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Cullen Super Fund must be stopped

16 July 2002

Cullen Super Fund must be stopped

Speech Notes
Christchurch Rotary Club
Canterbury Club, Cambridge Tce
1.15 pm

Rod Donald MP
Green Party Co-Leader

I appreciate the opportunity to address you today, but I have to say that I would rather not be here. That is because Parliament should still be sitting and if it was I would be at the weekly meeting of the Finance and Expenditure Committee.

There wasn't a single good reason for Helen Clark to knock off early and call a snap election. The Government still had 59 votes and the Greens were still prepared to support them on confidence and supply. There were many good reasons for the Government to continue working. In particular there are 52 bills waiting to be passed into law but now they have all had to be carried over to the next parliament.

I blame the collapse of the Labour - Alliance coalition on the ridiculous party hopping legislation which Labour, the Alliance and NZ First forced through under urgency against strenuous opposition from the Greens, National and Act. By outlawing political divorce, Jim Anderton had to disguise the fact that he had defected from the Alliance to avoid being chucked out of Parliament.

It would have been far better if he had simply been allowed jump to his latest political party and you, the voters, retained the power to decide whether or not he defected honourably.

We are equally happy for you to decide whether, and in what strength, the Greens should be re-elected. We worked extremely hard in the last parliamentary term and, despite being a brand new party in parliament, we've got a solid record of achievement to show for it.


Helen Clark has been making a lot of noise about what a stable, effective government she's run over the last two and a half years. But who gave it that stability? We did! What's more, we did it without losing our identity.

The Labour-led Government has implemented many worthwhile measures in its first tem of office. We were pleased to make that possible. We gave them supply by voting for their budgets. We backed them on confidence motions. We were the only party to support them on 30 bills, including Employment Relations,

ACC, Paid Parental Leave, Property Relations, the marine farming moratorium and ending logging on West Coast Crown land.

We didn't just vote for those bills. We proposed constructive amendments to them, and others, to ensure they are better than they would have been.

Once, when Labour wouldn't listen, we co-operated with National to get improvements to the health reforms, to ensure that the underlying causes of illness would be addressed and that there would be quality standards across the whole health sector.

Are those the actions of a 'destabilising' force in politics? I think not.

I know we lent considerable stability to the last Labour-led Government - but we did not sell out our principles along the way. When the Government went too far, we made our objections known.

We opposed the so-called free trade agreement with Singapore which has led to the trade deficit blowing-out from $24 million to $220 million in the first year of free trade; the Cullen Superannuation Fund, which is both extremely risky and a massive opportunity cost to New Zealand; and the equally disastrous Electoral Integrity Act of course.

We were successful in negotiating the passage of two of our own bills - Jeanette's Energy Efficiency Conservation Act and my Single Transferable Vote option for local authorities. Sue Bradford's bill to restore the emergency unemployment benefit for students was defeated by Labour and the Alliance, despite both parties being outraged when National took it away and they both also voted against Jeanette's bill to extend New Zealand's Nuclear-free Zone to 200 miles. Four others - Keith's International Treaties Bill, Nandor's Clean Slate Bill, his Industrial Hemp Bill and Jeanette's Traffic Reduction Bill have been carried over to the next Parliament.

We also initiated several select committee enquiries: into organics, climate change, human rights and cannabis. And we negotiated three Green Budgets worth a total of $55 million, which boosted support for organics, authors, biosecurity, conservation awareness, energy efficiency, environmental protection and education, health, justice and youth drug education.

We added value to the last Government. I have no doubt that the Greens will play a significant role in the next parliament, but we will only be able to achieve serious change if we are also part of the new Government. I personally hope we have that opportunity.


We have served our apprenticeship on cross benches and now we are ready for the responsibility of Government. It's time to get our hands on the ball instead of just giving advice from the sidelines.

Of course whether that happens depends on several factors: our relationships with other players; the rules of game, and you - whether you put us in the team.

We will only contemplate coalition if we hold the balance of power, can negotiate a good coalition agreement, and have enough MPs to make it work.

