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The New Zealand Superannuation Fund (NZ Super Fund) has unexpectedly provided a financial windfall for the government, offering relief amidst an increasingly uncertain fiscal outlook.
The 2024 Half Year Economic and Fiscal Outlook (Hyefu) report, released on 17 December, revealed that the government would cut contributions to the fund by $2.1 billion over the next five years. The decision follows an extraordinary surge in the fund’s value, which reached a record $76.6 billion as of 30 June 2024, a significant increase from $65.4 billion the previous year.
Reduced Contributions Amid New Capital Investments
The reduction in contributions to the New Zealand Superannuation Fund (NZ Super Fund) comes after its value reached a record $76.6 billion as of 30 June 2024, a sharp rise from $65.4 billion the previous year.
The 2024 Half Year Economic and Fiscal Outlook (Hyefu) report noted that the lower contributions would “largely offset” $2.2 billion in additional capital investments.
For the five-year forecast period to 2029, government contributions are expected to total $1.7 billion, with $879 million allocated for the current financial year.
The report outlined that “Contributions to the NZ Super Fund are forecast to reduce over the forecast period as a combination of the returns forecast and forecast size of the economy reduces the funding requirement as set out in the NZ Superannuation and Retirement Income Act 2001.”
Strong Returns Amid Economic Challenges
While contributions to the NZ Super Fund are being reduced, the NZ Super Fund and the Accident Compensation Corporation (ACC) portfolios are forecast to remain crucial to New Zealand’s financial stability.
These funds are expected to contribute $38.8 billion to the $57.2 billion growth in total financial assets by June 2029. The government expects a net operating deficit of $10.2 billion for the year ending 30 June 2025, yet the Hyefu report anticipates $9.5 billion in net gains on financial instruments, attributed to the solid performance of both portfolios.
Sustaining Future Fiscal Stability
The NZ Super Fund’s strong returns highlights its its resilience and the importance in mitigating future fiscal pressures. The fund ensures that the government can allocate resources effectively while maintaining long-term financial security for an ageing population, with consistent growth.