Bill English

By Ian Llewellyn of NZPA

Wellington, April 5 NZPA - Finance Minister Bill English has given his strongest hints yet that he intends suspending or reducing payments into the New Zealand Superannuation Fund until the economy improves.

NZPA reported recently that poor returns by the New Zealand Superannuation Fund mean the Government should by law increase its contribution by at least $400 million in the coming year.

Today, Mr English signalled that the budget on May 27 would include the Government putting the brakes on contributions to the fund.

"The fund was set up at a time ... when there was a view there would always be surpluses -- now we don't have surpluses, it's something we'll be having a pretty close look at," Mr English told TVNZ's Q&A programme.

Last year Treasury calculated that in 2009/2010, the Government would need to put $1.97 billion into the fund.

This figure is based on a complex series of rolling forecasts which estimates how much is needed to go into the fund each year in order for it to be large enough to help meet future demands for super funding.

The $1.97 billion figure was worked out before the global recession took $4 billion off the super fund's investment values and the wider economic outlook deteriorated further.

A recalculation by NZPA -- which takes into account lower forecast returns and the lower value of the fund -- shows that Mr English would need to increase the contribution to at least $2.3 billion to keep pace with the legally prescribed formula.

Mr English's office refused to comment on the figure, saying it was being recalculated as part of the budget to be delivered on May 27.

Other government officials spoken to by NZPA confirmed that the $400 million increase was at the conservative end of the possible range.

One of the problems for Mr English is that a reduction or suspension of payments in the coming year or two would mean that future contributions would have to be higher still to make up for lost ground.

Mr English said today there was "no free lunch" with a contributions holiday as National was not planning to change the law.

"The way it works is if you don't pay in this year or next year then you have to make higher payments later, but that's all part of the automatic stabilisers of getting through a recession," Mr English said.

"If you don't make a payment now then when the economy picks up then you would be in a better position to do it."

On the same programme today Mr English re-emphasised his recent messages that the budget had to be focused on getting debt under control.

This was not for the benefit of credit rating agencies, who he did not believe would downgrade New Zealand, but for the good of the economy.

Mr English also said that New Zealand had suffered from some immoral capitalism.

"The collapse of the finance companies I think shows that our regulators were not assertive enough, and that allowed individuals who did not have the risks and the concerns taken by their investors in mind."

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