Bill English seems set to suspend the government’s contributions to the Cullen Fund.
Here’s a little-known fact, one that Bill English probably doesn’t want you to know: The Cullen Fund made money in March, the sharemarkets are rising and we’re making money on that. In fact, the Cullen Fund out-performed the market.
The markets might go down again before the recession ends but, unless you believe the economy is going to remain in recession forever, this is a great time to invest to make money in the long-run because assets can be bought at such cheap prices. Long-term investment is what the Cullen Fund is all about.
Here’s another little-known fact: the law says that if contributions to the fund are suspended, they have to be made up with larger contributions in the future. We pay either now or later but we pay. That way, it’s a sure thing that we will have the pot of money when we need it.
Put these facts together. We have to put the money in some time and if we put money in now we will get a great long-term return, far better than normal = if there was ever a time not to suspend payments it’s now, we should be buying while the buying’s good, not waiting until prices are higher before we start buying again.
The reality is that National doesn’t like the Cullen Fund, and they would get rid of it if they could. When they nicknamed it after Cullen, they meant it pejoratively (like the John Key Memorial Cycleway). Their long game is to reduce the costs of public superannuation by cutting entitlements, rather than fund those costs with the Cullen Fund. That’s what really underlies English’s move to suspend payments to the Fund because he knows once they’re suspended, it will be politically hard to start them again.
In his valedictory speech, Michael Cullen bemoaned the press gallery’s lack of understanding of fiscal policy and economics. When English cries poverty as an excuse to suspend contributions to the Cullen Fund, he will be counting on it.
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