Cullen rules out NZ 'slush fund'

By KEVIN TAYLOR political reporter

The architect of the multibillion-dollar New Zealand Superannuation Fund, Finance Minister Michael Cullen, says it will not be used as a "slush fund" by finance ministers.

He came under fire from parties at both ends of the political spectrum yesterday after the release of the fund's investment policy, which will invest 78 per cent of it overseas.

Under questioning in Parliament, Cullen repeatedly said the investment policy was up to the fund guardians to decide.

Asked by NZ First MP Peter Brown whether any of the fund would be spent on infrastructure projects such as roading, Cullen said that was an issue for the guardians but it would not be a "slush fund" to be used at the whim of finance ministers.

"This is never going to be a fund which is at the whim of any minister of finance to use as a slush fund for things like silly Think Big projects."

To a question from National Party finance spokesman Don Brash, Cullen said he believed the Treasury's original assumption of a long-term annual return of 9.4 per cent from the fund was realistic.

He said the guardians' estimate of long-term returns was "extremely close" to the original Treasury estimates, despite the fact that there was now a "somewhat different mix" of investments in the portfolio.

Green Party co-leader Rod Donald asked Cullen if he was happy the guardians had an "ethical investment strategy" which allowed it to invest in things such as casinos and brothels, and armaments, cigarette and alcohol companies.

Cullen said Donald's comments were unfair.

"At the end of the day it is up to the board of guardians to interpret their statutory responsibilities and to carry them out.

"I repeat, one of the main purposes of the way the fund is structured is to stop ministers of finance determining how the fund should be invested."

United Future finance spokesman Gordon Copeland asked Cullen whether he viewed the investment of a "mere one-fifth" of the fund in New Zealand as a vote of no confidence in the future of the economy that denied local firms access to capital.

Cullen replied the guardians were determined to invest 7.5 per cent in New Zealand shares.

"The New Zealand share market is 0.2 per cent of the world total, so they are weighting New Zealand 40 times its world average."

Donald said it was "crazy" to risk more than half the fund on overseas sharemarkets which had proved to be a graveyard for New Zealand investments.

He said the ink was still wet on last month's Government Superannuation Fund Authority statement of intent which showed the same investment strategy helped turn a forecast profit of $232.8 million into a $47.7 million loss.

When the GSF was previously invested in Government bonds it made a profit in every one of its 55 years as part of a Government department, he said.

Federated Farmers president Tom Lambie said the Government was robbing taxpayers of vital cash by diverting it into the fund, which would put huge pressure on the fund managers to perform.

"International evidence confirms that increased taxation tends to be associated with reduced growth, while history shows us the adverse returns from Government-inspired investments."

Lambie said the money would have been better left with businesses to make their own investment decisions.

"For many, this brings back memories of Think Big."