31 October 2001

A National Bank report into how the Government's Super Fund will be a drag on growth proves the scheme is all pain and little gain, Opposition Leader Bill English said today.

"Analysis by National Bank economists shows that the rising debt consequences of the Super Fund will lead to a permanent increase in New Zealand's risk premium on long term interest rates.

"This will, in turn, lower New Zealand's economic growth by 0.2% per annum.

"The National Bank economists argue that medium-term fiscal pressures are intensifying and that it will be a struggle for the Government to meet its forecasts. As the debt picture worsens, the risk premium will get larger and the Fund will become an even bigger drag on growth.

"They have even gone so far as to urge the Government to condition the market to the fact that Super Fund contributions may have to be lowered if fiscal objectives are not met.

"It's not hard to see why the Bank's report concludes that the Super Fund 'has little to offer on economic grounds'. Dr Cullen's only answer to New Zealand's economic malaise is in fact going to add to it.

"This report proves that Dr Cullen's 100-year plan is looking increasingly dead in the water before it even gets going. It has all the characteristics of a solution looking for the right sort of problem," Mr English said.

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