First your so called fisking:

1) The $8 billion is a Treasury projection. The same sort of projection that said we were in surplus a year ago. Projections are risky. Anyone who has?

You are guilty of the same thing as Rob – knee jerk conservatism.

No offence to either of you, but I'm going to frame that one.

iPredict stocks in 'Curia backs budget' r wobbly.

And Penguin: this is from yr first line in this thread 'you shouldn't make som may silly errors yourself'.

I'll frame that one Russell.

Namely, it's missing an internal anchor next to the analogy-of-the-analogy so that one can point one's friends directly to it while commenting 'OMFG this is genius'.

– according to the Dom Post GDP per capita will "shrink by the equivalent of $10,500 per person per year until 2014".

Since the current figure for this is $42,089, then GDP will reach zero in 2013 and be down to negative $10k by?

People will marvel at this country where each person destroys $200 in wealth every week.

And with the resulting tourism spin-offs we'll be back above the Congo in no time. Sure it'll re-collapse our economy, but it will be sustainable.

With a graph which doesn't show that at all.

This is a very well thought out post and better than DPFs, but it still deals with only the cost half of the equation.

This SF has lost $4billion in the last 12 months. Why should we invest $billions in a fund that has delivered such apalling losses? Sure?

Members of the former Todd Taskforce on Superannuation have spoken out to reassure New Zealanders that pensions remain sustainable despite the Government's decision to suspend payments to the Superannuation Fund.

...Jeff Todd, who chaired the taskforce?

This SF has lost $4billion in the last 12 months. Why should we invest $billions in a fund that has delivered such apalling losses?

1. Those losses are largely unrealised losses, caused by a decline in market prices for shares. Over the period of decades that the fund is supposed?

It's an odd belief for the National Party to hold, though?

Over the period of decades that the fund is supposed to invest for they are very likely to be recouped and more.

Tell it to investors in the Nikkei.

And furthermore, even if you have a paper loss on the current house, why wouldn't you buy another one?

You might if you had the money to do so. But if your income was dropping, and you had other demands on it, I doubt you would.

The Farrar index of accuracy is that the accuracy of your post is exactly relative to the speed and size of his response – so it seems on that basis you are pretty much 100% right.

Tell it to investors in the Nikkei.

I knew you would say that. But the fund is not supposed to invest in one share market, or even one asset class. So yeah, we can find examples of markets that never recovered, comparing the peak of a bubble to the present,?

So yeah, we can find examples of markets that never recovered, comparing the peak of a bubble to the present, but I don't think they prove much at the scale that the Cullen fund is supposed to operate at.

I've never heard of a compelling argument as to why what?

But in the end, the idea that diversification saves you is based on the fact that whatever Japan got, is not catching. I think that just remains to be seen.

I would hope that diversification would mean that the Cullen Fund wasn't just investing in stock markets, as they all?

Peace index ranks New Zealand the safest country in the world

Mind you, as a NZer, you can cheer yourself up with any story from the Guardian about the?

The Super fund has the advantage of?

I would hope that diversification would mean that the Cullen Fund wasn't just investing in stock markets, as they all tend to fall over at the same time.

NO they don't. If they had. we wouldn't be discussing the Nikkei having been so bad for so long while other equity?

2) Treasury does not include tax on the NZSF Fund as a net gain for the economy as if the money was not invested in the fund, it would have been invested in other taxable activities. You really think you can just invent tax revenue?

David, surely the opportunity cost?

I was actually awake at 2am last night thinking through key points for how to rebut the general absurdity of the "borrowing to save" and the "YOU do it then" lines.

I'd written the following this morning on a notepad to try and create a story around?

With a few exceptions though (like Playstations), Japan hasn't delivered?

It's?

One just needs to quickly think about Peak Oil to be highly sceptical of that approach.

One just needs to quickly think about Peak Oil to be highly sceptical of that approach.

But then after Peak Oil there will be Peak Water and we have plenty of that, so we're going to be rich. Rich, I tell you! Like one of those middle eastern states that?

I always feel like I should be standing behind him as a hype-person, with one white towel over my shoulder, going 'yeeeeah!' and 'DAMN right!'

If Keith would just kneel on the steps of Parliament you could cape him (ala Bobby Byrd) and lead him off stage shaking with mathematical?

Then I popped in here and you'd done it all for me! Perhaps I should lie awake at 2am thinking about winning Lotto...

While I'd be quite happy if Keith won Lotto, I doubt he'd share it around us all.

While I'd be quite happy if Keith won Lotto, I doubt he'd share it around us all.

