Public Address | System (Home)

Posted at 10:25AM on 16 Oct 08. Permalink.

i have a serious question. if the cullen fund is invested overseas, and growing, isn't that a bit like drawing foreign money into the country? something we need?

<che exposes his almost complete lack of macro-economic learning>

Posted at 10:26AM on 16 Oct 08. Permalink.

large pubic fund

</cough>

Posted at 10:30AM on 16 Oct 08. Permalink.

i have a serious question. if the cullen fund is invested overseas, and growing, isn't that a bit like drawing foreign money into the country? something we need?

Someone will doubtless know much more about this than me, but I think one of the drivers of our current account deficit is interest and other investment income going out of the country. If we're investing elsewhere, such revenue comes back in too.

Posted at 10:42AM on 16 Oct 08. Permalink.

Yes as Russell says it is better for foreign investments to come back in from our investments overseas than to attract foreigners to invest in NZ as the their profits leave the country.

NZ could do with better Ventral Capital funds too. It is the country that gave the world the jetboat, the automatic rotary milking machine etc, etc. One of the good things about being at the arse end of the world miles from anywhere else is that necessity often has to be the mother of invention. We should be investing in those.

I often wonder exactly how much the recent hitching of science to the 'Knowledge Economy' has actually yielded vs the previous situation as well.

Posted at 10:44AM on 16 Oct 08. Permalink.

I'm a little torn on the forced NZ investment. I'm all for local capital availability, but forcing a fund designed to "pay for our futures" to make investments it doesn't necessarily want could get a little messy.
If NZ businesses put up strong enough models etc then the money should be available.

It has interesting impacts for Kiwisaver as well - I've tended to the belief that many of the Kiwisaver funds are smaller and will tend to back a local operation more readily given they understand the market and can face-to-face the people.

Posted at 10:50AM on 16 Oct 08. Permalink.

Lately we have also been treated to the spectacle of Jim Anderton decrying National for not supporting businesses.

Ventral Capital funds

They grow out you stomach?

(Sorry)

Posted at 10:50AM on 16 Oct 08. Permalink.

Che - that's right. One of the lessons learnt from the Asian crisis of the 1990's was to shore up savings and overseas investments.

Looks to me as though National are planning to borrow from the fund on order to have their tax cuts, sorry, infrastructure investments. I guess this raid was bound to happen but I did expect it to be later rather than sooner.

Posted at 10:55AM on 16 Oct 08. Permalink.

Looks to me as though National are planning to borrow from the fund on order to have their tax cuts, sorry, infrastructure investments

I think that's a little rough. It won't change the accounting of them if the NZSF or SuperMegaChinaInvestmentFund are the ones buying the infrastructure bonds.
The risk is that the investment bonds will not be as rigorous as they'd otherwise be, because they know full well that the NZSF has to invest in them to meet it's 40% criteria...

Posted at 10:59AM on 16 Oct 08. Permalink.

Meanwhile, I did wonder if my PAR piece last week was a little too harsh on National and Labour. This week, I've come to the conclusion that I wasn't tough enough -- they're not only incompetent to run a kindie cake stall, I wouldn't take my eyes off Cullen and English if they got within arm's length of the cash box.

I've got some advice for both camps: Pick a face. Then decide which side of the selected mouth you're going to speak out of, and stick to it.

And don't announce any more policy with costings that have been pulled out of your arse so recently they're still fragrant and slimy -- assuming we're not being told to wait and see until after the election.

Posted at 11:00AM on 16 Oct 08. Permalink.

If the Super Fund invests in NZ infrastructure, doesn't that make it a Public-Public Partnership?

Posted at 11:06AM on 16 Oct 08. Permalink.

@don & RB thx.

i'll now be quiet on the matter, as this is a policy question...

Posted at 11:06AM on 16 Oct 08. Permalink.

Still, it is bloody brilliant politics, if shit public policy. I believe this is what I/S has taken to calling a "gazump", so what do you think Labour is cooking up to gazump National's gazumping of their campaign launch.... oh, you get it. Can't we just give 'em all our pocket change and sent them off to Sky City if they really want to play craps?

