sign uplog in
Want to go ad-free? Find out how, here.

Paul Goldsmith on why using borrowed money to invest in the Super Fund is a bad idea, even if halting contributions would reduce the size of the fund by $20 billion over 10 years

Paul Goldsmith on why using borrowed money to invest in the Super Fund is a bad idea, even if halting contributions would reduce the size of the fund by $20 billion over 10 years

The New Zealand Superannuation Fund is projected to be $20 billion smaller by 2031 should National implement its policy to suspend contributions for 10 years.

If contributions were to continue, the closing balance of the Fund is projected to increase from $45 billion to $109 billion by 2030/2031.

If they were to be halted from 2021/22, the closing balance would be $89 billion. If they were stopped straight after the election, the closing balance would be $87 billion.

These figures are derived from a detailed Treasury model that uses forecasts and projections from the Pre-election Fiscal and Economic Update. It projects an annual average rate of return of 7.9% over the 10 years. The Super Fund’s average annual return is 9.97% since inception.

On the flipside, by halting contributions for a decade, National would free up $14.9 billion, which could be used elsewhere.

Speaking to, National’s finance spokesperson Paul Goldsmith said: “We’re not against the Super Fund…

“We just take the view that at a time when we’re borrowing colossally, it’s better to be spending that money on New Zealand and on improving the infrastructure of New Zealand rather than putting it on global stock markets for use in 20 or 30 years’ time…

“In seven or eight years’ time we may be in a position to start up again, but at the moment… we’ll halt those payments.”

The Super Fund was created by the Labour-led Government in 2011 to smooth the cost of superannuation between today's taxpayers and future generations.

The Super Fund invests in a global portfolio of investments. The Government will start withdrawing money from it about 15 years’ time.

Put to Goldsmith that even if returns were lower than 7.9% per annum, they would still likely be higher than the interest the Government is paying on the borrowed money it’s using to make contributions, he said that what we do know is that we “definitely” have to repay the borrowed money. What we don’t know is what the return on the Super Fund investment will be.

“If it was a slam dunk, then we may as well borrow a half a trillion dollars and give it to the Super Fund. It’s not a slam dunk,” he said.

Goldsmith also pointed out John Key and Bill English halted contributions between 2009 and 2017 in response to the Global Financial Crisis.

Asked why bother having a long-term investment vehicle, if the government doesn’t take a long-term investment approach by making contributions through economic highs and lows, Goldsmith said: “Governments are not the same as individuals so we have a different approach towards funding and saving.

“And we do recognise that we have very high levels of debt over the next few years. So the question is, do we want to keep adding to that debt at even higher levels?

“The overall amount of debt does matter.”

This is how the cost of NZ Super is expected to increase as a portion of gross domestic product (GDP), according to Treasury:

See the video interview for more on the Super Fund, as well as comments from Goldsmith on National’s JobStart programme and income tax cuts.

On the issue of the wage subsidy, Goldsmith said National would try to tighten the scheme, should it need to be used again, and would only look to recoup payments from undeserving companies as a “last resort”.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.



Sounds like 'John Key stopped it, so should we'.


I am trying to make sense of what Goldsmith is saying, but I can't.

When you have a guy with a Masters in History running your finances this is what you get


This page makes it clear that, depending how you calculate it, whizzkid John Key's decision to suspend contributions to the fund has cost us between $9.7B and $26.5B.

We shouldn't let National near the levers of power again if they're insisting on making the same mistake again.

We were also able to borrow a large sum of money to help get through COVID-19. If the debt levels had been much higher, we would be much worse off.

Other countries with 4-5x our debt-to-GDP ratio are not struggling to borrow money at rock bottom interest rates, no reason to think we would be struggling to raise money either if we were at ~30% rather than ~20% pre-covid.

Right. The surplus in gov books to pay down debt came from years of under-investing in infrastructure and social services while population grew at 1.5-2% a year.

Because National managed to convince the public at large that running a surplus was the most important thing, after their big play about a "decade of deficits" at the 2008 election - that they then almost delivered themselves thanks to cutting taxes for the rich during the worst recession in living memory and the worst natural disaster this country has ever faced.

