Brian Gaynor Blog

Don Brash’s formula for the economy is quite simple; slash government spending, privatise Government owned assets and let the markets do the rest. Unfortunately this simple formula doesn’t work in New Zealand.

The latest New Zealand and Australian September quarter managed funds statistics, which were released in the past week, show that the market is not working in New Zealand in terms of savings and providing capital for the productive sector. 

The first point to note is that the gap between Australia and New Zealand in terms of managed funds has widened as follows;

-         Total Australian managed funds have risen from A$732.8 billion at the beginning of 2004 to A$1,303.4 billion at the end of September

-         Total New Zealand managed funds have risen from NZ$52.7 billion to just NZ$61.2 billion over the same period.

The second is that Australians now have A$497.7 billion invested in domestic equities through managed funds whereas we have only NZ$6.7 billion. In addition, New Zealanders have a far higher percentage invested offshore, 43.5% compared with just 17.0% in Australia.

Brash wants to wind up the New Zealand Superannuation Fund and remove all KiwiSaver subsidies.  

How can we bridge the gap with Australia if our banks won’t lend to companies and individuals are unwilling to provide equity to them?

How can we improve our economic performance if two of the main sources of equity funding for the productive sector, namely the New Zealand Superannuation Fund and KiwiSaver, will be effectively wound up under Brash’s proposals?