Changes to address New Zealand's national savings problem could be addressed as early as the Budget in May, Finance Minister Bill English said yesterday.
Speaking after the release of the Savings Working Group's final report, Mr English said any immediate policy decisions were likely to be included in the Budget.
"Ministers will carefully look at the working group's report over coming weeks with a view to picking up practical ideas that can feed into the Government's economic programme and Budget 2011."
Mr English immediately ruled out one suggestion - increasing GST to 17.5%.
"Otherwise, we are not ruling anything in or out at this stage."
The only exclusions in the terms of reference for the working group were changes to New Zealand Superannuation and the broad taxation of capital gains or a land tax, he said.
The working group, chaired by Kerry McDonald, did not recommend compulsory KiwiSaver at this time, partly because there was considerable other scope for improvement.
Among several recommendations were.
- Extended automatic enrolment for all employees.
- Lowering the starting age of full membership from 18 to 16.
- Various changes to the default regime, including a single low-cost scheme with an ultra-low risk option.
- Measures to significantly improve disclosure and the return to savers from lower fees and costs.
- Improving financial literacy.
Better availability of annuities was encouraged by the working group, along with restarting contributions to the New Zealand Superannuation Fund, in the context of a shift towards a "save-as-you-go" approach.
"Unfortunately, low national savings is not New Zealand's only problem," Mr McDonald said.
"Growth in productive exports, incomes and living standards has been poor.
The productivity growth rate actually halved over the last decade."
The vital tradeable sector - producing exports and import substitutes - reached a plateau in the mid-2000s and then declined in both output and employment.
The non-tradeable sector - such as property, retail and government services - continued to grow strongly.
"The whole position was, and still is, unsatisfactory and unsustainable," he said.
Forsyth Barr superannuation specialist Damian Foster said the recommendations were a "big deal" although it would be May before it was known which ones the Government would adopt.
The recommendation that all employees started in the scheme at 16 with a contribution rate of 4% was welcome, although new employees could still opt out or reduce their contributions to 2%.
"The proposed changes are clearly a step towards making KiwiSaver compulsory in the future.
Given the recent economic climate, and the current structure of KiwiSaver, the leap to compulsion has been seen as too big an action at this stage."
It was encouraging to see the working group propose some changes which had a proven record of success in Australia, he said.
They included reducing the Government contribution for those on higher incomes and allowing KiwiSaver accounts to be managed individually once they reached a high value.
Business New Zealand chief executive Phil O'Reilly was more guarded in his comments, warning against the Government reintroducing a "social security tax" to be channelled into the New Zealand Superannuation Fund.
That recommendation would lock New Zealand into current policy settings, reducing the flexibility to choose potentially better options, he said.
Specific recommendations on KiwiSaver were also "mostly positive", including keeping it voluntary.
"There would, however, be concern by business if the recommendation not to allow a `total remuneration' approach was implemented," Mr O'Reilly said.
