DEFU Shows Increased Debt and Increased Risk
Tuesday 18 Dec 2001 Rodney Hide Press Releases -- Economy
ACT Finance Spokesman MP Rodney Hide said today that the December Economic and Fiscal Update (DEFU) showed a Government
borrowing ever more, exposing taxpayers to increased commercial risk.
"The Government is borrowing $10.6 billion over the next five years - $1.5 billion more than just six months ago. The
increase is due to Air New Zealand, increased student loans, and refinancing District Health Boards. The blow-out is
completely policy driven.
"Increased borrowing means increased risk for taxpayers.
"Of the $10.6 billion in borrowings, $7.9 billion for Cullen's Super scheme. Michael Cullen's biggest fiscal risk is
the very scheme that is supposed to give security in retirement. He is borrowing every one of the $7.9 billion that he
is putting aside for our future pensions. This fact is made plain in Table 3.2. The strategy is very risky - it's just
like mortgaging your house to play the stock market in the hope of striking it lucky.
"The table on page 68 of the DEFU reveals just what a financial wizard Michael Cullen thinks he is. The table shows he
is planning to borrow at 6.2 percent to invest on world share markets, to return a hoped for 9.4 percent. That is true
financial wizardry. Michael Cullen believes that he can make $32 million a year for every billion he borrows and invests
on behalf of taxpayers.
"It sounds too good to be true - and it is. Michael Cullen has no track history in investing his own money let alone
anyone else's and here he is borrowing billions to play the world's financial markets. It's nuts. The best security for
the future would be to cancel the scheme and drop the borrowing.
For more information visit ACT online at http://www.act.org.nz or contact the ACT Parliamentary Office at
act@parliament.govt.nz.