Both Peters and Hipkins cite Singapore’s Temasek as a role model when it comes to spurring economic growth.
The S$434 billion global investment company holds the Singapore Government’s commercial assets – among others – on an arm’s-length basis. A similar model here would see all the Government’s holdings in SOEs and publicly listed companies transferred to a new government-owned fund, which would manage the portfolio.
Capital would be recycled – if assets were divested and reinvested in new companies. That’s not going to happen.
Peters earlier told me a lot of time was spent working with Treasury to try to get Labour involved in a similar initiative during a previous government.
“It works. I’m seeing a whole lot of countries that are thinking that way.”
NZ First is instead promoting a $100 billion fund focused on investing in New Zealand infrastructure. It would also be ring-fenced from political meddling and billed as a silver bullet for infrastructure funding.
The devil is in the detail – and NZ First’s Future Fund is light on them. Purists will be aghast at the notion of offering tax incentives to attract infrastructure investment, though it tallies with the philosophy behind the party’s proposal for a special Economic Zone at Marsden Point to “provide relief” from planning regulations and the Resource Management Act.
Tax and investment incentives and reduced company taxes would also be considered for the zone, as part of a wider strategy to produce more goods and services for export.
The potential benefits from a $100b fund are significant. But with the establishment of National Infrastructure Funding and Financing (NIFF) to connect private capital with New Zealand’s public infrastructure projects, the opportunity may have passed.
Where Peters is mining votes is with the party’s proposal to buy back the Bank of New Zealand (BNZ) from its Australian parent, National Australia Bank (NAB), and merge it with Kiwibank. The goal is to create a major, state-owned “National Bank of New Zealand” to increase market competition and keep banking profits onshore.
Peters estimates the purchase price to be in the range of $7.5b-$15b, while market experts suggest it could cost upwards of $20b. The proposed funding stack would involve issuing domestic sovereign banking bonds, long-dated Crown debt, and utilising investment vehicles like the Future Fund and ACC. His coalition partners have panned the proposal.
Labour’s proposal
Labour‘s New Zealand Future Fund also draws inspiration from Singapore.
Aimed at boosting domestic investment, the party’s flagship economic policy proposes keeping Crown assets in public ownership and leveraging their dividends to fund national infrastructure and innovative Kiwi businesses.
Hipkins says tax can’t be the Government’s only source of income: “It’s time instead to build new ways of generating national wealth.
Labour leader Chris Hipkins says his government’s future fund would “keep opportunities in New Zealand by investing in our people, our ideas and our industries.” Photo / Mark Mitchell
“The Future Fund will keep opportunities in New Zealand by investing in our people, our ideas and our industries, so the next Trade Me, Xero or Rocket Lab can thrive and grow with the wealth they create staying here.”
The fund would be seeded with an initial $200m in taxpayer capital and existing state-owned commercial assets (such as energy gentailers or state-owned enterprises). There is, as yet, no transparency on which assets will go into the fund.
The Government holds 51% stakes in three of New Zealand’s four listed power companies – Genesis Energy, Meridian Energy and Mercury Energy. It also holds 51% of Air New Zealand and owns outright NZ Post, Kordia, KiwiBank, Pamu (Landcorp), Airways Corporation and Quotable Value NZ and Transpower. These companies paid $688m in dividends to the Government last year.
The NZ Super Fund would run the fund. The single shareholder would be the Minister of Finance (similar to the Singapore model). But unlike the Singapore model where its fund can freely buy and sell assets, Labour’s policy includes a legal firewall preventing the initial “seed” assets from being privatised or sold to private investors.
Critics, including economists from the New Zealand Initiative, argue that the fund forces bureaucrats to “pick winners” rather than allowing private capital to allocate resources efficiently. Others note that diverting dividends from Crown assets reduces revenue for much-needed services.
The fund will, however, use the assets as collateral to borrow against, with the goal of expanding the fund’s investment capacity to as much as $20 billon over time.
Infrastructure NZ has welcomed the proposal, saying it would secure Aotearoa’s future and would be a positive step towards long-term infrastructure planning.
“Labour’s proposed New Zealand Future Fund could also depoliticise key aspects of the funding process – a long overdue move,” said Infrastructure NZ CEO Nick Leggett.
“New Zealand’s infrastructure deficit is well-known and understood. “However, solving it will take political courage, bold long-term thinking and the willingness to seek additional investment. A future fund as Labour has proposed has the potential to bring scale, certainty and domestic capital into the system to fund much-needed infrastructure.”
Successive Labour governments established ACC (Kirk Government); KiwiSaver and the NZ Super Fund were launched by the Clark Government. The last Labour Government also created the Elevate NZ Venture Fund, with $300 million seed capital.