts of things govts get up to. There could be no certainty that a Cullen Fund type system would never be rorted by a future govt in some way.
  
  This will be very interesting to watch over the next year or three…
  - aj 16.1.1
    
    2 June 2009 at 4:10 pm
    
    Like, rorted like NatACT are doing now?
    - The Baron 16.1.1.1
      
      2 June 2009 at 4:13 pm
      
      Thanks for adding nothing to the conversation, fanboy.
      - felix 16.1.1.1.1
        
        2 June 2009 at 8:16 pm
        
        Actually aj’s comment pointed out an interesting disconnect in the comment above. Yours, on the other hand did nothing but waste electricity.
    - vto 16.1.1.2
      
      3 June 2009 at 8:30 am
      
      yes aj. my pointy point exactly. thanks.
      
      felix, there was no ‘disconnect’ there was a direct connect, as aj has pointed out.
      
      but the debates have moved well past this now it seems. I’m half a day late.
- Quoth the Raven 16.2
  
  2 June 2009 at 12:28 pm
  
  Making Kiwisaver compulsory at least would give people the choice of where they invested their money.
  
  But it wouldn’t give them the choice of whether or not to save. You think government compulsion is a good thing, ts?
- Zaphod Beeblebrox 16.3
  
  2 June 2009 at 10:11 pm
  
  Gareth Morgan is hardly unbiased- he stands to make millions from commissions.
Ianmac 17

2 June 2009 at 11:03 am

I was pleasantly amazed that Guyon Espiner of all people persisted with his questioning of Bill English on Qand A. Amazing! And Vernon Small too! And here on the Standard. Some of us (me) can only just follow the Economic arguments but we (me) are learning.
Adrian 18

2 June 2009 at 11:13 am

The chances of super being rorted (and rooted) by private “managers” and “advisers” are infinitesimally greater than by government agencies, tho National is once again doing it’s damndest.
- Draco T Bastard 18.1
  
  2 June 2009 at 11:39 am
  
  bingo
- vto 18.2
  
  2 June 2009 at 11:44 am
  
  wrong
jarbury 19

2 June 2009 at 11:45 am

I think the debate about whether it makes sense to “borrow to save” is actually irrelevant.

If we say that it is ESSENTIAL for us to continue paying super at 66% when people turn 65 then that’s an amount of money WE HAVE TO PAY in the future. Therefore, if you don’t have the cash you’ll need to borrow for it – either now or later.

Surely we can work out the amount of money we’ll need in the Cullen Fund in 2030 for superannuation to continue in its current form – and then we work out the best way to ensure we have that money. It may make more sense to spread the borrowing out over time, or it may make more sense to borrow more later (or not have to borrow at all).

Surely the safer option is to keep paying now, then later on if we have surpluses we can sink that money into paying back our debt rather than paying higher levels of Cullen Fund contributions?
- Matthew Hooton 19.1
  
  2 June 2009 at 1:19 pm
  
  No, borrowing in 2030, if necessary, is far more sensible than borrowing now because it may turn out that the economy grows faster than expected between now and 2030 in which case we won’t need to borrow at all.
  As my RNZ colleague Laila Harre has pointed out over and over again, including this morning, ultimately the only factor that will determine our ability to pay Super in 2030-2050 is the size of our economy then (and, I would add to this, our willingness to borrow or reduce the surplus then if necessary.) Everything else is just an accounting trick.
  It seems a little silly to think that decisions made in 2009 will really affect transfer payments in 2050. Between 1909 and 1950 there was a major Depression, two world wars, the invention of jet aircraft, nuclear power etc etc etc. We really don’t know what 2050 will look like and it is arrogant to think that the 2009 Budget will have much bearing, if any, on the state of the world 41 years hence.
  - Pascal's bookie 19.1.1
    
    2 June 2009 at 1:22 pm
    
    Muldoon couldnae have said it better matt.
    - Matthew Hooton 19.1.1.1
      
      2 June 2009 at 1:29 pm
      
      No, I think you’d find that Mulddon would have decided to borrow to invest, because he thought he was an economic wizard and fiscally profligate, who throught he could foresee the future many decades ahead. Michael Cullen, however, I think would probably have suspended contributions to the Fund, exactly the same way Bill English has, because he was much more fiscally conservative.
      - Pascal's bookie 19.1.1.1.1
        
        2 June 2009 at 1:56 pm
        
        Yeah, Cullen would totally have signed the death knell on the Cullen fund. We also know what Muldoon would have done about prefunding retirement, he would have said “no need, the future can look after itself” and gutted it while promising no change to entitlements, ’cause that’s what he did. Just like English.
        
