Taking a punt on New Zealand? 

The harsh reality of this financial crisis is that over the next year or so credit for business - the engine room of our economy - is likely to be a lot more difficult to get from overseas investors.

This could severely restrict the ability of the economy to grow and create jobs.

One way to help ease the pain of this credit crunch could be to get the fifteen billion dollar New Zealand Superfund investing more of its cash in Kiwi firms and local infrastructure projects.

That is of course exactly what National has proposed. Leader John Key says National would require the fund to lift the local NZ Superfund fund investment to 40%.

Given the scale of the economic slow down and the dangers facing New Zealand there is a strong argument for doing this and the plan has won plenty of applause from the likes of the New Zealand Institute's David Skilling and even the Greens.

At the heart of the new 40% strategy is a faith that New Zealand Inc will remain a good investment option and that its firms can overcome recession, grow strongly and provide investment returns as good as elsewhere.

It's an appealing and patriotic idea (some say socialist) that could see the government effectively taking very large ownership stakes in New Zealand companies....

But there are risks with this type of policy change.

Firstly do we really want politicians meddling with the New Zealand super scheme?

It's a slippery slope, history shows us that - remember what Muldoon did in 1970s - and it's only 15 billion at the moment, imagine what happens when the fund is 40 billion!

Plus shouldn't the focus of this fund really just be on getting the maximum return for the country? Investing 40% in New Zealand may mean weaker returns.

Putting 40% of the your eggs in the New Zealand basket also means a less diverse investment portfolio. This reduces the benefits of having money in different geographical locations, which may of course have differing economic growth rates...think China v USA.

Or what if New Zealand has a foot and mouth outbreak as an economist from Westpac noted?

Out of all these concerns it's the idea of forcing the Superfund managers to take a 40% in New Zealand that worries me the most.

So far the Guardians of the New Zealand Superfund have done a very good job, even this year with the 5% loss.

We have to have the best people as Guardians and we have to trust them to put the money in the best investments.

If they decide more can go into New Zealand then great and if they fill a gap left by foreign lenders then even better....

But should they be forced to do that ? I'm not sure, but then given the potential scale of this crisis, maybe we really don't have a choice.

About Corin Dann

Leading economics and finance reporter Corin Dann is the host of TVNZ's dedicated business programme NZI Business. Corin also has extensive experience as a parliamentary reporter. He combines an in-depth understanding of New Zealand's business community and the issues it faces, with extensive journalistic experience.