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Widely regarded as perhaps Labour's strongest policy package in some time, the Government was initially dismissive but chose not engage on the specifics of the plan to vary employees' KiwiSaver contributions within a band of about 8 to 10 per cent as a substitute for some Reserve Bank interest rate movements when fighting inflation.
Labour argues increasing KiwiSaver contributions to fight inflation would cool the economy by diverting a portion of households' cash into savings rather than into higher interest payments. Avoiding some interest rate hikes when fighting inflation would help prevent the dollar rising to levels that damaged export earnings and jobs.
But Economic Development Minister Steven Joyce, one of National's key political strategists, this morning suggested the policy was no more than half baked and it would take massive increases in contributions to have a meaningful effect on interest rates.
Mr Joyce said Labour's finance spokesman David Parker had been unable this morning to this morning to "answer a simple question today on how much KiwiSaver contributions would have to go up for wage and salary earners in order to stop a 1 per cent rise in interest rates".
"Surely you must be able to answer that question. If you can't, it's not a policy, it's not even an idea, it's just a David Parker thought bubble.
"It's simply not thought through," Mr Joyce said.
Mr Joyce said Mr Parker had indicated a 1 per cent increase in KiwiSaver contributions would generate about $400 million of net new savings.
"My estimate is it would take roughly $2.5 billion in extra savings to keep the OCR 1 per cent lower. Labour would need to take another 6 per cent of people's pay packets off them and put it into KiwiSaver to avoid a 1 per cent increase in interest rates. Given they already want people to save 9 per cent, that would whack it through to 15 per cent," Mr Joyce says.
Conservative Leader Colin Craig also joined in, saying that a central plank in Labour's plan - making KiwiSaver compulsory - was flawed.
"The problem here is that Labour has missed the obvious, the best form of saving that any individual can make on average is to reduce their borrowing, and in most cases this means paying off credit cards, and then their mortgage as soon as possible."
Making KiwiSaver compulsory would force "many New Zealanders to make a less than optimal financial choice".
"Government should not dictate the types of investment New Zealanders hold, particularly when they dictate a sub optimal choice," Mr Craig said.
Given KiwiSaver was not government guaranteed, Labour would be forcing financial risk on New Zealanders and had also overlooked the fact many New Zealanders simply couldn't afford to save.
"If those struggling financially are forced into Kiwisaver they are most likely to take on borrowing, and often at a punitive interest rate. Labour's policy will be putting these New Zealanders in an impossible position, and in most cases increasing their personal indebtedness," he said.
Addressing party faithful at National's Northern regional conference this morning, Finance Minister Bill English also attacked Labour's policy, saying people preferred simple rules they could understand and everyone knew what happened when interest rates went up.
KiwiSaver was a completely different thing.
"KiwiSaver is long-term retirement policy that is designed for stability over 30 to 50 years.
"You do not want the Minister of Finance messing around with that every six weeks like the Reserve Bank does with interest rates."
- By Adam Bennett of the NZ Herald