Robertson Grant: Oral Questions — Questions to MinistersText is incorporated into the Bound VolumeRobertson Grant: Oral Questions — Questions to Ministers[Sitting date: 23 September 2015. Volume:709;Page:6925. Text is incorporated into the Bound Volume.]6.GRANT ROBERTSON (Labour—Wellington Central) to the Minister of Finance: Does he stand by his statement in relation to capital contributions to the NZ Super Fund that “saving by borrowing is like building up your savings with your credit card it just doesn’t make sense”; if so what has been the average return per annum since the NZ Super Fund was created?Hon BILL ENGLISH (Minister of Finance): I stand by my full statement in which I also said that the fund was always predicated on having surpluses to invest—actual money to save. That is how the legislation was set up. In answer to the member’s second question the average return per annum since the fund was set up in 2003 is 10.1 percent. Returns have varied between minus 22.9 percent and plus 25.8 percent.Grant Robertson: How does he reconcile the first part of that answer with the 15 percent return the Superannuation Fund has made in the last year and the 10 percent per annum return the fund has made since its inception compared with 3.3 percent—the cost of Government borrowing?Hon BILL ENGLISH: The way to reconcile those statements of course is the concept of risk which I know the Labour Party does not really understand. So just to illustrate the kind of risks in 2008-09 the fund made minus 22 percent. In 2007-08 it made minus 4.9 percent. In 2011-12 it made 1.21 percent. The fact that it has made 10 percent—that is above the market rate on average—for the first 15 years or so means it is highly likely it will make negative returns for an extended period some time because no managed fund beats the market by much over any length of time. So we just did not want to take the risk of borrowing more—for which Labour criticises us—in order to invest in overseas shares.Grant Robertson: Are the Guardians of New Zealand Superannuation correct when they say that the Superannuation Fund is worse off by $18.2 billion comprising $12.7 billion of unmade capital contributions and $5.5 billion of forgone earnings as a result of the Government’s decisions?Hon BILL ENGLISH: Yes they are wrong.Grant Robertson: They’re correct.Hon BILL ENGLISH: They are not—they are not right. It is just that the management of the Superannuation Fund would of course love to have billions of dollars. The question I would say to the management of the Superannuation Fund is whether they would go and borrow $5 billion in order to invest on overseas equities markets that have been deliberately inflated in value by central banks around the world. No one knows what will happen to those share funds when central banks stop printing money. One of the preoccupations of world financial markets right now is the risk of the very investments that the Superannuation Fund has made.David Seymour: If the Minister did know how to consistently borrow at 3 percent and make a return of 15 percent would he be either very very rich or on the front bench of the Labour Party?Mr SPEAKER: Order! That is a marginal question. I will let the Minister answer the part of that question for which he has got ministerial responsibility.Hon BILL ENGLISH: Whoever did it would be very very rich and then they would probably be entitled to join the ACT Party.Grant Robertson: Are the guardians of the Superannuation Fund correct when they say that compared with the cost of borrowing taxpayers are now $6.2 billion worse off than if capital contributions to the fund had been continued by his Government?Hon BILL ENGLISH: Yes they are wrong for two reasons. One is that the calculation is completely hypothetical. Second as the contributor of the funds we have a different perception of risk from what they have. They would love the Government to take huge risks and give them billions of dollars. That is what you would expect them to say. We do not want to take that sort of risk. Third they are a long-term fund and the fact that they have beaten the averages for a few years is no indication of the risks out ahead of them. A future Minister of Finance may well be in this House defending persistent negative returns on that fund—in fact I believe that is certain.Grant Robertson: In light of all those answers what does he suggest a future Government do to fund the cost of New Zealand superannuation in 2030 if as Treasury forecasts the fund is $36 billion smaller than it should be and there will be a 2-year delay in drawing upon the fund? What should they do: raise taxes cut spending on health and education or cut New Zealand superannuation?Hon BILL ENGLISH: What they should do is stick with the expenditure control regime that the current National Government has in place because if Governments do that for the next 10-15 years they will have sufficiently large surpluses to top up the fund get rid of all our debt and afford national superannuation. But if the Government changes to the reckless Labour approach to expenditure we will not be able to do any of those things.