Let me guess, you're voting Labour then?

“What we didn't realise was that Labour slipped in a reduction in their own contributions to the NZ Super Fund without announcing it or telling anyone,” Goldsmith said

Labour has begun to do the same thing.

Isn't that "reduction" due to the reduction in GDP, which the Super Fund contributions are indexed to?

Today I learned that a party deciding to reduce contributions slightly in the short term was actually the same thing as another party saying they would stop contributions entirely for many many years.

Lanthaide, comparing things can be a trick, are you sure you got the apples to apples?

I never said they were the same thing. I said they had begun to do the same thing.

Hence why they don’t announce the policy, it’s coy. Can’t say it’s an accident they kept it as quiet as possible.


So more "short -term juice the books" and forgetting the long game from National. God, when did we all fall for this myopic debt to GDP figure in the absence of other indicators?

His point is that if it is a good idea to borrow money to put in the super fund then we should borrow much more and invest it. It is the equivalent of increasing your mortgage significantly to buy shares. It is a wonderful idea if the returns exceed the interest cost but a terrible idea if the investments don’t pay off. There is also a limit to how much debt you can take on before it becomes a problem.

Well it is not, you seem to be unaware of the fact that when you borrow you must pay back capital plus interest so unless you can make ROI higher than the interest rate in less than a year or accumulated over a period of time you are out of luck.

This is just greed in action, helping their friends the banks to issue more debt for growing their portfolios, putting the country in serious risk. BTW this is exactly how a lot of investors went bankrupt in the 1929 market crash.

it is nothing like increasing your mortgage to invest in shares that is a typical right wing smoke screen.
by the way our fund already pays back tax , they have already paid 6.25 billion in tax to the government, and have been given 14.95 billion from the government, not a bad return
national have no understanding of any other form of investment other than rental houses, and it does make you wonder how the last PM a finance guy oversaw a massive increase in home lending during his tenure then ended up at the biggest recipient of it as chairman, was that his reward.
the two countries that have done this the best are singapore and norway, they understand long term vision for the reward of the country and over time they will get back a lot more that they used as seed money,

Very well said, sharetrader. I am afraid though that it is not only national that appear to have no understanding of any other form of investment other than rental houses: it seems to me that this is a problem with many investors and the political class in general.
This is possibly one of the reasons why we have such an unbalanced economy directed towards unproductive speculation rather than towards the real economy.

If that is the case we should never have put a cent into it, the government has always had debt since the superfund was created.

Yep. I agree. Sell it all now and pay down debt..

A very significant amount of that money has come from investment returns. It has made some serious returns year after year. Had we listened to the likes of goldsmith we would all be a lot poorer.

JT, why do you headline this as bad?

As we stand now, has any cost benefit been conducted?

“We just take the view that at a time when we’re borrowing colossally, it’s better to be spending that money on New Zealand and on improving the infrastructure of New Zealand rather than putting it on global stock markets for use in 20 or 30 years’ time…

Investing in infrastructure here in NZ, compared to an international investment portfolio?

Supplementary question, for debt junkies, explain why not borrow for both, as much as you want?.

very good question, we already do cost benefit on new roads which need to return 3 to 1 before they will be funded , but sometimes that actually works against us in that it slows productivity, like nationals 4 lane motoway from whangarei to hamilton to tauranga makes good sense but on current cost benefit it will not be built unless for political reasons.
that is foolish as it costs as a lot lot more in the long run, take the motorway to whangarei, the leg to warkworth has about a year and a bit to go so why not get the next section to wellsford ready to go so the workers can mover over, the machines etc as soon as they need to so as to not lose them and keep the costs down
instead they way we do it we lose a big section of the workforce each time not to mention the selling and buying of machinery.
the loss of the MOW was the worst thing any government did as it has cost us billions over the years and slowed progress


this guys is a terrible finance spokesperson, is that the best national can offer if so we are in for a world of hurt in ten years time if he gets his hands on the books, he rates ruth richardsons budget as number one of all time

Wears white glasses to look like an accountant.....but actually just has a Masters in History. Classic stuff.