        8 billion dollars treasury reckons.
      - aj 19.1.1.1.2
        
        2 June 2009 at 4:13 pm
        
        Cullen would have had the guts to stop the tax cuts. He might have been on the backbench the following day though.
      - The Baron 19.1.1.1.3
        
        2 June 2009 at 5:10 pm
        
        More great analysis from AJ.
        
        God, why don’t you go ask Cullen if he will let you blow him?
  - Maynard J 19.1.2
    
    2 June 2009 at 3:33 pm
    
    “…ultimately the only factor that will determine our ability to pay Super in 2030-2050 is the size of our economy then.”
    
    If there is a multi-billion dollar fund that is big enough, apparently it will take a whole percentage point off the GDP funding required for super. From over 6.5% to below 5.5%. If that is a mere ‘accounting trick’ then we should magic up a few more solutions.
    
    “It seems a little silly to think that decisions made in 2009 will really affect transfer payments in 2050.”
    
    No it does not. If a savings fund was started in 1909 and regularly added to over the next 50 years, it would have a pretty pile of cash in it, “a major Depression, two world wars, the invention of jet aircraft, nuclear power etc etc ” not withstanding. What a thoroughly specious argument.
    
    Hopefully you are right about this though: “… arrogant to think that the 2009 Budget will have much bearing…” – I would also like to think that this mistake can be erased by a Government other than the current one, before we all pay the ($8bn) price.
    - Matthew Hooton 19.1.2.1
      
      2 June 2009 at 4:24 pm
      
      No, I think that’s wrong too. I think that you’ll find if a savings scheme had been set up in 1909 and invested in the sharemarket it would be unlikely to have delivered a return by 1950. I suspect that most of it would have been lost in the 1929 sharemarket crash and I’m not sure how it would have come out of the Second World War, depending on where it was invested. Some one out there will know for sure.
      
      I think you are also over-emphasising what $8 billion means in the context of a multi-decade entitlement scheme. It is not very much at all (the turnaround in the fiscal position in the last 12 months is more than that). It is certainly not enough to justify Enron economics of the sort the Labour Party (although, I suspect, not Michael Cullen) is proposing. The margins involved here are very small.
      - Maynard J 19.1.2.1.1
        
        2 June 2009 at 5:05 pm
        
        Do you make financial decisions based on the assumption that a big event or two will wipe out any long term savings several times each generation? Is this generally considered sound economic practice, to assume two events will wipe out all your savings every 20 years or so?
        
        If that is really the case, then I imagine you will support my call for the end of capitalism as a failed model.
        
        Did you know that if you start saving $100 a month at 18, you will end up with more money at 65 than someone saving $200 a month from 30 despite the latter having a significantly greater capital input (at a 2.5% net real rate of return)?
        
        It is not possible to over-emphasise $8bn in the early stages of what was meant to be a long-term saving scheme.
        
        Not sure what your Enron comment is meant to allude to, or exactly how much hyperbole is involved so I shan’t tender a response yet – just what do you mean?
jarbury 20

2 June 2009 at 11:46 am

I would prefer this sort of option. Clearly something needs to be done about superannuation. Making Kiwisaver compulsory at least would give people the choice of where they invested their money.

