3. AMY ADAMS (National—Selwyn) Link to this
to the Minister of Finance
What commercial risks does the Crown face, and how do these relate to public services?
Hon BILL ENGLISH (Minister of Finance) Link to this
In recent years the Crown has built up almost $30 billion worth of investments in financial markets. Gains and losses on these investments are eventually borne by taxpayers, as we saw recently with the $300 million blowout in accident compensation expenditure. It is important that the Government monitor those investments closely and make sensible decisions about the risks it is taking with taxpayers’ money, because when things go wrong those losses could affect the Government’s ability to continue to deliver public services.
For the 8 months ended February 2009 the losses on the Crown’s financial assets have totalled $9.848 billion, relative to the projections made in the pre-election update—that is, those assets have lost $9.8 billion in value in the time since September. The majority of this shortfall—some $5.5 billion—relates to losses in the New Zealand Superannuation Fund.
The scale of those losses of almost $10 billion in 8 months is staggering. A recurrence of those losses in the future is an option that the Crown cannot really tolerate, so the Government will have to make some sensible decisions that weigh up the balance of borrowing money to invest in still risky financial markets, against the long-term benefit of the Crown’s continuing to build up its financial assets.