Labour finance spokesman David Parker yesterday released
a monetary policy upgrade aimed at alleviating New Zealand's
low savings rate, current account deficits, high interest rates
and an overvalued dollar.
The main parts of the policy were making KiwiSaver universal
for all paid employees, starting at the current 6% (3% for
both employees and employers) with an annual increase in
contribution rates until it reached 9%.
The scheme remained optional for self-employed.
The Reserve Bank will be granted an additional tool, the
''variable savings rate'' (VSR) where it can vary - or
request the government to vary - KiwiSaver contribution rates
over the cycle.
The VSR could be used instead of interest rates to increase
or decrease domestic consumption.
Dunedin financial consultant Peter Smith, of the Kepler
Group, said there was no doubt New Zealand's savings rates
were low compared with other countries, such as Singapore,
where workers must pay 20% of their gross monthly income to
the government scheme which was topped up by 16% from
Other countries such as Chile required as much as 10% of
gross wages and Australia was moving to 12% from the current
9.25% by 2020.
''It would help savings in New Zealand if KiwiSaver could be
made compulsory but actually making the savings rate variable
would be a nightmare for contributors, employers, the IRD and
''I would expect most contributors would be more confused
they they are now.
''Many people do not know what scheme they are in and what
they are actually contributing.''
The ''Kiwi dream'' was owning a home and it would seem no
matter what the cost, many people were still aiming for that
goal, he said.
The dream had been a barrier to people joining KiwiSaver as
home ownership for many had been a higher priority than
saving for retirement.
''The fact they still have a choice is probably in their
favour, as repayment of debt as fast as possible is still the
best investment you can make,'' Mr Smith said.
ANZ chief economist Cameron Bagrie liked some of Labour's
proposals, including a capital gains tax on second properties
and the ring-fencing of property investment losses.
The policies also ''hit the right notes'' in preserving the
Reserve Bank's independence and running fiscal surpluses.
The ANZ also supported making KiwiSaver universal, although
the evidence in regard to compulsory savings schemes was
mixed in regard to aggregate savings performance.
Australia still ran current account deficits.
''There are problems galore with using KiwiSaver contribution
rates as a monetary policy tool, with politics being number
"If it were practical for the Reserve Bank to control
KiwiSaver, why not give them the New Zealand super fund too?
That doesn't pass the smell test.''
The Reserve Bank could be a ''supporting actor'' but not the
lead role in regard to lifting savings and economic
performance across the economy, Mr Bagrie said.
New Zealand's poor external position was far from solely a
result of New Zealand's high currency and low savings rate,
Mr Parker said Labour's policy would lead to lower interest
rates, a more competitive dollar and better jobs with higher
Governments around the world had changed how they operated
monetary policy since the global financial crisis.
New Zealanders had a dollar overvalued by up to 15%, a
weakened export sector and mortgage rates that were among the
highest in the developed world, he said.
Forsyth Barr broker Peter Young said the time lag between
increased savings and the impact on the economy was quite
long - much longer than changes to the official cash rate.
There would be confusion on how the policy would work.
Australia had had a compulsory super scheme for 30 years but
it had not stopped the Australian dollar appreciating, the
Reserve Bank of Australia raising interest rates and savings
being diverted from other areas.
Recent house price gains in Australia were in part driven by
self-managed super funds investing more in property and there
was no reason why the same would not happen in New Zealand,
A lower dollar might help some exporters but it would hurt
the economy overall with higher import prices and higher
interest rates, Mr Young said.
At a glance
• The Reserve Bank Act would be changed.
• KiwiSaver to be universal.
• A variable savings rate, which the Reserve Bank could use
to vary the KiwiSaver contribution rates as an alternative to
the official cash rate.
• Capital gains taxes on property other than the family home
would be introduced and tax losses on property investment
would be ring-fenced.
• Non-resident foreigners would be banned from buying
existing New Zealand housing and farmland.