And for those who can’t afford to contribute much to Kiwisaver? We’ll just let them starve in their old-age right?
- vto 20.1
  
  2 June 2009 at 11:52 am
  
  of course not mr jarbury, that’s just being silly
OhPlease 21

2 June 2009 at 2:28 pm

I’ve said it before – the Cullen Fund is not economic, it is political. We have a Pay as you go (PAYG) Pension Scheme. I pay for the oldees now, rather than save for my retirement, in the trust that the young ones will pay for me. Nothing in the Cullen Fund changed that. However, PAYG schemes are vulnerable because they rely on an inter-generational compact. How do I ensure that the young ones will pay for me???

The problem is that every generation is vulnerable to being shafted — and baby boomers because of their sheer size are more vulnerable than most. We had to do something to shift the “moral” high ground to these baby-boomers. The Cullen Fund does that by making it look like the baby-boomers did try to do something to ensure the viability of their pension.

English is pulling this high ground away from boomers When they retire, their children and grand-children who are then the taxpayers will say : “you didn’t want to pay higher taxes in 2009 to pay into the fund when you knew there would be a problem in 2020, why should I now have to pay higher taxes to keep your pension at 66%?”
Trevor Mallard 22

2 June 2009 at 2:32 pm

All the debate above ignores the tax paid by the fund.
- The Baron 22.1
  
  2 June 2009 at 3:08 pm
  
  Oh come now, you’re so confident in this “everything goes up” investment plan that you’re already counting the increased tax take too?
  
  I think it is remarkably foolish to assume that now is a “great time to buy”, either on a personal or national sense – there is still plenty of shake out to happen according to plenty of commentators. I would hate to lose a big chunk of that borrowing to poor timing.
  
  So, Trev – have you maxed out your credit cards to take advantage of the great offers that you see available on the share market? If not, then why are you willing to take that risk with public funds?
  - merlin 22.1.1
    
    2 June 2009 at 3:19 pm
    
    They’re Treasury’s numbers. Not ours. They say that over the longrun a managed fund will outperform the risk-free rate of return on government bonds. Don’t know why that’s so hard for you to grasp. Unless you think capitalism is dead.
    - Matthew Hooton 22.1.1.1
      
      2 June 2009 at 4:33 pm
      
      It is a banal observation that the long-run return from managed funds will (most probably) outperform the risk-free rate of return on government bonds. It has done in the past and, yes, in the very long term it is likely to do so again. (Of course, this issue is not about the very long term, because the fund is meant to start paying out in just 21 years.)
      
      The reason I say it is a banal observation is that it is hardly a foundation on which to build public policy. No Government in the world builds public policy on this observation. A government that did would then presumably abolish all taxation and just borrow the necessary billions to invest in equities to deliver the necessary profits to fund all social services and other government spending.
      
      Labour’s absolute nonsense over this issue probably is not hurting them with readers of The Standard just yet but Phil Goff and David Cunliffe have abandoned any chance of being taken seriously by the business and economics communities. Labour did have the Government in trouble in recent weeks with Rankin and so forth, but this promotion of Enron economics is going to see a reveral in that I expect.
      - Pascal's bookie 22.1.1.1.1
        
        2 June 2009 at 6:31 pm
        
        Funny. “Oh noes the business communiteeez will be the unhappy with Labour. Pleez go back to the talking about the rankin distraction, I dare you”
        
        If they are so concerned about Enron economics then they wouldn’t have paid for Brash to take over the National party in the No Brash No cash deal, and ACT would never have received any funding at all before then.
        
        If National and it’s supporters were happy about how this story is playing out, you wouldn’t even be here trying on transparently hollow lines like ‘enron’ and ‘it’s just what Cullen would have done’.
        
        So since when did National consider Cullen to be the bees knees, and where are Cullen’s comments endorsing English gutting the Cullen fund for the next ten years. Nowhere, that’s where.
        
        And Enron economics eh? Would that be pretending that a bunch of liabilities don’t exist, finding some numbers that ignore them, putting those numbers on the prospectus and then promising something like, I dunno, personally guaranteed tax-cuts north of fifty dollars a week?
  - Maynard J 22.1.2
    
    2 June 2009 at 3:26 pm
    
    Credit interest on cash is about 20%. Do you think that is what the government would be paying, or is brain not engaged? If you want to make a point, try to make it remotely relevant.
    - The Baron 22.1.2.1
      
      2 June 2009 at 3:34 pm
      
      Point taken, Maynard – my example was facetious, but you have caught the error in it.
      