Yes, that is one fatal flaw in my otherwise flawless plan.

I don't think Treasury's forecasts?

make som may silly errors

Muy silly errors, surely – David's been watching Jon Stewart about that new supreme nominee, innit.

Is Japan really that?

I don't think Treasury's forecasts are worth shit

At which point, there assumptions around the cost of borrowing to pay for that super bulge are equally shit. As are their assumptions around fiscal position in 2030. As are...

They have to make the best call with what they know. Obviously?

While I'd be quite happy if Keith won Lotto, I doubt he'd share it around us all.

Yes, that is one fatal flaw in my otherwise flawless plan.

Just get a baby boomer minister to tell him we are defering payment of his prize for eleven years, and pretend we?

Is Japan really that bad? Or do they show us the future where you can have a high standard of living without an obsession of "growing the economy" all the time?

They fret greatly about an unemployment rate having reached 4.4% and the possibility it could climb as high as?

I am not?

Of course Gareth Morgan reckons we should just gut the Super Fund now and transfer it to compulsory KiwiSaver accounts... in funds like the one he makes money from managing.

Awful conflict of interest (yet again from that guy on Kiwisaver) but I actually agree with him.
If you're going?

Is Japan really that bad? Or do they show us the future where you can have a high standard of living without an obsession of "growing the economy" all the time?

Their immigration policies are draconian and isolationist crap.

Don't recall where it was in our local blogosystem, but someone pointed out that government borrows a certain proportion of its total income and that it is misleading to say any one expenditure item is all funded from borrowing while another is totally funded from tax, etc.

While some of?

It seems to me that this?

I would recommend watching this Yale lecture by the guy running their endowment.

I see alot of parralels between the Yale story and our own. Over the history of the endowment every stock market crash caused THE FEAR which led to them selling equities buying bonds and missing out?

1) The $8 billion is a Treasury projection. The same sort of projection that said we were in surplus a year ago. Projections are risky. Anyone who has been in business will understand the difference between guaranteed return and risk.

Yeah, so? Do you think that Treasury made its estimate?

Given that, you need to build up a?

other Govt agencies that invest their funds for future use – ACC being one that immediately jumps to mind.

I've never understood that. I can't see that the future will have an inbalance of accident beneficiaries over contributors, unless life is suddenly going to get more dangerous. Surely the simple?

Investment returns boost Crown accounts

For the 10 months to April 2009, the Super Fund generated $800 million, ACC $500 million and the EQC $200 million.

The Crown accounts remain in deficit, though investment gains from the New Zealand Super Fund, ACC and the EQC, has?

Also, they're moving from a "Govt pays what they need each year" to a more prudent "we're forward covered" position. So the investment arm looks after the amount sitting there for that forward cover.

In the case of Super, Treasury (I presume they look after Super???) have decided it's best to put aside some money now to?

Still, if the NZSF goes belly up, we'll survive. It would have a deep impact on our living standards, but hey, that's what happens when there are major global catastrophes.

Still havent' heard any argumetns as to why what happened in Japan couldn't happen to international stocks.

...we now collect enough money during each levy year to cover the full lifetime costs of every claim that occurs in that year.

Some people who are injured need ACC?s help for 30 years or more, so significant reserves must be built up to fund these?

Could you lay these arguments out for me Giovanni? The reasons for Japan's 90's stagflation and how they hold again now in the broader global economy?

No, as i'm not an economist. However, Krugman has warned of a Japan-style asset bubble for years (and now he's worried that the counter-measures?

Still, if the NZSF goes belly up, we'll survive. It would have a deep impact on our living standards, but hey, that's what happens when there are major global catastrophes.

Exactly, we are basically putting the superfund into the middle of the world economy. If the world economy stiffs we'll?

It's very unlikely that the NZSF contribution was a key consideration for taking us off downgrade-watch.

Do S+P base assessments on short or long term deficits? If short term then the NZSF is the major contributor, if long it is mostly irrelevent.

The world could indeed?

But they matter: NZ will have its best chance of surviving those kinds of external shocks if we haven't put borrowed money into the Super Fund.

No, only under certain assumptions you've made as well. e.g. if those shocks directly affected our revenue base and drove sovereign borrowing rates through?

Given all that, if you make a forecast of what the risk-free rate might be and what the market average might be you get a small margin and you can then "forecast" the difference between them and come up with a number.

In this case the Treasury has come up?

The margin (6% vs 6.53%) is small because 6.53% is after tax. The estimated pre-tax rate of return is 8.65%.