Looking forward to after the election, it will be our responsibility to put the brakes on Labour where we need to in areas such as free trade, foreign investment and the Cullen Super Fund; strengthen their resolve where it counts on issues such as tackling child poverty, valuing teachers properly, paying tertiary students a living allowance; steering them in the right direction on key goals such as buying back the rail track, and implementing a comprehensive Buy New Zealand Made strategy and putting the economy onto an ecologically sustainable footing.


I would like to focus on one area where will need to put our foot down: the Cullen Super Fund. The Green Party is committed to the universal provision of super for everyone aged 65 and over, paid at not less than 65 per cent average net ordinary time wage to couples and 60 per cent of that amount to single people.

But we are implacably opposed to the Cullen Fund because it will fail to achieve what it has been set up to do. Far from leading to certainty and security in retirement the Cullen fund is causing working people to be very worried about whether there will be anything left for them when they retire. That's because Dr Cullen wants to invest the bulk of the fund overseas on the international share-market, or as we call it, the global casino economy.

Dr Cullen intends to borrow an extra $8.3 billion for capital projects over the next five years and during the same period he plans to put $7.7 billion into his super fund. The whole viability of his super fund depends on the cost of borrowing, currently 6.5 per cent, being less than the return he hopes to make from the share-market, currently 7.5 per cent after tax. If making money was as simple as borrowing some and buying shares with it then we would all be rich! But of course the reality is quite different.

In fact returns on the global share-market are negative. And that's not just because of Enron and WorldCom, although they obviously have had an impact.

If on 1 July 2001 Dr Cullen had invested the first $600 million of the superannuation fund in stocks listed on the FTSE 100 in the UK and the Dow Jones 30 in the USA, what would they now be worth? The Dow Jones has dropped 18.6 per cent since then, which means $300 million of shares would only be worth $244 million now. The FTSE has dropped 30 per cent in the same period reducing the $300 million to only $210 million.

But wait, it gets worse! Because over this time the New Zealand dollar has appreciated 19.4 per cent against the US dollar and 7.8 per cent against the UK pound, our initial investment is actually only worth NZ$399 million - one third less than it was to begin with.

Fortunately my scenario is hypothetical because the $600 million is still sitting in the Debt Management Office. But the reality of the fragile global economy has just hit the South Australian Government. Plunging

world stock markets have caused its superannuation fund to lose $30 million this year, delivering a minus four per cent result instead of the 7.5 per cent profit forecasted.

Thank goodness the Cullen fund isn't running yet. One of my key goals in the next Parliament is to make sure that it never gets underway. Our opposition to the fund is not just because it's risky. It's also because it represents an enormous opportunity cost by stopping us from properly tackling the many challenges facing us.

Rather than putting all our eggs, including Dr Cullen's borrowed ones, in one superannuation basket, the Greens would allocate the eggs we own to a number of key areas: debt repayment, eliminating child poverty, education and training, research and development, employment creation, positive ageing, health and housing, putting the economy onto an ecologically sustainable footing, strategic asset investment, and encouraging private saving.


Here is our strategy of future proofing our economy and strengthening our society to meet the future costs of superannuation:

Debt repayment

New Zealand's net crown debt is around $20 billion. At the current interest rate of around 6.2 per cent these borrowings are costing us $1.24B per year and consuming 1.1 per cent of GDP. The current Government intends to increase the debt level. We would pay it off instead. Reducing debt offers the best guaranteed return on investment because you know exactly how much interest you are saving. In our case, if we committed to paying back $1 billion of debt every year for the next 20 years we would save over $12.4 billion in interest alone.

Eliminating child poverty

Society is judged by how it treats its most vulnerable. It is simply not acceptable that we have 300,000 children living in poverty in New Zealand. We have just launched a strategy to end child poverty by 2010 which includes the reintroduction of a universal child benefit, at a cost of $500 million, and a number of other initiatives.

I agree with the Child Poverty Action Group who say that if the Government is going to protect even the wealthiest of those over aged 65 with generous universal indexed pensions then it should provide the same protection for low income families with children.

