Hide on the Cullen Fund


Rodney Hide has a great column in the NBR. These are his comments about the Cullen Fund:

The previous administration invented the pretend policy of having a giant government piggy bank to pre-fund future payments. Journalists understand the concept if not the practice of a piggy bank and bought the policy without hesitation and without a thought.

Political success

They wrote the policy up as though it made a difference. Finally, they wrote, someone has done something to fix the problem: future pension payments are to be pre-funded.

The policy has proved a great political success even though it serves no useful public purpose. The $20 billion fund doesn’t change the cost of pension payments one bit. It just ever so slightly shuffles a very small part of the cost forward.

Besides, if the government knew how to invest money to make a buck there would be no need for tax. The government could earn its own money. That we are still taxed suggests the government’s investment skills are no better than the rest of us.

But here’s the thing: Both National and Labour now agree that borrowing money to sink into the Cullen Fund is dumb. But why are we even borrowing money when we have the fund?

There’s $20 billion in the Cullen Fund. That’s twice what the government hopes to make selling off half a stake in power companies and Air New Zealand.

The same logic that sees payments to the Cullen Fund suspended should see the entire fund on the block. Getting rid of the pretend policy would also focus minds on the need for the real policy.

The trouble is politicians have been pretending for so long that the Cullen Fund serves a useful purpose that they now can’t sell it.

But at least it’s easy to see what New Zealand will look like in 20 years: just look at Greece now.


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  • Bawaugh

    I understand super costs $10 Billion a year. Thus we have enough cash for 2 years of super. 

    He is quite true that we could pay of debt before saving, however there is merit for budgeting purposes by having the savings. Without the fund I think Labour would have spent more money in the last decade and there would be less restraint. 

    I think having the fund gives some budgeting restraint – because it is there the Govt has to make contributions to it over spending money elsewhere (always more popular than paying of debt).

    I think to that over the long term the fund will make a return that is greater than the cost of borrowing the money (although not a large sum). 

    • AngryTory

      The choice of course is putting the money in the fund vs tax cuts.

      Singpore – which Roger lauded in his valedictory speech – is probably the poster-boy for huge government pension funds, government real-estate funds, government investment 

      It’s clear NZ as a whole would have been better off had Ruth and Roger not any given tax cuts, but just dumped the money into a Singaporean-style fund.  Or if the only houses you could buy or rent were provided by the Housing Corp, who also set prices & handed out all the mortgages. 

      Singapore has money.  

      We have freedom.

      • I completely disagree.  It isn’t clear at all.  do you know the tax rate of Singapore?  Nearly 60% of the people there don’t even pay tax.

        Back in the 70’s we used to donate money to Singapore, but they simply followed sensible tax policy and we didn’t.

      • AnonWgtn

        I quote

        “The problem with the Singapore model of governance – in restricting political freedoms for security and the greater economic good – that is it only works if the ruling elite, and above all the man at the helm, leads by example, avoiding the temptations offerred by high office, and near-total control of the political apparatus”

        Cannot see New Zealand in any comparative way.

  • Vlad

    Do you think Rodney has a back to the future chance in politics?  He is doing himself a power of good with his journalism……

    • hide is an asshole

      i hope not he is a lier and a money grabbing maggot

      • Tom

        Stop eating your crayons

    • Le Sphincter

      Its his job application.
      I understand he has no current employment.

      Considering before parliament he was a professional student and university tutor, with a brief work experience as Alan Gibbs mouthpiece, you would think h’ell be  pontificating at the NBR for a while

  • Rodger T

    Why is it, as soon as these guys leave politics they start making sense?

  • Rodney_Hide

    Vlad: No!

    Hide is an asshole: Lighten up!

    Rodger T.: I suspect two reasons: (1) our fingers are on they keyboard; and, (2) our ability to succeed and get things done no longer rests on the opinions of others.

    • Rodger T

      Yeah, I know how the system works . 
      LoL , I suspect you`ve been called worse.

      My one and only reason for voting.

  • Timboh

    I hope that Rodney_Hide is Rodney Hide. If so, well , I’ll be fucked. And of course thanks to WO for his efforts. Compelling site!