      Would you care to engage the more salient points of my comment, or prefer just to stick to ad hominem?
      - Maynard J 22.1.2.1.1
        
        2 June 2009 at 4:24 pm
        
        Your example undermined the point.
        
        I think there needs to be some serious consideration around this though – when Treasury tells English that it is a costly choice and it is also politically unpopular I start to wonder who benefits. and when.
        
        I have a mental image of what is going on here that I will use to explain my position. Think of a population pyramid that shows population in 10-year age bands. Right now we have a relative bulge at the middle. That bulge needs to put aside some money for when it moves to the to of the pyramid (deforming the pyramid even more) and needs to be paid super. It is an unfortunate demographic feature that extra super savings are needed. If they are not paid now, those under the bulge in the pyramid will do all the paying – and they will not be able to do so. The consequences then will be much worse than borrowing now. The Cullen fund pays for that bulge and if it does well enough, it covers for an increasingly aging population post-baby boomer as well.
        
        I mainly argued against your argument (or at least what was supposedly a supporting example), and not against you, so it was not ad hominem by definition. The bit about brain engangement was A.H. but that was an aside to my main point. Hardly ‘sticking with A.H.’
      - Maynard J 22.1.2.1.2
        
        2 June 2009 at 5:12 pm
        
        I would love to, but an earlier and fairly comprehensive comment failed to appear.
        
        In short (very short!), there is a demographic glitch which means that super will be too expensive in a decade or two. This needs to be funded now; if we think the price is too high here then imagine what we will think the cost is when we are billions short and need that money. Either way, it will have to be paid for.
        
        You can not really use the ad hominem call when one small protion of a comment was critical you you and not your argument. By doing so, you make an ad hominem attack of your own.
- felix 22.2
  
  2 June 2009 at 5:54 pm
  
  I would have factored tax into my scenario above, but as far as I’m aware there is no tax on pubes.
- SPC 22.3
  
  2 June 2009 at 11:29 pm
  
  Why is the Fund paying tax now when its purpose is to minimise future tax required to pay for Super after 2027/2030?
Irascible 23

2 June 2009 at 2:37 pm

Investment in the future and in supporting those who have contributed to that future is far more politically and socially responsible than the gamble (gambol) and hope policies advocated by English, Hoot-on & Key.
They demonstrate the same selfishness as Muldoon did in the 1975 election and the campaign to destroy the equivalent of kiwisaver.
doc whose asking 24

2 June 2009 at 4:16 pm

Regards to Adrian and Robert Winter (above) who touched the reality base in respect of purported financial decision and decision-makers.. for the remainder a recommendation.. Go read the feller here for a phase I answer as to why administrators claiming to advance a national profile would even now assume an absolute* position.

Pay if you will particular respect to the word ‘Depositary’ in the legislation enacted and described there. Add a sprinkle of the salty interlacing financial markets have become in the interim and.. maybe you’ll be ready pick up on phase II with its strong – so strong at the time – banking adherents only too willing replace the commerce of commodities with that of financial ‘structures’..

The overall question being asked, of course, whether today’s people are competent to rebuild from the strictures they alone imposed. Or criminal..?

* no rebuttal of reports that enzed government members were paying heed to the former president’s actions at their last annual conference has been received. Let alone expressed. Without such a thing well.. what goes around comes around.. as they say..

ps: the body’s a little better, the neck sounder, yet right now inpassing and ripp0 are excommunicado..
doc whose asking 25

2 June 2009 at 9:02 pm

Something I didnae see in Vernon Small’s article was this..

More to the point did you see it elsewhere too. If so, why so and what about all those unanswered questions. including background questions and likely non-disclosure/s.. for whatever reason.. and where were the media..?.. on those public disciplines… heh

And if you didnae see it then IMO you should, not least bcos in the private sphere relating thereto cronyism can count… unfavorably as well as positively..