Education and training to achieve greater productivity

The last four OECD reports on New Zealand repeatedly emphasised that low standards of education and training are the prime causes of New Zealand's low labour productivity. At the same time the OECD recently reiterated its conviction that human capital is the core element in economic growth.

There is a contradiction between this Government's rhetoric about the knowledge economy and its failure to invest in our young people, through a Universal Student Allowance and lower fees, and in our tertiary institutions especially through remuneration for teaching staff, who are after all the knowledge generators and facilitators. This contradiction is further highlighted by the Government's recent announcement that it wants to offer incentives to attract talented people from overseas to fill skills shortages here. Why not spend the money on training our own people?

Research and Development

We should also be investing more in research and development if we are serious about the knowledge economy. The focus of this R & D should be to make the most of our natural assets - our unique environment and out talented people.

Employment Creation

On today's figures, if we could reduce the current level of unemployment from around 5 per cent or 100,000 people to 1 per cent the Government would be $1.19 Billion better off. This is made up from a saving in benefit payments of $638 million to the 76,000 people who are now in a job plus another $554 million in taxation received from those workers now earning the average wage. Together this represents a gain of 1.1 per cent of GDP.

Positive Ageing

Giving older people the choice to continue working if they so wish is vital. As the OECD says: "encouraging people to work longer would raise economic growth, increase the tax base and reduce the number of dependent older persons. A triple gain." Positive ageing not only strengthens economic growth, improves the dependency ratio and therefore the fiscal position, it also increases the incomes, self worth and quality of life of superannuitants.

Health and Housing

Health costs are expected to rise even more dramatically than superannuation expenditure, from eight per cent to 10 per cent of GDP by 2050. We say now is the time to invest in preventing illness - improving our diet, encouraging exercise, fixing unhealthy housing, and tackling environmental threats to our health. We believe a strategy focussing on primary health and preventing illness would achieve health savings of up to two per cent of GDP in the long term.

Ecologically sustainable economy

Now is the time to green the economy by adopting genuine measures of progressive triple bottom line accounting and eco-taxes and creating the infrastructure for solar and wind generation, energy conservation, public transport, organic farming and a whole host of other green initiatives which reduce Government and citizens' costs and / or increase revenue.

Strategic asset investment

Considerable revenue is already generated from existing State Owned Enterprises. There is every reason why the Government should reinvest in strategic assets such as Contact Energy, TranzRail or Air New Zealand, providing, they contribute to strengthening the economy, our social fabric and ecological sustainability.

Encouraging private saving

Much more should be done to encourage people to save for their retirement. New Zealand Super is the bread and butter of a retirement income. If you want jam you have to make it yourself but the government should offer a sweetener to give you an incentive. At the moment only 12 - 17 per cent of New Zealand workers are members of employer subsidised superannuation schemes. We want to revitalise private saving by providing employers who subsidise the staff super with an across the board tax incentive.

Incredibly the Labour-Alliance Government currently gives employers of staff on the top tax rate a 6 cent in the dollar tax break for contributions to their superannuation while imposing a 12 to 18 percent penalty on employers who contribute to the super of their low paid staff.

The Government says it can't afford to fix this anomaly but will to do something by 2004. Yet it has just announced that it wants to offer incentives to attract more foreign investment to New Zealand. Instead the Government should be helping New Zealanders to reverse the negative household savings trend. It was minus 3.7 per cent last year and is expected to be minus 5.5 per cent next year. If we saved more ourselves we could invest it in our own economy instead of becoming even more dependent on overseas capital and losing even more control over our economic destiny.


The Cullen super fund was appealing at first glance but we now know it will be a disaster. New Zealand will only be able to afford the future costs of superannuation by building a stronger, more confident nation. That's why we want to dismantle the Cullen fund, repay what's been borrowed and invest the rest in putting our nation on a just, sustainable and secure footing for this century and beyond.

At this year's election you have to decide what will be better for your children and grandchildren - pre funding superannuation, as promoted by Michael Cullen, Jim Anderton and Winston Peters, or the green alternative.


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