  • AngryTory

    But at least it’s easy to see what New Zealand will look like in 20 years: just look at Greece now

    20 years.   The Guardian, SMH, Age, & UK Telegraph are reporting that the CEO of ANZ says ANZ is unable to borrow.  Not in 20 years time. Today.

    Bill English is bringing down a budget that will require borrowing another 10 Billion on the governments books, and private & corporate overseas borrowing will be another 30-40 Billion. 

    If the ANZ can’t borrow today, why on earth will any other NZ bank, or the NZ government be able to borrow tomorrow.

    20 years? Rodney. More like 20 weeks, perhaps even 20 days.

  • Cullen’s Sidekick

    Couple of bad news items guys. First of all Roy Morgan poll presents a scenario in which Labourers-toxic Greens-Winston First-No Mana party will rule NZ in 2014. Then Mathew Hooten writes an article that Russel Whinging Norman will be Finance Minister in 2014. Want any more bad news?

    • Kosh103

      There is zero chance of anyone from the Greens being the Finance Minster.

      I would say they will pick up environmental and social positions.

      • Bawaugh

        All the more important to get National’s welfare reforms through and embedded as normal. Then the poor Greens will then have to fight Finance for the money to expand the system.
        The more that is changed and the longer it is running for the less they will be able to change. 

      • gazzaw

        What if they win more seats than labour? Labour not looking 100% convincing, largely leaderless and 30 months is a long time in politics.

      • davewin

        You would have been right in the days when Labour commanded a respectable majority on the so called left. But do the Maths the nightmare will consist of Greek style Coalition, with no real majority, and Labour with an ego the size of Texas and a whole swathe of new members.

        You are as always Kosh an UN enlightened mathematically defective, languages challenged schoolteacher.

        Stick with your strengths and plot how to progress in an education system which does have progressive elements.

      • AnonWgtn


        Russel has made it quite clear, and not necessarily in private, that he will look only to coalition if he gets Dep PM and Finance, with Turei as Welfare minister.

    • Blokeintakapuna

      yep – and when I wrote a comment contradicting his thoughts… well, it wasn’t posted, yet others were – so selective/creative editing happening at the Horrid to make the comments fit the story line….

      No surprise there though…

  • Slijmbal

    Much of Rodney’s article is not new – the original discussions around Cullen’s folly pointed out the immense fallacy of its basic premise – in effect it borrowed to invest throughout its entire existence – an approach rightly condemned in every basic “How to save …..” piece of advice out there.

    It also sucked an amazing amount money out of an economy – about 15% of one year’s GDP based on my last fag packet calculation – this has the inevitable consequences on growth.

    • Le Sphincter

      The cost of borrowing was less than the expected rate of return. Its called leverage.
      Its what you do when you put down a  5% deposit on a house.

      • Patrick

        Hmmm ivesting 101 – go to the bank & ask for a loan – tell them you are going to invest in the sharemarket & make a killing. Then wait for the pain as your ass hits the sidewalk when you get flung out the door

      • Le Sphincter

        Yes, its not for ninnies like you.

        John Key made a fortune for his NY merchant bank  by the well known ‘carriage trade’ which involved borrowing cheaply in one country- say Japan and then leding that money out at higher interest rates in say NZ.

        For large financial institutions borrowing to fund share purchases is very common. The shares are the security and depending on rises and falls in value, the bank may  vary the amount you have to pay or margin.

        Do you really think the world of finance runs like your household budget ?

  • Patrick

    Do you really risk taxpayers hard earned money with dodgy sharetrades – plenty of recent examples of how successful that has been? Great with your own money but Governments have an absolutely shocking history when it comes to financial astuteness. – Labour & National. 

    • Slijmbal

      Sadly there are many who believe it makes sense for the government to borrow to invest. If that’s true we should do it for all government expenditure then we wouldn’t need taxes. A ludicrous assertion, obviously,  At best the Cullen Fund could be seen as a form of tax  smoothing but in reality it has actually depressed the economy by removing money from it.

  • jay cee

    but at least cullen was prepared to try to make people save for their retirement. something had to be done given the size of the problem.