KEY POINTS:
New Zealand's savings problem is real and serious, Finance Minister Michael Cullen says, rejecting research from the Institute of Economic Research which concludes that policies to foster saving are unnecessary, inefficient and unfair.
Institute economist Trinh Le, in a report titled "Does New Zealand have a household saving crisis?" said there were many reasons to be sceptical of Statistics New Zealand's household income and outlay account - the data normally cited as evidence that households collectively spend more than they earn, and by a growing margin.
It did not, for example, take account of income from assets New Zealanders directly held abroad.
Any errors in calculating households' combined incomes and expenditure accumulated in the difference between them - the savings rate.
Other data sources painted a different picture, she said.
And a drop in the household saving rates since 2000 would be a rational response to the introduction of the new top tax rate of 39c in the dollar.
Policies to encourage saving which included subsidies, like KiwiSaver, would result in higher taxes or lower Government spending.
"Much of the saving is likely to be merely the reallocation of saving from other forms to the tax-favoured vehicle," Le said. "The subsidies will also induce some people to borrow or delay loan repayment to fund their 'saving' contributions."
Cullen said that over 200,000 people already signed up for KiwiSaver families clearly recognised the need to save and were jumping at the chance to make that easier.
Le said she would be joining the scheme too, because the subsidy available made it in her interests to do so.
Cullen said New Zealanders' savings were often tied up in housing.
"But not only can you can you not eat your house in retirement, you would have to release half your equity to make any substantial difference to your retirement income."
Le said that you can't eat bank deposits or KiwiSaver accounts either.
The institute and the Business Roundtable both deny Cullen's assertion that the report was commissioned by the business lobby group, although it contributed to the cost of the research. "I had a completely free hand," Le said.
She has collaborated for several years with economists Grant Scobie and John Gibson on work arguing that policy to encourage savings is a solution that won't work to a problem that doesn't exist.
