Budget 2006: Cullen Fund profit at 17pc

A bumper 17 per cent profit on the "Cullen fund" has helped push the Government's balance sheet into the black for possibly the first time since Parliament was established in the 1850s.

Finance Minister Michael Cullen, who began pre-funding superannuation five years ago, says New Zealand is now one of only seven Western Governments whose assets exceed their debts.

"New Zealand is in a far stronger position to cope with the fiscal consequences of the demographic transformation which will occur over the next 30 to 40 years than almost any other developed country," he said.

"This will increasingly become a competitive advantage for us as other countries face increasingly difficult fiscal tradeoffs."

The super fund, in which the Government is investing just over $2 billion a year to build up a surplus for the ageing future population, has almost doubled in size from $6.6 billion last June to a projected $10 billion by the end of the present financial year next month. It is forecast to have made a profit of $1123 million in the year - 17.1 per cent of its opening balance, much higher than the sharemarket average.

Dr Cullen said the falling kiwi dollar helped to boost the latest profit figure, pushing up the NZ-dollar value of the fund's foreign investments and dividend earnings.

But the fund also outperformed the market last year, making a profit of 14.1 per cent of its assets against the average for similar low-risk funds of 6.3 per cent.

On average it has made 12.5 per cent a year since it made its first investments in 2003, compared with the risk-free market average of 5.9 per cent.

The fund is forecast to grow to $23.3 billion by 2010, rising from 6.4 per cent of the current national income to 12.4 per cent.

In the black

* The NZ Superannuation Fund made a $1.1 billion profit (17 per cent) in 2005-06.

* The Government's assets, including the super fund, now exceed its debts for the first time since the 1850s.

* NZ is now in a good position to cope with the ageing population.