Labour Unveils 'NZ Future Fund' Policy to Boost Domestic Wealth and Investment

Labour Launches Major Election Policy

The Labour Party in New Zealand has unveiled its first significant policy initiative for the next election, proposing the establishment of an 'NZ Future Fund'. Announced by Labour leader Chris Hipkins in Auckland, the fund is designed to foster domestic wealth creation, support local businesses, and invest in New Zealand's infrastructure. The party cited Singapore's successful Temasek fund as a model for its proposed sovereign wealth fund.

According to Labour, the 'NZ Future Fund' aims to address years of underinvestment that have seen 'too many great Kiwi ideas without support, while the wealth we create flows offshore,' as stated by Hipkins. The party's objective is to create 'secure, well-paid jobs across the country,' enhance productivity, and ensure that wealth generated remains within New Zealand.

Structure and Investment Focus

The proposed fund would operate alongside the existing New Zealand Super Fund and be independently governed by the Guardians of the NZ Super Fund. The Minister of Finance would serve as the sole shareholder, responsible for setting broad expectations, but without the authority to direct individual investment decisions.

A core principle of the 'NZ Future Fund' is its exclusive focus on investments within New Zealand. This contrasts with the Super Fund, which currently invests only about 11% domestically. The fund's mandate would include investing in infrastructure and businesses, with the goal of nurturing the growth of future New Zealand success stories, such as 'the next Trade Me, Xero or Rocket Lab'.

Key operational aspects include:

• Independent governance by the Guardians of the NZ Super Fund.
• The Minister of Finance as the sole shareholder.
• A focus on New Zealand-only investments in infrastructure and businesses.
• Legal protections to prevent the sale of seeded assets.
• Authority for the fund to invest and borrow.

Funding and Financial Projections

The 'NZ Future Fund' is planned to be established with an initial capital contribution of $200 million from the government. Additionally, it would be seeded with a small number of commercially viable Crown assets, whose dividends would be ring-fenced and reinvested to build national wealth.

While specific assets were not named due to commercial sensitivities, potential candidates mentioned include state-owned enterprises like Transpower, major electricity companies, Kiwibank, Landcorp Farming, Timberlands, New Zealand Post, and Air New Zealand. These assets could form a base worth over $20 billion, generating more than $1 billion annually in dividends, against which the fund could borrow to finance domestic investments.

Labour projects that the fund could see its first withdrawal of $32 million in 2028, with withdrawals exceeding $1 billion expected from 2036 onwards.

The Temasek Model and Political Reactions

The Labour Party explicitly referenced Singapore's Temasek fund as an inspiration. Temasek Holdings, established in 1974, manages a portfolio of approximately SGD $306 billion (US $226.6 billion as of March 2020) and has played a significant role in Singapore's economic development. Like the proposed NZ fund, Temasek operates with a degree of autonomy, with its board and CEO accountable to the President of Singapore and the Minister for Finance as its sole shareholder.

The announcement has drawn political commentary. Labour leader Chris Hipkins positioned the fund as an alternative to the current government's economic strategy. However, NZ First leader Winston Peters criticized Labour's proposal, calling it a 'try-hard Temu mail-order rip-off' and noting that NZ First had proposed a similar fund in 2024. The current Coalition Government has also reportedly received advice on similar policy ideas.