Hon Dr Michael Cullen
Deputy Prime Minister, Minister of Finance, Minister for Tertiary Education, Leader of the House
Tuesday 8 November 2005 Speech Notes
Address to open Crown Finance Institutions Forum
The Treasury, Level 5, 1 The Terrace, Wellington
I am pleased to have this opportunity to address all of you here today, and to extend a warm welcome to Mr Keith
Ambachtsheer who will be today’s keynote speaker.
Since this is intended to be a discussion forum, I will keep my own comments brief, and then invite questions on any
issues from you.
As I’m sure you are all aware, over the next twenty years the Crown balance sheet will come to be dominated by financial
assets, rather than physical ones. That may require a shift in thinking for New Zealanders, who are very comfortable
with the notion of their government owning large public infrastructures, hospitals, schools and so on; but perhaps less
comfortable with the notion of large holdings of financial assets. Fears of dancing Cossacks alternate with naïve
visions of endless pools of cash available for local pet projects.
You and your successors will play a very important role in managing these financial assets to the benefit of all New
Each of you has developed investment strategies particular to your own circumstances and I would like to commend the
very professional approach you have all taken in developing them. It has been very interesting following the investment
strategies of all the Crown portfolios over the past few years.
Allowing diversification of the EQC and GSF portfolios and the establishment of the NZ Superannuation Fund has put the
investment of all the funds firmly in the public eye. This has been a good thing. Investment returns since 2001 have
been very volatile, and reported returns have occasionally provided the financial media, and the opposition, with a
number of opportunities to have a go at the wisdom of some of your investment strategies.
Your response to those criticisms, and indeed your advice to my office, has been uniformly resolute in the message that
long-term value to the Crown will accrue from well planned and executed investment strategies. To their credit many of
the critics have acknowledged the investment successes you have all achieved over the past year or so.
And further, I think the public account of your results and the ensuing debate has undoubtedly enriched the investment
knowledge of all New Zealanders. I hope that this leads to people becoming more aware of the benefits of saving for the
future. Indeed, my office has had a number of suggestions from members of the public to open the New Zealand
Superannuation Fund up to private contributors. While that is not the purpose of the Fund, it certainly demonstrates
that the public is aware of the performance of both private and public investment funds.
Your success convinces me that the model we have set up to manage the Crown financial portfolios is a very sound one.
That model is based around three important principles:
- independence from government,
- commercial investment objectives, and
- public accountability.
I see no reason to change that model following the formation of the new government.
One aspect of legislation that applies to many of you that has recently been brought to my attention is the requirement
to avoid prejudicing New Zealand’s reputation as a responsible member of the world community.
By way of background, ultimately the funds are part of the Crown and the independent commercial nature of the objectives
should be tempered with a responsibility to avoid prejudice to New Zealand’s reputation. Arguably all entities
responsible for public money have an implicit requirement to avoid prejudice; however it was included specifically in
the CFIs legislation to ensure that you develop explicit policies and did not overlook the implicit requirement.
There are some voices, notably the Council for Socially Responsible Investment, who are questioning the broad nature of
this legislation, and proposing that more specific criteria be set out in the legislation. I am strongly inclined to
give the current policy framework time to work, and at this stage I am not convinced that we need to alter the
You have all developed policies that address the issue of avoiding prejudice to New Zealand’s reputation, and I think it
is important to let those policies evolve and meet the test of the real world.
However, groups such as the CSRI will no doubt provide you all with plenty of ideas, and of course they will monitor
your progress very closely!
I note that your annual reports contain your investment policies including those relating to avoiding prejudice. This
issue is likely to continue to be of public interest, so I would also encourage you to provide more comment in your
annual reports, and in other reports relating to investment performance, on the results of applying those policies.
As I mentioned before, I do not see that the formation of the new government will change the way you all operate. You
will continue to remain free to develop your own investment strategies consistent with the nature of each of your funds.
I would now like to open the discussion to your questions.