We called for leadership and National has responded again. And the response is very much in line with what Skilling and Weldon were calling for.
It seems to us that the proposal to mandate that the NZSF invest 40% of assets in New Zealand is the inevitable consequence of the lightening of international liquidity and the design of the Government's deposit guarantee scheme, which unlike Australia's or those in Europe, fails to guarantee international transfers into New Zealand. This means that it will be more difficult and expensive for New Zealand banks to borrow internationally. If we want to remain as liquid as we need to be to keep the economy going and to build essential infrastructure the National plan seems pretty essential.
It seems to us that Cullen realises that we have a problem which is why on Tuesday he suggested that he would be asking the NZSF Guardians to invest more in New Zealand. Mandating such a policy in legislation is one day later a grave mistake. What are we missing here?
