Cullen’s greedy gamble costs $425 million so far

Green Party Co-leader Rod Donald is calling for the Government Superannuation Fund Authority to be disbanded, and public service pensions to be run again by a government department.

Sunday, February 23rd 2003, 10:24PM

The call follows revelations that the authority has lost a further $138 million on the overseas sharemarket over the six months to December 2002, taking total sharemarket losses for the fund over 14 months to $380 million.

The latest loss was revealed by Finance Minister Michael Cullen in response to written questions from Donald.

"The Government Superannuation Fund had operated profitably throughout its 55-year history as a government department until Dr Cullen handed it over to the seven-member, private-sector authority and told them to invest retirement savings on the overseas sharemarkets," Donald said.

"Dr Cullen must be called to account for the spectacular failure of his "Think Big" investment strategy, and the authority has to go. Dr Cullen promised in Parliament that investing in shares rather than Government bonds would generate better returns and reduce fiscal pressure on the Crown. Instead his greedy gamble has cost the country at least $425 million, so far."

Donald said that the fund sustained sharemarket losses from November 1, 2001 to December 31, 2002 totalling $380 million. If the money had stayed in the safe haven of Government bonds it would have earned another $45 million after tax on top of that - taking the total opportunity cost to $425 million.

"The result is a long way from the $272 million profit forecast by the GSF Authority for the current financial year. Even if the shares now miraculously earned the 9.6% return forecast by the authority, it would take 32 months - nearly three years - to recover the losses to December 2002. It’s likely the authority has lost even more money over the past two months."

Overall, the authority has invested $1.692 billion on the international sharemarket, from November 1, 2001 to the end of December 2002. Despite its sharemarket losses over the first eight months, the authority increased its investment in overseas shareholdings from 33% of the fund at the end of June 2002 to 42% at the end of December 2002.

"I simply can’t understand why they threw another $230 million at the sharemarket when it was so fragile and volatile, especially after already losing $242 million. It was a dumb time to invest in the first place and even dumber to keep on doing it.

"Dr Cullen cannot be allowed to continue gambling public servants’ savings away. He and the authority have to be stopped before this farce gets any more out of hand," Donald said.

This is a press release from Greens co-leader Rod Donald

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