Posted at 11:14AM on 16 Oct 08. Permalink.

I'm giving Key/English the benefit of the doubt on this one. There's acknowledgement that the move to increase the domestic investment level of the fund would take some time, due to the current rush of global de-leveraging going on at the moment. Secondly, there's the assurance that the Guardians of the Fund will remain apolitical, with due diligence on investment decisions.

It's got me curious on how the Nat infrastructure roll-out is going to be laid out. The threshold for return on prudent domestic investment is going to need some very sound business plans behind them to pass the Guardians' BS detectors.

Then there's the venture capital side of it. Dragon's Den sponsored by the Cullen Fund could prove entertaining, enlightening and enriching all at once.

Posted at 11:18AM on 16 Oct 08. Permalink.

Oh, golly good Media7 show.

How is it that book reviewers can report on weighty tomes in newspapers, but it is too much for a crime & justice reporter to read a 20 page essay of suggestions from Becroft J?

Mind you, shouldn't be too harsh. Still haven't got round to reading the Law Commission's two volume phonebooks on police search & surveillance rules.

Posted at 11:23AM on 16 Oct 08. Permalink.

Then there's the venture capital side of it. Dragon's Den sponsored by the Cullen Fund could prove entertaining, enlightening and enriching all at once.

I'm seeing it now. An NZ On Air-funded game show on state TV that hands out tax money previously directed by the government to a public investment fund. It's the new socialism!

Posted at 11:30AM on 16 Oct 08. Permalink.

Muldoon was right, those communists can come from anywhere. We should have never stopped playing that ad.

Posted at 11:34AM on 16 Oct 08. Permalink.

Consumer NZ claim that the average return from the Super managed funds has been around 3.6% (not forgetting the recent $700 million loss).
Maybe investment in, say, broadband throughout the country may indirectly achieve a better return?

Posted at 11:39AM on 16 Oct 08. Permalink.

i have a serious question. if the cullen fund is invested overseas, and growing, isn't that a bit like drawing foreign money into the country? something we need?

I am far and away no expert on macro-economics, but surely only if the income drawn out of the overseas investments and brought back into the country (I don't think this has happened yet, but presumably will when the fund starts paying for our aging population) exceeds the additional investment moved overseas as the government puts more money into the fund.

Currently, for each billion the government puts into the fund, most of it goes overseas.

Of course, there must be a difference between capital and earnings. Capital is going out, earnings are coming back.

Posted at 11:40AM on 16 Oct 08. Permalink.

http://www.scene-stealers.com/wp-content/uploads/2007/09/being_john_malkovich-1.jpg

Posted at 11:41AM on 16 Oct 08. Permalink.

Sorry, wrong thread (lot of that going on this morn..)

Posted at 11:42AM on 16 Oct 08. Permalink.

I said "So while the announcement is a bold move in response to the credit crisis, it is one which causes me some concern."

Also "Ever since the Cullen Fund was established, I have had fears that as it grows larger, politicians would want to start directing where it is invested.

I doubt "the team" would see that as taking one for them. Yes I use mild language when criticising National, but I don't think many people would read my post as supportive.

Posted at 11:48AM on 16 Oct 08. Permalink.

Of course, there must be a difference between capital and earnings. Capital is going out, earnings are coming back.

Another long bemoaned weakness in the NZ economy is the lack of investment in overseas markets from NZ. The ratio of incoming versus outgoing investments has been worrying folks like the NZ Institute for some time. Again, the Cullen fund goes some way to redressing that imbalance.

Posted at 11:54AM on 16 Oct 08. Permalink.

Consumer NZ claim that the average return from the Super managed funds has been around 3.6% (not forgetting the recent $700 million loss).
Maybe investment in, say, broadband throughout the country may indirectly achieve a better return?

I don't think so, otherwise the Telco's would be in boots and all.

If by "indirectly" you mean other benefits to the economy that is almost certainly true but those indirect benefits can't be used to fund the retirement of the contributors to the fund.

Posted at 11:55AM on 16 Oct 08. Permalink.

I wouldn't take my eyes off Cullen and English if they got within arm's length of the cash box

I think not enough kudos is being given to our government for having left us in a situation where no mainstream banks have gone bust and the fundamental economy remains pretty sound. This isn't the case in many other OECD countries.

