The partial sale of a number of Government owned commercial assets would be a better way for the Crown to raise new funds instead of directing the New Zealand Superannuation Fund to invest a higher percentage of its money in the domestic economy.

As at June 30 the New Zealand Government had total assets of $200.8 billion of which $14.8 billion was represented by the Super Fund. Thus only $12 billion or 6% of the total Crown’s assets were held offshore because most of the non-Super Fund investments are in the New Zealand.

The Super Fund was established to help partly fund the country’s escalating national superannuation bill. It also gives the Government the opportunity to diversify its asset base, particularly from a geographical point of view.

In addition offshore investments generate overseas earnings. These have a positive impact on the country’s bourgeoning balance of payments or current account deficit.

The preferred

New Zealand’s balance of payments figures for the June 2008 quarter demonstrate once again that the country’s weak balance sheet – the difference between offshore assets and liabilities – is the main contributor to the burgeoning current account deficit.

Statistics New Zealand reported a current account deficit of $15.0 billion for the June 2008 year compared with $14.2 billion for the March 2008 year and $14.1 billion for the year ended June 2007.

The main contributor to the deficit is investment – the difference between dividends and interest paid and received – which accounted for $13.9 billion of the $15.0 billion June 2008 year deficit.

The main contributor to the deficit is investment – the difference between dividends and interest paid and received – which accounted for $13.9 billion of the $15.0 billion June 2008 year deficit.

The core problem

The latest current account or balance of payments figures are a stark reminder that we are living well beyond our means. Economists were expecting the deficit to decline from 7.9% to 7.4% of GDP, mainly because of higher commodity prices and Tui oil field exports.

The actual outcome was a decline to 7.8% of GDP, far less than expected because of the burgeoning investment deficit. As the following table shows the current account comprises trade, services, investments and transfers, with trade and investment being the most important.

New Zealand’s Current Account Deficit  (year ended 31 March) ($ million)                             2008                  2007              2006               2005              2004 Trade                                     (1,748)             (2,831)          (4,105)         (2,230)         (1,192) Services                                    294                    501                  447                1,071            1,595 Investments                     (13,123)            (11,863)        (11,256)         (9,466)       (7,328) Transfers                                 790                    671                 373                   318                 237 Total                                    (13,787)           (13,522)         (14,541)        (10,307)     (6,688) As % of GDP                           7.8%                   8.2%               9.2%               6.9%             4.8%

Exports increased by $3.1 billion or 8.7% in the March 2008