Hon GRANT ROBERTSON (Minister of Finance): I present a legislative statement on the New Zealand Superannuation and Retirement Income (Controlling Interests) Amendment Bill.
SPEAKER: That legislative statement is published under the authority of the House and can be found on the Parliament website. And I would ask members leaving the Chamber to do so quickly and quietly, please.
Hon GRANT ROBERTSON: I move, That the New Zealand Superannuation and Retirement Income (Controlling Interests) Amendment Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill.
I am pleased to be able to bring this legislation to the House. It marks a moment of the maturing of the New Zealand Superannuation Fund, or the way in which it operates. When the fund was established, it was established deliberately to not allow the Guardians of the New Zealand Superannuation Fund to take a controlling interest in an entity. This was done at the time because the establishment of the fund was obviously taking place and also because, at that point in history, sovereign wealth funds across the world weren't tending to take controlling interests in their work. Over time that has changed, both in terms of the maturing of the fund here in New Zealand and the approach that is taken internationally.
We undertook, through the Treasury, to do a review of section 59, which prevents the New Zealand Superannuation Fund from taking a controlling interest in the entity, and that piece of work was completed in 2021. What that piece of work told us was that there was a pathway through for the fund to be able to move into this direction. The purpose of the legislation that is in front of us now is to take forward what was said in that report and put it in front of the House for debate.
When I was assessing whether or not it was a good idea to go ahead with this idea, I did speak to the late Sir Michael Cullen as the architect of this fund, and I was reassured in doing so that Dr Cullen thought that the time had come for this move, as he noted to me, as the fund grew in the size of its assets but also in the way that it invested. He had always felt that this would be a course of action that would make sense and he felt that the time for doing this was right. So today we come to the House with the bill that, as I say, amends section 59 of the New Zealand Superannuation and Retirement Income Act to allow the guardians to take a controlling interest in an entity.
The bill also makes a number of other amendments to ensure that the investment by the fund does not result in an entity being treated as part of the Crown, which was one of the concerns at the initiation of the original Act.
Part 2 of the Act makes some consequential amendments to the Ombudsman Act and the Official Information Act to make sure that a private sector subsidiary of the fund would not have the Act applied to them—however, the guardians themselves, of course, remain subject to the Act—and some changes to the Income Tax Act to address the removal of references to fund investment vehicles and to preserve the current tax treatment of New Zealand Superannuation Fund investments.
It is part of the rules of the Act that I consult with other parties about any changes to the Act. I did that across Parliament, and without wanting to put words into the mouths of any of my colleagues in the House, the feedback I received was broadly positive, although I'm sure we will hear from some members about some of the issues they have, and those issues I am confident will be able to be resolved at the select committee when we reach that point.
As the fund has grown and matured, it has increasingly developed the capability to take on a lead investor role with the ability to own businesses. The New Zealand Superannuation Fund wants this ability, and I do think it will provide a significant support to New Zealand's capital markets. It also will allow the New Zealand Superannuation Fund, as I said before, to bring itself in line with global peers, who, of course, at this point, are in a different place than they were when the Act was passed some 20 or so years ago. Those global peers have shown that sovereign wealth funds can in fact play a significant role in not only the capital markets of their own countries but also in others when they do do this.
Removing the control that is currently in section 59 will enable the fund to access a wider group of viable investment partners and opportunities, especially in strategic infrastructure. It will, according both to the report done through the Treasury but also to the experience of other countries, attract institutional investors who are comfortable with the guardians' due diligence practices and, as I say, therefore deepening capital markets for domestic transactions. It does also provide an opportunity set for New Zealand investments and the potential to increase the risk-adjusted return of the fund.
The guardians' flexibility around their investment strategy that will be enabled by this Act should enable the portfolio to realise a greater return after costs for the level of risk taken. That is exactly the position I think New Zealanders would want the fund to be in coming up to a couple of decades past the institution of the fund. It continues to play an important role as a partner in a number of businesses both here in New Zealand and offshore, but this opens up a new pathway and a new strategy.
The guardians, through the amendments that we are making to section 59, may have controlling interests in a number of different ways. These include controlling an entity through ownership of shares, controlling a holding company, controlling their other ownership rights under a trust, contractual rights, or rights to appoint directors—and entities that are so controlled may in turn control other entities in different ways.
I understand that people will want to make sure that there are some checks and balances upon this approach. The bill provides for a review of these changes within 10 years as part of one of the regular five-year statutory reviews of the fund. It is important to note that this bill does not alter the statutory independence of the guardians from political influence in relation to investment decisions, which is provided for in section 64(2) of the Act. That independence is vital. This is simply a mechanism to enable a different form of investment through taking a controlling interest.
Another matter that was in fact raised in the Treasury's review of section 59 was the question of how to create a framework that would be transparent for New Zealanders to understand the way in which the guardians will go about their work. So they will be including in the statement of investment policies, standards, and procedures the details of a governance framework for the operation and implementation of controlled entities. So I do think it is important that that provision exists so that New Zealanders can understand the way in which the Reserve Bank is going about its work and understand where that fits in. This was a particular matter that was raised in the review and I'm pleased that we've been able to pick that up and put it into the legislation.
So, from my perspective, this is a good piece of legislation that marks the further maturing of the New Zealand Superannuation Fund. It gives an opportunity for New Zealanders to know that greater returns will be made, which will enable the Superannuation Fund to grow and play its part in contributing to the future costs of New Zealanders' superannuation. As a Government, I am especially proud of the fact that we reinstated contributions to the New Zealand Superannuation Fund, on coming into office, and that has seen the fund grow at a rate that unfortunately it missed out on for a few years. This bill will make sure that there is an additional incentive and opportunity for the Guardians of the Superannuation Fund to grow the wealth that we need to support New Zealanders having dignity in their retirement. I commend this bill to the House.
DEPUTY SPEAKER: The question is that the motion be agreed to.