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Is the Govt borrowing to seed its super fund?

One of the big superannuation issues since the Budget has been about the Government borrowing money to put into its dedicated super fund. But is it? SuperTalk investigates.

Thursday, June 7th 2001, 9:49AM

One of the big issues about superannuation since the Budget has been about the Government borrowing money to put into its the New Zealand Superannuation Fund. But is it?

Budget documents show that Government borrowing is going to borrow $3.5 billion next year, and an extra $5 billion over the next four years. Net public debt is predicted to rise over the next four years - from more than $20 billion to nearly $24.5 billion.

This borrowing programme is well above what the markets expected and a link is being made between this increase in borrowing and the level of contributions to the super fund.

Some economists suggest the rise in borrowings is similar to the contributions budgeted to be put into the super fund.

Opposition politicians, including National deputy leader and finance spokesman Bill English and Act leader Richard Prebble have been quick to highlight this apprarent link. The line they are spinning on it is that the Government is "using the mortgage to play the sharemarket".

English says the government "doesn't have enough cash to spend what (it) wants to spend nor maintain and improve the Crown's existing asset base while at the same time investing in the Superfund."

"In the period to 2005, the Crown needs to invest $19.3 billion, which includes $6.1 billion for the Superfund. But over that period Dr Cullen has only $11.7 billion cash available from surpluses. He therefore needs to find another $7.6 billion.

However, finance minister Michael Cullen claims the government's borrowing programme is "a victim of distortion through over-simplification."

He argues the government is keeping its debt in line with declared objectives and the new borrowings aren't being used to invest in the super fund.

"Yes, the Budget shows a modest increase in net debt over the next few years," he says.

"But that has nothing to do with the proposed Superannuation Fund. Instead it reflects the Government's decision to take on to its own books the borrowing programmes of the District Health Boards and Housing New Zealand.

"This makes shrewd sense because the Government can negotiate cheaper interest rates than can these smaller organisations.

"The other reason there is a small increase in the debt profile is that the previous government allowed the infrastructure to deteriorate through persistent under-investment over many years across many activities - from transport through to corrections and defence," Dr Cullen says.

"As a consequence, the coalition Government has had to embark on a heavy capital investment programme.

Cullen says the budget forecasts operating surpluses of $1.4 billion in 2002, and $2.4 billion, $3.1 billion and $3.7 billion in subsequent years.

For more on this see Govt not borrowing to pay for super scheme

« Fund's rules present problemsAMP & Good Returns launch superannuation website »

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Lender Flt 1yr 2yr 3yr
ANZ 6.49 5.10 5.59 5.59
ANZ Special - - 4.99 -
ASB Bank 6.50 5.49 5.49 5.75
ASB Bank Special - ▼4.89 5.10 5.39
BankDirect 6.50 5.49 5.49 5.75
BankDirect Special - 4.99 5.10 5.39
BNZ - Mortgage One 6.90 - - -
BNZ - Rapid Repay 6.49 - - -
BNZ - Special - - 4.99 -
BNZ - Std, FlyBuys 6.49 5.19 5.39 5.29
BNZ - TotalMoney 6.34 - - -
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 6.70 - - -
Credit Union Baywide 6.45 5.75 5.75 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct 6.10 6.45 6.69 7.10
First Credit Union 6.45 - - -
HBS Bank 6.39 5.39 5.39 5.39
HBS Special - 4.99 4.99 4.99
Heartland 6.70 7.00 7.25 7.85
Heretaunga Building Society 6.45 5.40 5.40 -
Housing NZ Corp 6.74 5.70 5.99 6.29
Lender Flt 1yr 2yr 3yr
HSBC Premier 6.60 4.95 4.95 5.40
HSBC Premier LVR > 80% - - - -
HSBC Special - 5.29 5.29 5.29
ICBC 6.75 5.99 6.39 -
Kiwibank 6.40 5.39 5.49 5.69
Kiwibank - Capped - - - -
Kiwibank - Offset 6.40 - - -
Kiwibank Special - 5.09 4.99 5.39
Liberty - - - -
Napier Building Society 6.50 5.80 6.70 -
Nelson Building Society ▼6.70 ▼5.65 ▼5.95 -
Lender Flt 1yr 2yr 3yr
NZ Home Loans 6.85 5.49 5.49 6.29
Perpetual Trust 7.70 - - -
Resimac 5.84 5.60 5.65 5.79
SBS Bank 6.39 5.39 5.39 5.39
SBS Bank Special - 4.99 4.99 4.99
Sovereign 6.60 5.49 5.10 5.75
Sovereign Special - 4.99 5.10 5.39
The Co-operative Bank 6.45 5.15 4.99 5.35
TSB Bank 6.49 ▼5.45 ▼5.49 5.75
TSB Special - - ▼4.99 5.40
Wairarapa Building Society 6.20 5.75 5.95 -
Lender Flt 1yr 2yr 3yr
Westpac 6.40 5.49 5.49 5.59
Westpac - Capped rates - 6.74 6.99 -
Westpac - Offset 6.40 - - -
Westpac Special - - 4.99 -
Median 6.49 5.45 5.40 5.40

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