I’m going to mention Wellington later on—tale of two cities.
I just wanted to start off by congratulating Dr Carlos Cheung, my good friend there, for your sponsorship of this bill. I also wanted to congratulate the Auckland Council because they brought this bill to the House. They didn’t have to do it, but they brought this, and I think it’s a matter of great responsibility on their behalf to safeguard this Auckland Future Fund. They’d already established this Auckland Future Fund before coming to the House, so they didn’t have to do this. What they’ve done is said, “We want to wrap some extra rules and controls around this so that future councils cannot spend that money too easily.”
It was fascinating listening to Simon Court there. I think he probably spent the fund about a hundred times over! What we’re talking about here is the ability to spend some of the income from the fund, not to be able to dip into the fund itself, unless you generally have a real emergency that the Auckland Council, by a 75 percent majority, have said, “Actually, we do think it’s more important to be able to spend some of that money to run down some of that capital, and to keep growing that money.” It might make $40 million, $50 million a year, that’s going to be a significant benefit, but it’s not going to pay for all of those things—and certainly not all the things that Simon Court was talking about—in a short period of time. It might contribute to them over a longer period of time; that will be a significant contribution.
I just wanted, also, to credit Auckland Council—because I’ve been given a little bit of a serve there—not only for their responsibility in bringing this legislation to the House but also for their responsibility in the way in which they are managing their finances and their rate increases. I would note that of all the big metropolitan councils in the country, their rates increase over the last two years is the smallest. The one thing we hear from ratepayers all across the country at the moment is their concern about rates levies. Auckland Council: last year, 6.8 percent on the residential rates; this year, 5.8. They’re not tiny rate increases, but they are the smallest of the big metropolitan centres, and some of the smallest in the country. So I want to congratulate them for that.
The money that’s made up this Auckland Future Fund has been from the sale of shares in Auckland Airport and, of course, the various constituent parts of what is now the Auckland Council—so the Waitākeres, the North Shores, and Auckland Councils, and so on. They all had shares in Auckland Airport, and they’ve been progressively sold. This was the last big chunk of those. Of course, the Crown itself sold its shareholding probably—what?—20, 25 years ago, I think it was. That means good, logical sense to say, “Instead of having a large chunk of our money in one asset, Finance Management 101 basically says ‘You diversify your assets’.” That is what the Auckland Future Fund is about. It’s about giving this in a controlled way to professional financial managers to manage a fund to achieve at least the kind of return that you were getting from the shares in Auckland Airport, and, probably, at the moment, a greater return from those shares. So it’s a diversification proposition.
It is not a spending proposition. It is not saying “We have sold these shares, and now we’re going to sell them.” Because the shares, of course, are in Auckland Airport. Auckland Airport represents something which has been built up as an asset over a very, very long period of time by the owners of that asset: the Crown, the councils, and, more latterly, private shareholders as well.
In fact, we heard about the investment in City Rail Link in Auckland, that’s a huge investment that’s been made, but, actually, by dollar numbers, the biggest investment in the country at the moment—and I think it probably will be the biggest investment in nominal dollar terms ever in New Zealand—is the redevelopment of Auckland Airport. Air New Zealand might not be entirely happy with the scale of that, but that is the nature of that. It is a very significant investment.
The establishment of the Auckland Future Fund is about not spending that long-developed asset, that long-developed amount of money quickly; it’s about saying that it was built up by past generations and it will be available to continue to provide benefit to today’s generations but also to future generations. The whole idea of wrapping that fund around with this legislation which we’re talking about at the moment is to say to councils that there is a discipline on you that you cannot simply go and raid the piggy bank; you have to do that in a careful and measured way. I think that shows great responsibility on behalf of the current Auckland Council, who have said to the Government—to the Parliament, actually, not to the Government; to the Parliament, “Can you pass this piece of legislation?”
I’d also make the point that the fund is worth about $1.3 billion, and, actually, there’s been an addition to that fund as well. There was a special dividend from another asset of the Auckland Council, that is the Ports of Auckland. They declared not only their normal dividend but also their special dividend of $45 million. That has gone also into the Auckland Future Fund, and that came from the sale of their shares in Marsden Maritime Holdings up in the Northport area.
The idea, as I said, is that this fund will be run by appropriately skilled investment professionals—not by politicians; by appropriately skilled investment professionals. They will make sure that there’s properly diversified, proper good returns, there will be asset sales and purchases and so on, as any good professional manager would do.
This fund represents, as I said, the assets which have been built up over a long period of time and it’s something that follows the model that has also been established by the New Plymouth Council. So they have also got a very similar kind of fund. I can see you nodding, Madam Speaker, because you’re well aware of this. So that, again, is another council which has said, “We have a set of assets, we want to sell those, we want to put that into a fund for the benefit of future generations which inhabit this particular part of the country.”
I did want to contrast that with another council very close to here, which looked—I told you it was going to be a tale of two cities in this particular bit—to sell shares in its airport, and that’s the Wellington City Council. They made a complete hash of it. Unlike Auckland—where Auckland said, “We are going to sell these shares.”, they went out and consulted on that and they said, “We are going to put the proceeds of that into a fund. We’re going to lock it away and hold it for future benefit.”—the Wellington Council, in contrast, in part said, “Oh, we’re going to sell those shares and then we’re going to use it to invest in a whole bunch of pieces of various assets of various sorts, kind of now.”, which would have of course run up their debt and, then, would also have had lots of costs ongoing.
The people of Wellington weren’t particularly keen on that proposition because they said, “Well, look, you’re going to sell an asset which earns revenue and makes a significant contribution to the funds of Wellington, which offsets rates, and you’re going to propose to sell that and transfer that into assets which do not earn revenue; in fact, cost you more.” So, quite logically, Wellingtonians were going, “Oh, hang on. I don’t particularly like that.”
They made that worse by, in some parts, saying, “We’re going to put it into those kinds of assets.”; other councillors saying, “We’re not going to put it into that; we’re going to lock it away.” I think, in the Wellington case, unlike the clarity that Auckland managed to deliver, they got everything completely confused. So, in the first place, they said they were going to sell; they then decided they weren’t going to sell; they then managed to be the only council in the country that that managed to torpedo their entire long-term plan; they then became the only council in the country which ended up an observer.
So it’s an example in Auckland—tale of one city—of how to do it right, and an example in Wellington—tale of another city—of how to do it completely wrong because you got your messaging and your ideas completely wrong, and probably misunderstood what you yourselves were trying to do.
So I just want to finish off with a couple of comments from a New Zealand First perspective. New Zealand First has always been a very, very strong advocate for the retention of assets. We like to see assets owned by New Zealanders, contributing to New Zealand’s economy. The more that we sell, the more that we borrow, of course, the more that the balance of payments is undermined and we keep on paying for that. There is no free lunch when you do these sort of things. We have always supported New Zealand ownership of assets, but in this case, what’s happened, of course, is you’re transferring one asset into another asset, and that is a perfectly valid thing to do because the return is still there for New Zealand—or, in this case, for Auckland. That makes absolute sense to us.
Of course, from our perspective, this also fits very, very closely with our approach, which is, as a party, to say, “We want to see New Zealanders saving more and investing more in our country because that is a way of both making individuals wealthier, of making our country wealthier, of providing better for our retirement income—and we know that that is a massive challenge—and it fits very, very strongly with our initiative to say that we want more money invested in the likes of KiwiSaver.”
So I’m delighted just to finish off and, again, to commend Dr Carlos Cheung and to commend the Auckland Council for this initiative, and to commend the bill to the House.