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Saturday, 30 May 2009

Slamming the Budget Slammers


I really don’t understand why people are getting so worked up over the cut in contributions to the super fund.

I think the hype is largely made by Labour and the left wing factions of the media who will take a contrary position irrespective of common sense. It doesn’t make sense to borrow at an interest cost of over 5% p.a. to invest in the super fund which is made up of more risky investments – which have produced a negative return to date! Furthermore, if we had a credit rating downgrade, this borrowing cost would rise further. No rational person would do this in their own daily life, why do we expect the government to? I believe there is more risk to pensioners if we borrowed to invest now, and the markets carried on going south. Any supposed future “hole” in the super fund could just as easily be funded by debt in the future as it can today. At least we won’t have the interest cost until such a time to contend with. Listening to Labour leader, Phil Geoff, on The Breakfast show last week, I think we can all thank our lucky stars that he is NOT in charge. CLICK ON THE TITLE OF THIS POST TO BE TAKEN TO OUR BLOG, TO POST YOUR COMMENT!

4 comments:

Steve Baron said...

There is no doubt that when we look at various media commentries, it is obvious they come from an alternative economic viewpoint. The media certainly has changed over the years from being an unbiased reporter of events to organisations that put their slant of events. Does this mean the media has too much say in how we think? Can the media be trusted given most are owned by wealthy individuals? I remember reading once... the media can decide what we think about, but it can't decide how we think. In other words, they might set the agenda but they don't decide how we think.

Steve Baron said...

This post by our regular contributor, Will Fourie (Fourie Investment Research),could also be asking another question. Where do we draw the line with our social welfare system? Should we be borrowing for health, education, welfare payments, superannuation etc when we can't afford this either? Is it time to look at the structure of all of these issues and decide if they need to be reduced or changed in some way to fit our budget?

Rusty Kane said...

"I really don’t understand why people are getting so worked up over the cut in contributions to the super fund".posted by Will Fourie.

Maybe your to young to understand that when you get older. A good super fund... now costs you the next generation less later.

pgtips91 said...

"Maybe your to young to understand that when you get older. A good super fund... now costs you the next generation less later."

That would be true if it was putting savings away for the future, but you have ignored the fact that NZ would have to borrow to invest. Now that is an entirely different choice and one that adds a known risk for an unknown benefit. The likelihood that the benefit would outweigh the cost is a gamble - not the sort of move that a superannuation scheme should ever take.

The overall odds are against the gambler, always, even though they may occasionally win. So far the Cullen fund has just been steadily loosing, so why throw more good money after bad?