And yet even if the margin was zero (post-inflation) the Fund would still be fulfilling it's duty – which is to keep aside some money for the future (and it?

Gareth, sorry to say this, but the idea it would be worth setting aside money even if the margin were forecast to be zero is absolutely insane (let alone there "possibly being an argument for indulging a slight loss?

There are more working age taxpayers to pay for the contributions to the fund now than there will be in 2030.

But, that's not the only or necessarily even the main asset class for the fund. Cf the famous foreign pension funds and endowment funds buying up our forests right now. Shares are a very risk asset class, but a fund the?

Although, certainly, we could end up with a "lost?

But if all the money for the contributions is borrowed

As I said above, I'd welcome some discussion about that point.

there may be more working-age taxpayers now (relative to the retired) in 2009 and 2030 but none of us would have been making any contributions to the fund -?

But if all the money for the contributions is borrowed

Which they are clearly NOT.

And, as Sacha points out, the interest on borrowings would be paid by current taxpayers, so it is user pays (in the broad sense of the word).

Which they are clearly NOT.

I'm not sure either way – have seen assertive statements in either direction but no one explaining themselves further in a way my untrained self can decipher.

But if all the money for the contributions is borrowed

Treasury effectively treats the capital contributions as part of total superannuation spending for the country (they always graph Net super expenditure plus the capital contributions). This seems valid as it's a net super position over the years.

So to try?

Citing the 2050 projection as being the difference between 8% and 11% of total payout. Doesn't dwell on 2030 much. Says by freezing contributions we get "much less debt" now, so interest?

I'm really not all that sure.

Which they are clearly NOT.
I'm not sure either way -

I was simply meaning that the contributions to date are not funded from borrowing – they were from the surplus.

I meant what are those billions going to retirees going to be spent on?

If my country is any indication: decks of playing cards, spittoons.

I think it's unhelpful to bring up a hypothetical zero-margin scenario,

I disagree – your argument (equally hypothetical) hinges on the Fund making returns above debt. I believe THAT muddies the waters as it continues to frame the discussion around how well the Fund returns, rather than the intent of?

1) The $8b forecast is uncertain.

As I said in my last reply, the margin is actually quite large (6% vs 8.65%). Over the time period we're talking about, it is very likely that returns on the NZSF will be greater than debt servicing costs, and?

If abandoning the NZSF were in fact critical in avoiding a credit downgrade...

No, it wasn't.

The NZSF contribution holiday reduced debt by around $21.5b in 2022/23 (or $27.2b, if you ignore the lost tax revenue).

The reduction in new operating allowance allocation reduced debt by around $128b in 2022/23?

One point of interest though:

Good question. The rate of return and the debt risks were assessed as part of the original fund design process. Treasury had?

Actually, the house analogy isn't that bad. I have a mortgage, but I also I pay into Kiwisaver, so effectively I'm borrowing to save. But the reason I'm doing it is to spread my risk – I don't want?

"As it is the current Government's intention to make no further contributions to the New Zealand Superannuation Fund for at least the next 10 years, would it be too?

I have a mortgage, but I also I pay into Kiwisaver, so effectively I'm borrowing to save.

Yay Slarty — over dinner I was mentally composing a comment to enquire how many people both have a mortgage and some kind of savings, and how they justify diverting money to saving?

JOHN Look households do this all the time, I've got a Kiwi Saver account, I've got a superannuation fund and I pay into those even though I've got a gigantic mortgage. On the?

People should learn about stuff. the world isn't going to get simpler. That's like saying that physics is too bloody complicated and we should go back to the Plum Pudding Model.

Jeremy, this doesn't require anything other than multiplication and division to understand. It isn't mysterious or absurdly complicated

I'm not saying it's hard, it's just time consuming. Maths, i have no problems with. Economics is really got to get its shit together as a science.

That said, I'm sure there is a semi-solid mathematical underpinning to economic theory but it is not helped by the unrealistic assumptions about people being 'rational actors' and the sustainability of constant growth in economic?

That said, I'm sure there is a semi-solid mathematical underpinning to economic theory but it is not helped by the unrealistic assumptions about people being 'rational actors' and the sustainability of constant growth in economic terms.

There's maths and then there's invisibility.

That's like saying that physics is too bloody complicated and we should go back to the Plum Pudding Model.

Physics is beautiful. And the theory of the atom, they might as well still call it the mother fucking plum pudding model, electrons spend the majority of their time in other?

Just of interest – since just before the decision to halt contributions in May's?