Opposition continues to gather to Labour's plan to allow the
Reserve Bank to use KiwiSaver contribution rates to help
control domestic inflation.
But Labour Party finance spokesman David Parker is not fazed,
saying he is receiving overwhelming positive feedback from a
wide variety of people.
''The breakthrough for us is people are now linking universal
KiwiSaver, jobs and interest rates.''
Universal KiwiSaver, along with linking the proposed variable
savings rate for the superannuation scheme, was the ''once in
a lifetime chance'' to bring New Zealand's interest rates
back to a global norm, he said in an interview yesterday.
BNZ chief economist Tony Alexander said yesterday long-term
KiwiSaver returns would be reduced as savers were forced to
buy more shares when prices were high and fewer when they
A Massey University KiwiSaver expert, Claire Matthews,
believes Labour's proposal to introduce a variable
contribution rate to compulsory KiwiSaver would have negative
impacts for small businesses and those on low incomes.
''I would love to see KiwiSaver rates increase - but not this
way. The spectre of the Government meddling with KiwiSaver is
It was the realisation of the fears of many Kiwis, especially
those who had not signed up to the scheme, Dr Matthews said.
This week, Mr Parker released the party's monetary policy
upgrade, which called for compulsory KiwiSaver with
contributions increasing to 9% from the current 6% (3%
employers and 3% workers).
Also, a Labour-led government would allow the Reserve Bank to
increase or decrease contributions to the scheme to control
domestic demand, instead of using only the raising or
lowering of mortgage interest rates. Beneficiaries would be
excluded from the regime.
Dr Matthews said each time KiwiSaver contribution rates
changed, businesses would need to update their payroll
systems, requiring additional, non-productive compliance
Mr Alexander said the policy, as proposed, would probably act
as an incentive to raise one's debt level, boosting New
Zealand's external debt rather than lowering it as Labour
That was because the explicit reduction in the heights to
which interest rates would go over the monetary policy cycle
meant the income shock from the tightening would be less.
''Borrowing money would become safer as interest rate
variability would be reduced and the incentive to fix one's
mortgage interest rate reduced.''
While some of the commentary from Labour and others had been
negative towards banks, the proposed monetary policy would
boost bank profits because more people would stay on floating
rates than going fixed and margins were greater on the former
than the latter, Mr Alexander said.
Mr Parker said banks would make a margin on interest rates,
no matter what regime was in place.
He dismissed concerns raised by the Otago Daily Times that
KiwiSaver members could find themselves paying more into the
scheme while banks kept their interest rates high, just
because they could.
Overseas lenders into New Zealand would be penalised because
they would not be able to access recently high interest rates
and New Zealanders would benefit from having lower interest
rates, Mr Parker said.
Universal KiwiSaver was a much larger part of the proposal
than the variable savings rates.
New Zealand had higher interest rates than its trading
partners and the higher currency was a major factor in
driving higher interest rates.
''That's why the Balclutha timber plant can't make a dollar
"If we don't reduce interest rates, and the currency, we
hobble not only people with credit cards, car repayments and
mortgages, but also businesses. Businesses face a high
exchange rate and higher interest rates.''