National still wants Super Fund to invest 40% in New Zealand, PM Key says, as Labour's Parker highlights 2008 election target not met

Alex Tarrant

Labour is questioning a 2008 National Party election policy that the Super Fund should almost double the proportion of the fund allocated to local investments, saying there is no sign of that happening.

But Prime Minister John Key says National still has a "long-term goal" of seeing 40% of the Fund's investments in New Zealand, up from about a quarter when it came into power in 2008.

The plan - and others released in the 2008 election campaign such as the creation of long-term infrastructure bonds - appears to have been given the quiet treatment, especially after the Fund itself told newly minted Finance Minister Bill English shortly after the election what it thought of the idea (see more in Tim Watkin's Pundit column here).

Labour Party Finance spokesman David Parker today criticised National for making the directive, but then not allowing for it to happen by "[pulling] the levers that only a government can pull in order to improve the New Zealand economy for the higher-value jobs, the better businesses, which would give the Super Fund something to invest in.”

Parker said he was not criticising the Super Fund for not having followed the directive as there were not the investment opportunities in New Zealand for the goal to have been met by now.

“It’s yet another example of the government having said one thing and done another," he said.

"If you want to have a healthy business environment which would cause the New Zealand Super Fund to invest more in New Zealand, you have to have the right tax and savings settings to make those businesses in New Zealand thrive.”

Parker included the criticism in a booklet released by Labour on National's economic policies since the 2008 election campaign. Read the booklet in this pdf here.

“It’s gone absolutely nowhere,” Parker said of the Super Fund's local investments when talking to media before Question Time on Wednesday. 

In Question Time, Parker asked Finance Minister Bill English for the proportion of the Super Fund's assets invested locally, and how that compared with 2008.

English noted that despite the 2008 directive, it was up to the Super Fund to make its own investment decisions.

"If you exclude cash, and include foreign exchange hedging, the New Zealand investment has risen from NZ$3.2 billion to NZ$4.6 billion. On the same basis, as a percentage of total investments they’ve increased from 26.6% to 28.6%," he said.

“The Super Fund has identified a number of New Zealand investment opportunities, including, I presume, the government share sale coming up, but it will remain disciplined."

What National said

Releasing the policy in 2008: National Party leader John Key said it would be up to the guardians of the Super Fund to determine the appropriate rate at which to increase their investment in New Zealand to 40%, "taking into account their need to manage their overall risk profile, the availability of quality investments, and the impact of increased investment on local markets."

Read the policy in this pdf here.

"New Zealanders are entitled to take a view as to where this large pool of capital, funded by taxpayers, is invested. They are entitled to decide that these resources will be used to invest in our future growth and to underwrite our future prosperity," Key said when releasing the policy in 2008.

"At a time when credit and capital are both going to be in short supply, we would be negligent if we did not employ our own superannuation fund to grow our own economy. National, therefore, believes that a greater proportion of the New Zealand Superannuation Fund, which belongs to all New Zealanders, should be invested in New Zealand to grow our economy," he said.

"Drawing an analogy with a bank, it makes no sense for New Zealand businesses to be waiting at one teller’s window to make withdrawals while the Super Fund is lining up to make big deposits with the teller next door. It is better to use more of those funds here at home to invest in our productive sector and broaden and deepen our own capital markets."

That would have both short-term and longer-term positive impacts. 

"In the short term, in a world where money for investment is going to be more tightly held and more closely guarded, it will help ensure New Zealand has the investment capital we need to get out of recession and into a period of solid and sustainable growth," Key said.

"In the longer term, it will give New Zealand businesses a greater opportunity to grow from a domestic base and grow under New Zealand ownership further than they would otherwise have been able to," he said.

Key said National expected the range of possible investments for the Super Fund to invest in locally to include:

• New Zealand-listed equities. 
• Government bonds. 
• High-quality commercial paper. 
• Local government fixed-interest securities. 
• Private equity. 
• Property, infrastructure, forestry, and commodities.

"National will also work to create more investment opportunities for the Super Fund in New Zealand," Key said in 2008.

"In particular, we intend to develop longer-dated infrastructure bonds to help fund New Zealand’s future infrastructure requirements. There is strong demand for these sorts of long-term investment opportunities," he said.

"Theoretically, the fund could already invest more heavily in New Zealand assets. But in reality it doesn't because Labour has done nothing to generate new investment opportunities.  

"National knows that New Zealanders want better infrastructure sooner. Using the resources of the Super Fund is a way to achieve a step change in the infrastructure of New Zealand and help drive greater productivity in our economy," he said.