Fitzsimons Jeanette: Financial Review Debate 
Fitzsimons Jeanette: Financial Review Debate 
[Volume:607;Page:4175] 
JEANETTE FITZSIMONS (Co-Leader—Green) 
: 
 I am going to break with tradition here a little and speak about a financial review. In fact I will speak about the financial review of the Ministry for the Environment and I would like to bring to the attention of the House a number of matters that concerned the Local Government and Environment Committee when it reviewed that ministry. The Ministry for the Environment has a new chief executive. He had come before the committee for the financial review for the first time so we thought it was appropriate to give some scrutiny especially as the ministry is currently reorganising its structure and work programme. Mr Carbon told us that the ministry had taken on more projects than it could satisfactorily deliver on and was in the process of prioritising. The committee agreed that it was important to prioritise and do those things that one can do well but we were a bit concerned at some of the priorities that seemed to have been chosen or more particularly those that seemed to have been omitted. 
Our committee spent a year—the year 2000—on an amendment to the Resource Management Act which among many other things established a more streamlined process for national policy statements under the Act. There have so far been none except the one that is mandatory. We were assured that the ministry had a lot of national policy statements waiting in the wings and that as soon as the new legislation was through it was keen to give us some. It has been a major reason for the Resource Management Act not working as well as it should. There has been no or very little direction from central government. That part of what the bill envisaged has never been carried out. We now find that apart from the national policy statement on biodiversity—which the committee felt was taking an extremely long time to produce; it has been in the pipeline for quite some time—there are no further plans to do any other national policy statements after that is complete. We wonder why we spent all that time and trouble refining the process to make it more usable. We also wonder just how the national level part of the Resource Management Act process will be accomplished without national policy statements. 
I turn now to the New Zealand waste strategy. When it was first published many people said the problem was that it had no teeth. But the good thing was that it had targets and maybe with targets for waste reduction we would actually start to make some progress. The select committee was told that two of the targets were overly optimistic and would not be reached. On investigation it turns out that those are the only two targets that are actually quantified and measurable. One relates to the reduction in organic waste and the other to 95 percent of the people living in areas with access to a recycling scheme. If neither of those targets are to be reached then the promise of the waste strategy is not being fulfilled. We have concerns that there is a real lack of progress in this area. 
Every year of the 5 or 6 years I have been in Parliament I can remember the select committee asking about progress on contaminated sites and in particular the Mapua site near Nelson which is the most seriously contaminated site in the country and the first to need remediation. Despite the voting of money several years in a row there is still no progress on the cleaning up of the contaminated site at Mapua. There is still discussion about how to do it who should do it and the contract details of doing it. The committee registered its disappointment that after all these years we are still no further on. There are many more contaminated sites—for example the Tui mine—that need to be worked on as soon as work on the Mapua site is under way. 
Two very important committees reported to the Minister last year. One report was on a pesticides risk reduction policy and the other was from the Agrichemical Chemicals Trespass Ministerial Advisory Committee. Both signalled important issues that needed to be managed in terms of the handling of pesticides and spray drift. The spray drift one was set up when a member’s bill was withdrawn from the House on the promise that this committee would be set up to address the issues. The Government has received a couple of reports but so far the Ministry for the Environment appears to have no plans to follow up with any action. The pesticides risk reduction strategy report was the result of a Greens’ Budget policy initiative which was accepted by the Minister and it appears it is not going anywhere. We are disappointed. 
ROD DONALD (Co-Leader—Green) 
: 
 I am pleased to speak in this debate on the Government Superannuation Fund Authority. However I am not pleased with the review of the authority’s performance in the year in question. My pleasure comes from getting a review in the first place because the Government fought against having such a review. To quote Mr Cullen’s words about us the Government did not want his “loony” investment strategy exposed because it is the Achilles heel of this Government that it took good money out of Government bonds and gambled it on the overseas sharemarket. I was a minority of one at the select committee when we did the review. As the conclusion states: “The majority of us are generally satisfied with the performance of the authority in the period under review and believe it is generally operated according to recognised best practice.” Of course the other members of the select committee had to say that because they all voted with the Government to change the investment strategy of the fund. Even my colleague Rodney Hide in ACT voted for it despite the fact that he also is now jumping up and down about the losses the Government Superannuation Fund has made. 
The report outlines the position of the Green Party in its minority view on the performance of the fund. In particular it highlights that we believe that the deterioration of the unfunded past service liability of $253 million as a result of factors within the control of the authority is unacceptable. We believe that puts in jeopardy the authority’s own risk objective amongst other things. As a result we have no confidence in the ability of the authority or for that matter of its investment advisor Frank Russell or its investment managers to achieve the investment objective of a 7.1 percent rate of return after tax. We have good reason for having no confidence in the authority’s ability to do that because it has failed to live up to its own expectations since the financial review was completed. In fact figures that have just been revealed to me by the Minister of Finance show that the authority lost $126 million for the 6 months to December. That was its overall loss. Its loss on international shares—and that is net of exchange rate hedging—was $138 million. That is a loss of 12.6 percent over that 6-month period. If that were not bad enough just consider that the members of the authority with the best advice they had received from all those expensive fund managers said that the authority was going to make $75 million over that 6-month period. So we have to add the two together. The under-performance on shares alone was $213 million for the 6 months to December. That is on top of the extraordinary losses that the authority managed to achieve for the period to June last year which is the period under review. 
It is interesting to compare that with the return on fixed interest and cash. The authority had projected earning only $24 million. In fact it earned $66 million. One of the reasons perhaps is that the exposure of the authority’s poor performance and of the total stupidity of Dr Cullen’s investment strategy did at least stop the authority in its tracks and as of last September it stopped putting more money on the international sharemarket. As of a couple of weeks ago 6 March it has announced that it will not increase its target for investment overseas and that it is keeping it at 42 percent which is roughly what it had invested at the time of the review. What interests me is that if it continues to lose money on its overseas shares will it continue to pump more money into that asset class just to keep that percentage up? It is a question that I will ask the authority in due course. 
The other interesting thing that came out from the chair of the fund is that the return target has now reduced so that now overall returns are projected to be only 2.5 percent above the Government stock rate. The authority originally targeted 3 percent. I ask Dr Cullen how much the authority will have to make in the next 8 years 9 months to get its 10-year target of even the 6.5 percent it is now projecting. It will have to be 9 percent to reach that target. The authority will not be able to do it.