Key or Keynes?

Antidismal is not happy with John Key's plan to require 40% of the State Pension Fund to be invested in New Zealand.

To this you can add the idea that this extra government investment
could just crowd out private investment, both from within New Zealand
and from overseas. So the total amount of investment in New Zealand may
not change much at all. And then there is the issue of what happens if
politicians start to take an even more hands on approach to the fund.
The last thing we need is for investment decisions to be made, not for
good economic reasons, but purely for party political reasons.

It does smart to see all that money leaving New Zealand when it could be invested here. But is money leaving New Zealand. I thought we had a current account deficit?



That means that people are lending us money, and that money is coming here, not flowing out, right? At 8% of GDP we are talking large numbers too, perhaps $14bn each year. A few hundred million more isn't going to be noticed probably, and the possible political interference is downright dangerous. My Key can hardly be thinking that the world is about to close its capital borders, given all the talk of international rescue. Opening the paper these days I expect to see 'Thunderbirds Are Go' written on the front page.

Perhaps Mr Key genuinely thinks that we will spend more money on these projects if it comes from the pension fund as well as other sources. This must surely mean that the fund would set a lower bar for investment than would currently be there. Does this mean dodgier projects? Does it mean that he wants the government to borrow from the fund at attractive rates, or do some sort of fiddle on this? Can't imagine it.

Does that mean Mr Key's plan is just politics? If so, we can hardly complain. The sorts of comments that come out of Mr Cullens lips suggest that this is the only way to get your message across in New Zealand. But sad to see that both major parties trade on our economic illiteracy.

I am all for big infrastructure projects. We desperately need more roads, power stations, and our Internet certainly is pretty crap. But perhaps Mr Key should look first at all the money wasted by the government on projects that not even the most compromised pension fund would invest in.