If I needed any convincing that he should not be allowed anywhere near control of our finances, this would be it.

This is nothing but extremely short-term politics. At 75, it's not my problem, but my grandchildren's. It's both cynical and stupid. Goldsmith disappoints me-I had thought he would make a decent Finance minister, but the first time I went to hear him speak-to the NZSA-I revised my opinion.

No need for the superannuation fund - Paul and everyone of his friends don't need it.


So it's clear National want to wind back funding future national superannuation, and balance that by raising the retirement age. That's fine if you are in good health and don't do proper physical work for a living.
But what if you do honest work like a tradie on the tools? 65 your body is already pretty much buggered.

“Honest work like a tradie....” So I guess teachers, Drs, architects and customer service staff don’t do honest work?

Goldsmith also pointed out John Key and Bill English halted contributions between 2009 and 2017 in response to the Global Financial Crisis.

Coincidently that happened to be the greatest stock market bull run in human history.

Goldsmith does a great job of looking like a Finance expert. Then he says something.

The NZ Super Fund is an exercise in futility designed by people that don't understand how the governments finances operate. The government is the currency issuer and as such it can always meet the costs of superannuation and so any talk of government debt and borrowing is a complete red herring. All spending carries the risk of causing price inflation and so the source of the money makes no difference in this regard.
Alan Greenspan comments on the financing of retirement here in reply to Paul Ryan.

Stocks are a claim on future productivity and growth of the parent companies. That growth is also denominated in euros, usd etc. Foreign stocks aren't bad to own for a country with an arguably overvalued currency. NZ lacks productivity, at least we can get a little by owing some foreign companies.

but perhaps the money would be better spent in building up the capacity of our own economy. It will be our own resources that will be required to support an aging population. More doctors and nurses and more aged care workers and better hospitals and so forth and we will have less workers to run the economy so more productivity will be required. Investing our money into other economies does not improve our own wellbeing.

I agree we should build up the economy however everything you mentioned is a cost to society - aged care hospitals. likewise the whole financial industry aka FIRE economy is a ticket clipping cost monster. That's the problem with NZ, we done have enough of the likes of siemens, BMW, Amazon, Intel etc. Companies that produce stuff like FPH, Raycon, skellerup etc. That's how we pay for our healthcare by adding value, innovating, producing wealth, being competitive, earning the money.

I do not want my kids anywhere near Goldsmith's statements. I am teaching them about the value of investing in superannuation from as soon as they start work, including the concept of compound interest. and this article suggests this guy could do with some teaching in this area. This proposed policy of suspending payments for 10 years would be economically counter-productive - especially if all or part of the $14. bn it would make available is used for tax cuts.

I carried out my own calculations (as part of an Excel I created to show my kids the value of investing in superannuation). These show the cost of stopping contributions to the Super fund for the next 10 years, - assuming a 5% real rate of return. IE Stopping contributions for the next 10 years compared with investing $1bn now and $1bn each year from the next 15 years = a future value of $23 bn compared with about $7.0bn. Yes, the gap between $7 and $23 could be at least partly compensated for by the rate of return from alternative use of the funds, but given the growing burden of paying everyone super, and the risks the alternative use of funds will not generate such a rate of return, I'd go for keeping up contributions.

(Sorry that the format gets stuffed up when I paste it below)

Rate of Return 5% 5% 5 % 5%
Number Years 15 5 15 5
Contributions each Year 0 0 1 bn 1 bn
Initial Payment 1bn 1bn 1bn 1 bn

Future Value $2.1bn $1.3bn $23.7bn $6.8bn

The Super Fund can regard the cost of debt capital as the opportunity cost and most of the commenters seem to agree. For the shareholder however(the Govt on behalf of taxpayers) it is much more complicated than this simplistic view. The return to the Govt from investing in a new surgical theatre, a school improvement programme, adequate funding of scientific research and a myriad of other competing demands including addressing child poverty may be infinitely higher and is the real opportunity cost from a shareholder's perspective. Cessation of contributions is the right thing in the current circumtances.