Posts by Gareth Ward
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But they matter: NZ will have its best chance of surviving those kinds of external shocks if we haven't put borrowed money into the Super Fund.
No, only under certain assumptions you've made as well. e.g. if those shocks directly affected our revenue base and drove sovereign borrowing rates through the roof, we would be much better having money put aside to help pay super given that we would have real trouble getting our hands on it elsewhere.
The point is, there are multiple scenarios - but one pretty damn solid one is that the baby boomers are going to retire and the cost of super as a percentage of GDP will be much higher. That's why you smooth it. That's why you put aside a bit of money each year from now on, and that's why you then get a bunch of people to DO something with that money while it's sitting there.
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Joshua - yes, absolutely. That is the exact reasoning behind smoothing super payments over a 40 year horizon, which leads to a pool of money being built up, which leads to investing that money (Super Fund) rather than having it just "sitting around"
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Krugman posited a very specific problem for Japan in the 90s though - it was the one time I ever saw him "in the flesh" at a lecture he gave at Auckland uni. They had very poor growth prospects, savings were massively preferred over consumption and it fell into the much feared theoretical liquidity trap, leading to Krugman proposing Government support FOR inflation. There was no underlying asset-bubble cause as I remember.
That problem is not what the world faces now. The fear around the banks is a case of "Japan didn't react fast enough or correctly to IT'S problem and neither are we". So our Govt reactions are unfortunately the same, but the underlying problems are very different.
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Amongst all the batshittery in that OIA, why would Wellington Police be investigating conflicts of interest for appointments of OTHER people in Auckland's water industry?
I fail to see how police would get involved in that at all
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Could you lay these arguments out for me Giovanni? The reasons for Japan's 90's stagflation and how they hold again now in the broader global economy?
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Well the leading contender for "why couldn't it happen" a few years back when I was up-to-date on Japan was the almost unique industrial/government dominance of their economy. Their economic structure looked nothing like that of Western modern economies.
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Just to make it clear - the Super Fund, ACC Investments etc are NOT playing the investment market to make all this lovely money for the future.
In the case of Super, Treasury (I presume they look after Super???) have decided it's best to put aside some money now to be prudent given the (pretty solid) forecast ramping up in super demands. The Fund is simply a "well given that we've got that money we should really make it work for us".
This seems to be a very common misunderstanding as to the point of the investment.
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It's global warming Rich.
Also, they're moving from a "Govt pays what they need each year" to a more prudent "we're forward covered" position. So the investment arm looks after the amount sitting there for that forward cover.
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Matthew, it isn't about making super special returns, it's about looking at what percentage of GDP we require to pay as super over a 40 year horizon and funding accordingly. It looks solely to smooth the payments to make fiscal control easier.
Given that, you need to build up a fund of money to pay that smoothing for the first 15 years or so. It's just a reality of smoothing. So given that, it is best to have that money invested somewhere doing something.
In their own words: "The intention of the Fund is to build up a portfolio of Crown-owned financial assets while the cost of New Zealand Superannuation remains relatively low. These assets will then be progressively drawn on to supplement the Crown's annual budget as its finances adjust to the much higher level of ongoing expense for New Zealand superannuation. In effect, the Fund provides a smoothing mechanism (or 'buffer fund') for what remains, fundamentally, a 'pay-as-you-go' system. In this way the Fund serves its purpose of reducing the tax burden on future taxpayers of the future cost of funding New Zealand superannuation payments."Also, there certainly are other Govt agencies that invest their funds for future use - ACC being one that immediately jumps to mind. Govt is, by it's very nature, fiscally conservative though so it is not willing to push the boat out on these.
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