Parker David: New Zealand Superannuation and Retirement Income Amendment Bill — In CommitteeText is incorporated into the Bound VolumeParker David: New Zealand Superannuation and Retirement Income Amendment Bill — In Committee[Sitting date: 30 June 2015. Volume:706;Page:4917. Text is incorporated into the Bound Volume.]Hon DAVID PARKER (Labour): I want an assurance from the Minister in the chair the Hon Hekia Parata that Part 2 is not going to effect a change to the principle that the fund should pay tax. It should pay tax like any other investor despite the fact that it is Government-owned. That is the underlying principle that we currently have and that is the principle that should continue. From time to time we hear claims—and I have even heard people who are very close to the Superannuation Fund questioning whether it should pay tax. The reason that it should pay tax is that otherwise it will be advantaged relative to other investors in the New Zealand market and it would also be encouraged to weight its investments to investments in New Zealand where it would have a tax advantage on those investments investing in New Zealand because it would not have to pay tax on those investments compared with investing overseas. That would cause it to weight its investments more into New Zealand than overseas for the wrong reasons.I want to have an assurance from the Minister in the chair that these amendments to the Income Tax Act 2007 and the amendments to sections CW 38 and CX 55 of that Act made by Part 2 of this bill do not affect the current status quo which is that the Superannuation Fund should pay tax as other taxpayers do. For some people that is counter-intuitive because it is a Government entity paying tax which decreases the amount that is left in the Superannuation Fund for the meeting of future superannuation and means more going into the Crown coffers because it is paying tax. But none the less I think that is an important point in principle that was imposed in the original design of the principal Act. As we know the Labour Party and Michael Cullen had more foresight—Brett Hudson: Dr Cullen was preparing it for privatisation clearly.Hon DAVID PARKER: Dr Cullen was preparing the Superannuation Fund for privatisation clearly! I mean I have heard some brain-dead comments from the Government on occasions but really that takes the cake. You should be brought forward to the front bench. You would be very comfortable on the National front bench. Of course this fund was created by the Labour Party and opposed by the National Party so how that member could say that this was preparing it for privatisation—fact is stranger than fiction sometimes is it not? No that is not correct.Indeed that gives me licence I think—responding to that interjection from the Government—to recount the fact ad nauseam really which we have heard before that we should take care in respect of the Superannuation Fund that we do not actually cause it to aid the privatisation agenda of any Government. Indeed because some of New Zealand’s largest listed entities now include energy companies one of the things that has happened through the Superannuation Fund since the Government privatised those entities is that we have cause to go from the Government balance sheet through direct ownership to the Superannuation Fund investments in privatised assets if the Superannuation Fund has invested in either Genesis Mighty River Power or Meridian.That of course was one of the things that Dr Cullen was trying to guard against when he set the fund up and he gave pretty clear directions that he did not want this fund to be weighted towards investing in New Zealand because he knew that one way or another there was always a risk that National Governments would plunder the fund in order to achieve their other objectives.Chris Bishop: Oh ha ha!Hon DAVID PARKER: We hear Chris Bishop laughing about that but if there was a subscription by the Superannuation Fund in those privatised companies it will have increased demand for those shares and will therefore have had some effect on the price that was able to be achieved on the sale of those shares. It may well be that it did not invest in those shares in which case that would not have happened but if it did it must have had an effect on demand and therefore an effect on price. And as Mr Bayly has already said this fund is already the largest investor in New Zealand. It is far bigger than any KiwiSaver fund far bigger than any private superannuation fund and far bigger than any other investment fund of the Government including the ACC fund. It is the largest investor in New Zealand. Therefore it does have the ability because of that size to influence price.So I invite the member opposite who interjected Brett Hudson to hang his head in shame and resile from those rather silly comments that he made at the start—Brett Hudson: Clearly he was more our side than your side Mr Parker.Hon DAVID PARKER: Say that again? Clearly—Brett Hudson: After all Dr Cullen was the one who said: “Don’t borrow to invest money in the Super Fund.”Hon DAVID PARKER: No he did not say that.Brett Hudson: He said: “Only make contributions when you’re in surplus.” Mr Parker.Hon DAVID PARKER: No Dr Cullen did not say that. No Dr Cullen thought indeed that contributions to the Superannuation Fund should continue. Again he is a very poor student of historythis particular member. I was here after the global financial crisis hit after we lost Government; so was Dr Cullen. That member was not. And you will recall that we were critical of the Government for making that short-sighted decision. I think it is actually testament to the independence of the guardians that despite the embarrassment to the Government caused by the guardians measuring the loss that the Government has caused to the Superannuation Fund by ceasing contributions they have continued to calculate what would have been in the fund had those contributionscontinued.That brings me to an inane contribution from one of Mr Hudson’s colleagues who said it was always stupid to borrow to invest. Well that is true if you are capital constrained but the current Government has not been capital constrained because it inherited very low levels of Government debt—zero net debt—and gross debt having been reduced from 38 percent to 18 percent of GDP. The member said that you can never beat borrowing rates—it would be silly. Well of course the Government’s stock rate is generally the lowest long-term rate to invest in and you get higher rates of return if you invest in security or balanced portfolio bonds as Mr Bayly knows well. So it should be no surprise to members on the other side that if they had borrowed they would have achieved a rate of return—Alastair Scott: If if if—“Harry Hindsight”.Hon DAVID PARKER: Actually you know the trouble with these guys is that they have got no foresight. I mean it would be nice if occasionally they got one of these decisions in advance right. We are not saying that you should judge everything by hindsight but it would be good if occasionally they got one right with foresight. They called it a dog; they were wrong. They now admit that they were wrong. They stopped investments when they should not have stopped them but they cannot bring themselves to admit that even though it was always obvious that the investment rate over the medium term exceeds the Crown cost of funds. They have not been able to acknowledge that that was a stupid decision too.