Improving Local Investment
16 10 2008Following on from yesterday it seems that some of the ideas in the draft strategy for coming out of the crisis stronger -Download Full Document here have got a bit more traction with National.
*Later in the day – John Key announced that he would be looking for the NZ Super Fund to invest 40% of its total in NZ rather than the 23% it does currently. As John Armstrong notes -(16th Oct NZHerald)
“Cue the balalaika music. Cue the dancing cossacks. Let’s electioneer like it’s 1975 in reverse.”
such a move in the recent past for the National Party would have been seen as pure communism.
1975 was the first election I remember taking an interest in. I was still at school and not able to vote and the whole election campaign with a Prime Minister called Piggy Muldoon was straight out of George Orwell’s Animal Farm. Completely bizarre. Hopefully 33 years later the voting public is a bit smarter than in 1975.
The policy of re-weighting Super Investment from 23% to 40% within NZ is in fact one of the ideas in the draft paper referred to above from the NZX / NZ Institute release.
The real difficulty here is that such a policy change fits more naturally with Labour than the National Party and there is no reason why they couldn’t adopt the same view and neutralise any gains from the policy.
I would have said in an election you want to differentiate your policies and people not just adopt the other teams policies and pretend this is your idea. I may have missed it – but it would also be polite for My Key to give a hat tip to David Skillings and Mark Weldon. (Correction: the hat tip has been made.)
On Page 14 “Re-directing taxpayer funded savings institutions”
“The government owns financial institutions that control in excess of $30 billion of financial assets (NZ Super Fund, EQC, ACC etc). These assets exist to fund specific liabilities, and are managed according to orthodox investment and portfolio allocation criteria.
However, the current crisis creates a case for examining whether these assets are being invested in a way that maximises the national interest.
Given that New Zealand firms will find it more difficult to access credit for investment, directing these financial institutions to place a specified proportion in New Zealand investments seems appropriate.” (my italics)
Along with the earlier recommendations on adopting a KiwiCo investment vehicle such as Temasek in Singapore and Khazanah in Malaysia a re-weighting of Government sector institutions towards NZ companies would seem to be at least partly the inspiration for Mr Keys’s policy announcement.
What do you think?
My view is that Labour and Mr Cullen in particular should say this is a good idea and that Labour would definitely look at the re-weighting of local investment from 23% to 40% and is they want to go one better they could expand the scope from Kiwisaver to include the EQC & ACC and noted above.
“Finance Minister Michael Cullen this week hinted he, too, was interested in getting the fund to invest more in New Zealand.
But yesterday, he said there was no way Labour would change the law so a minister could tell the fund what to do.” from Super Plan: meddling or a Good Idea
There are always ways to influence investment policies and I would have said risk management needs and urgent review given the global meltdown on equity markets. The second part of this is that redirecting EQC and ACC may be part of the answer as well.
My concern is that most larger NZ businesses are owned offshore anyway. It must be a concern and part of the macro-direction for NZX to encourage more local listings.
The other hidden factor in this equation is that the NZ Equity market is very thin and misses a fair number of substantial $100m+ businesses that are either family owned or owned by unlisted funds; and almost completely invisible to the investing public / NZX.
Note: Update On 22 Oct Lance Wiggs did this analysis which puts a different spin on many of the suggestions.
Jason,
these are all the right questions, and some strong ideas. We will look at these carefully. Thanks for thinking and being public with it