Governments are of course jammed between a rock and a hard place. It would have been desirable (as I pointed out many times) if the property boom had been choked off at an early stage through taxation and other measures. This wasn't done because the electorate had dreams of getting rich through house price speculation.

Posted at 12:00PM on 16 Oct 08. Permalink.

large pubic fund

</cough>

...and now turn to the right.

Posted at 12:05PM on 16 Oct 08. Permalink.

Since there is about $14billon in the fund now and at that rate by 2018 there would be perhaps $30b, wouldn't 40% enforced internal investment cause distortions in the Market? (Some-one said that our Market runs at about $50b.)

Posted at 12:08PM on 16 Oct 08. Permalink.

I'm seeing it now.

It's a user-generated Telethon! It's an Entrepreneurial Top Town! A Geek's Show (obscure pun on A Dog's Show, excellent family values show of old).

Posted at 12:12PM on 16 Oct 08. Permalink.

It's all very well decrying the lack of VC investment in NZ (and I do all the time .... we do need more) but you need to realise it's a very different sort of investment - it's risky, in fact MOST investments fail - but if you do it right some pay off big time

What you don't want is the guy who's picking stocks and bonds for your Kiwisaver/Cullen fund/401K/etc picking startup companies to invest in - you need someone running a VC fund who understand the part of the biz they are working in who can make an educated guess as to whether the guy you're giving money to is blowing smoke out his ass or not - and who can provide the other sorts of support a VC company provides to its investments

I've worked for startups supported by both good and bad VCs - there's a world of difference

I think in the interests of diversity it's appropriate for an investment fund to place a small portion of its investments in VC funds that have good track records or are run by people they think will make competent decisions (and also have some of their own money at stake)

Posted at 12:13PM on 16 Oct 08. Permalink.

It seems a shame to screw with the fund so early but like Craig I’d love to see a good summary of the risks and opportunities, but especially the risks at the moment.

And I am a little stunned…..for all the blue ribbon bluster of the last 20 years for government to be a periphery player in our economy it strikes me as a noticeable u-turn.

Have economics circumstances changed in the last month that much? Fuck yes.

Accepted market philosophy is at a mess at the moment. That such important markets could collapse themselves through their own unregulated gluttony is a major failure of the system from any angle.

Is Key starting to acknowledge that is there is no way you can reduce government out of the modern economy at this present stage of our economic development (2008-2011) . You’ve got to keep people selling and buying even in bad times because that’s the blood flow of the market. The market is populated by the citizen , the canopies are now in repossession back to a sad street in new york but the populace will always turn up for commercial enlightenment because what else are we going to do, live in caves?

And of course who knows more about building economies in what could be either a long volatile economic period or a fast swing out of growth thanks to hopefully better legal and market structures?

that"s what key has to articulate, that he has a vision that out reasons Cullen . Cullen built the economy for this kind of year, a quiet solidity.

Posted at 12:25PM on 16 Oct 08. Permalink.

Gordon Campbell ...

Smacks National:

There’s a pattern emerging here : raid the Kiwisaver savings scheme, intervene in the Super Fund earmarked for the needs of our ageing population, scrap the Fast Forward science fund, abolish the tax credit for research and development, dump the home insulation fund meant to offset the energy costs of dealing with climate change….

What do all these moves have in common ? They all involve a drive for short term advantage, and denial about the need to plan for longer run challenges facing the country. Savings, research, demographic change. All are being jettisoned in the name of instant gratification. If I can steal a line from the conservative columnist David Brooks, John Key shows every sign of having the policy libido of a 15 year old boy.

And the Greens ...

Before the Greens cheered this proposal, they might have considered whether – once you open this door - just what the cost may be, and where the 40 % is likely to go. The Fund guardians will - allegedly - be left free to decide where in New Zealand they put the money. The NZSX is small, and the Fund guardians are highly unlikely to become creative venture capitalists of fledgling enterprises overnight. Arguably, nor should they be. Moreover, the Fund moneys would quite conceivably be going into the kind of local investments that the Greens would abhor.