Compulsory KiwiSaver not necessarily silver bullet
Making KiwiSaver a compulsory savings isn't the silver bullet to address New Zealand's dismal savings record, with the evidence across the Tasman unclear, according to the Savings Working Group.
Thursday, October 7th 2010, 4:04PM
by BusinessDesk
The group's chairman, Kerry McDonald, told a media briefing in Wellington the group was using Australia as a "laboratory" to draw on the experience across the Tasman. Though Australia's had compulsory superannuation since 1992, McDonald said the data was unclear as to whether it had boosted that nation's overall level of savings.
"The data I've seen at this stage is pretty equivocal on whether it increases national savings or not - I need to be pretty clear that's work in progress," McDonald said.
The group won't be looking at the household sector, which includes KiwiSaver, until later this year, he said.
The group has been tasked with finding ways to lift the level of New Zealanders' savings across the board, and was asked to focus on government saving, tax on capital income and the role of KiwiSaver. Finance Minister Bill English excluded New Zealand superannuation from the terms of reference.
The group won't offer recommendations on issues outside the terms of reference, McDonald said they may make wider comments on issues such as superannuation, and recommend the government revisit some of the taboo topics.
The group has met twice so far and has taken a wide macro-economic look at the issues facing New Zealand, putting much of the blame on the poor performance of the tradeable export sector over the past decade, he said.
This has encouraged foreign investment and local reliance offshore debt, which in turn lifted interest rates and the strength of the kiwi dollar, which fed the imbalance further, he said. The group estimates interest rates are 1.5 to 2.5 percentage points more than they should be.
The group meets tomorrow and will focus on the government sector, with spending cuts likely to be on the agenda.
McDonald said the group's recommendations don't have to be fiscally neutral, but any proposals to take money from the government coffers and put it into another part of the economy have to be for the wider good of the nation.
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