Future fund loses $780M

Cossie's Future Fund has not faired well of late. Hardly surprising given the environment. The return for 07/08 is a modest 1.5 per cent. That's 3 per cent less that CPI and hugely down on the almost 7.4 per cent in the previous year. This is hard on people who're expecting to retire soon - I wonder what reforecasting is being done to assess the numbers of people who'll defer their retirements?

It's worth remembering that in 2006/7, Costello made one-off changes to the tax system to enable additional contributions of up to $1 million. Here's what he said at the time:

For people who were planning a large payment into superannuation under the current rules and would have become subject to the contribution limits, we are announcing that subject to any applicable work test, they will be able to put $1 million of post-tax contributions into superannuation before the 30th of June 2007.

Costello couldn't have foreseen the global financial meltdown so he can't be held responsible for the fact that these additional contributions may have reduced the net benefits for some (he does tend to have a bob-each-way however as he's also said that he'd told Greenspan that he foresaw problems...). Still his various disingenuous declamations possibly won't help his credibility.

Also note that compared with John Key's plan to have 40 per cent of the NZ fund invested domestically, the Australia Future Fund invests only 9 per cent with close to 20 in global equities. The majority, 35 billion or approximately 60 million is in cash. Note that these figures exclude Telstra holdings which are in escrow. Finally, check out the principles guiding the Board's investment strategy (page 17) which include this statement:

that a higher expected return per unit risk (investment efficiency) can be obtained from a broadly diversified allocation across asset classes.

Given that John's so keen on Australian aspirations, why's he so ignorant of their strategies? Costello's miscalculation disproves his legendary soothsaying abilities, why would you believe Key's are better?

World Bank ranks the NZ economy second most business friendly

Well, I've no idea how the right wing blogosphere in NZ will try to discredit it, but NZ has again received a very high ranking as a great place to do business.

The World Bank report, summary here, awards NZ second place overall (last year NZ was first, this time Singapore is) compared with 175 other nations and measured against 10 criteria. NZ achieves the top mark for the registering property and protecting investors criteria and has improved its ranking for paying taxes, enforcing contracts and starting a business. NZ has however, gone down in rankings against licences, employing workers and closing a business.

I'm picking the right will ignore that NZ has ranked in the top two for two years running and will instead decry the negative indicators.

Rates up as predicted

The Reserve Bank of Australia have this morning announced the third cash rate rise since the re-election of the Howard government. The cash rate is now 0.75 basis points higher than it was at the 2004 federal election.

Hardly what voters expected when Howard assured them of his government's credentials as managers of the economy. One of two things must therefore be true, they aren't great managers, or the limits of their managerial control was overstated for effect.

It's mostly the latter. Government's tend to overstate their influence over the day to day peformance of a largely deregulated and globalised economy and this situation exemplifies the risks.