SpeechHon MICHAEL WOODHOUSE (National): Thank you Mr Speaker. I think in this country we are well served by the two major sovereign investment funds that we have the Guardians of New Zealand Superannuation and the investment arm of ACC both of whom manage somewhere in the region of $55 billion to $60 billion. I've had a 27-year history with ACC—firstly as a manager and more recently as the Minister for ACC and the ACC spokesperson. So I've got a reasonably deep understanding and admiration for the way in which their investment managers have been able to enjoy returns on behalf of the New Zealand taxpayer pretty significantly above the market rates.Similarly the Guardians of New Zealand Superannuation have an excellent team with whom I had developed quite a good relationship in my time as finance spokesperson and I still keep in touch with them from time to time—they are really really canny people. We often have some political tête-à-têtes over the level of remuneration and bonuses for people in those teams. Well the reality is they could earn a huge amount more in other wealth funds here in New Zealand and around the world if they didn't choose this form of—albeit highly paying—public service. So I just want to commend them for the work they do on behalf of the New Zealand taxpayer.But I do share the concerns that were expressed by my colleague and friend Nicola Willis in our cautious support for this bill the New Zealand Superannuation and Retirement Income (Controlling Interests) Amendment Bill at first reading and I encourage those with views on both sides of the argument to come along and give the Finance and Expenditure Committee as good advice as we can get because there are very strong pros and cons on the degree to which big levels of institutional ownership in a stock is a positive or a negative thing.Now institutions like this have access to the best analysis and the best sort of insight into whether or not holding majority or controlling interests in companies is a good thing for them. So what it tends to do is that people will follow those institutional investors. And so the naive investor or the common stockholder often looks to those institutional investors to see what they're doing because they've obviously got a track record of getting returns above the market average. So they're going to be drawn to it.Now there's a double whammy in terms of that in respect to the fact that this is a Crown-owned wealth fund and therefore there's this almost implied sort of Government guarantee to it. Now we know that's not the case but that is a risk and it's actually I think a risk that was identified by Treasury in their advice on the bill. Conversely there is—regardless of whether the wealth fund is sovereign or not—always this kind of drag when an institution sells large parcels and or the controlling interest in an organisation. Research that I've had a look at suggests that the stock price could drop by as much as 5 percent below its real value simply because an institutional investor has decided to sell down a large portion of its stock. It's not appropriate to assign the blame or the cause of the drop in the stock's value simply to an institutional investor's sale of them but it does highlight the fact that large controlling interests in any event can carry some value risk.So I think that's probably why in 2001 when the scheme was set up there was this control. Obviously it was a risk management issue as well because you know if you're exposed to large parcels and things go bad then that can be quite a big hit on what was then a relatively immature sovereign fund. Now it's had 22 years to mature. So it has been—in the past—normal practice to control a private investment fund's controlling interests. I'm not sure that the case yet has been made that that restriction should be relaxed for the New Zealand Superannuation Fund but we'll keep an open mind on it.Nicola Willis also raised—and perhaps to some quiet derision from the other side—the possibility that there could be political influence on and the use of these funds to substitute for borrowing—and to use an example of Michael Wood as the Minister of Transport wanting to dip into it.Now actually Treasury also talked about the possibility that that pressure could be applied. Interesting to see that they warned that the risk of lobbying from other portfolio Ministers could become more pronounced". Implicit in that is the fact that they believe that exists now and needs to be resisted. But I think what she described is a sort of an odd form of public-public partnership. Now I in principle quite strongly support the idea of public-private partnerships actually. And it was a shame that things like Dunedin Hospital and one or two others weren't actually actively pursued by this Government. But actually in the advice given to Ministers when we came to office in 2008—Hon Dr David Clark: Ah they want to privatise health. The agenda's coming out.Hon MICHAEL WOODHOUSE: See there we go—see there we go. Ideological blinkers—ideological blinkers—are staying on all the way to that member's exit from the House. Well that's the point about a public-public partnership: the money is New Zealanders' whether it's borrowed or diverted from the super fund into those assets.But I actually don't think that's the worst thing the New Zealand Superannuation Fund could invest in. But I do think there are serious serious concerns about the extent to which they should be investing in those sorts of infrastructure assets. They have to be long run but I don't think they should be the sole investor or owner of them because I think that's a risk too big for them to carry. But what Nicola Willis was talking about and what Treasury advised could happen is the degree to which there is political pressure to draw on those funds to fund infrastructure assets into the future. I expect there to be some belt and braces controls around that sort of thing.The other risk that was highlighted was the sort of bailout expectation—if a company does go bad because it fails due to commercial reasons and the Government is pressured to support or bailout the company. Now we saw that with Air New Zealand actually. So it does happen. But the question is: if you take the politics one step removed—and the whole essence of the Superannuation Fund is that politicians and Ministers are not influencing their investments—then the risk that that could happen in a bailout situation is also quite real. It's much much lower-risk if the Superannuation Fund was prevented from having the controlling interest—then that pressure would never be brought to bear because they couldn't increase the interest above 50 percent. Now they could. So yes there are pros to this but there are also some significant risks that need to be managed particularly while there is a Labour Government.I've just got to finish by the ridiculous continuation of the mantra that because the Key-English Government suspended contributions to the New Zealand Superannuation Fund somehow New Zealanders were better off. Well I would encourage Grant Robertson—Hon Dr David Clark: $29 billion.Hon MICHAEL WOODHOUSE: —or Dr David Clark to go along to their bank. Let's say he goes along to his bank and he says "I've got a great idea for investment in these shares but I haven't got any money so I'm going to borrow it. Please give me all that money and I'll give you the shares as backing." He would be laughed out of the bank. But that was exactly what David Cunliffe expected Bill English to do in about 2013 so confident was he that the stock market would go up. Now had we been in the investment curve we're in now instead of whatever number Dr Clark called out we could have been billions and billions of dollars in the red. And if the member doesn't think that can happen he should just go along to the Reserve Bank Governor and ask him what's happened to the Crown balance sheet after the funding for the Large Scale Asset Purchase programme which so far has cost this country $8 billion and counting. But you don't hear the Labour Government talking about that.I look forward to the select committee process which should be a bit pointy-headed but actually it will be a very interesting journey as we explore this bill."