KiwiSaver high on working party agenda

The working party will look at the effect of a compulsory KiwiSaver scheme. Photo / Michael Craig

The new working party on savings has been told to steer away from a concentration on retirement but to look at ways to lift overall national savings - households, business and Government.

High on its agenda will be a look at KiwiSaver and what the effect of a compulsory scheme would be.

Since it started in July 2007, half of the workforce has signed up to the KiwiSaver scheme which attracts subsidies from the Government and employers.

Finance Minister Bill English said "any political issues to do with fairness or impact on households are the province of the Government".

He has told the group to stay away from changes to New Zealand superannuation, or capital gains tax and any land taxes, all of which have been ruled out by the Government.

He said he wanted the group to concentrate on the need for investment, jobs and economic growth in the economy.

That was a different look at national savings than looking at it solely from the point of view of retirement income.

"Of course they overlap but our focus is on lifting economic growth rather than on savings for retirement," he said yesterday, announcing the make-up of the group.

Mr English said the work on taxation would look at the dual tax system operating in Scandinavia where labour and savings and investment income might be taxed at different rates.

It would also look at an area of work that had been examined in Australia's Henry tax review, taking account of inflation on taxation of savings and investment.

"They are likely to be a longer term view rather than anything focused on short-term implementation."

Mr English said New Zealand's debt problem made it vulnerable, particularly the accumulation of debt in the past five or six years.

A combination of Government, business and household debt had risen from about $100 billion in 2000 to about $180 billion today and was forecast to reach about $250 billion by 2014.

That gave New Zealand a very high ratio of debt to GDP and put us alongside a number of countries that had had "difficulties" in the past few year - Portugal, Ireland, Greece and Spain.

"We have a level of debt to the rest of the world that is among the highest in the developed world and it makes this country vulnerable to a world that is less willing to lend us money."

Mr English said that like the tax working group, he expected its recommendations to be fiscally neutral.

It will report back by January 2011 and some recommendations could form part of next year's Budget.

* The Savings Working Group will be chaired by Kerry McDonald. Other members are Capital Markets research director Dr Craig Ansley, Motu economic and public policy research senior fellow Dr Andrew Coleman, financial columnist and Auckland University senior lecturer Mary Holm, Reserve Bank assistant governor Dr John McDermott, PricewaterhouseCoopers partner Paul Mersi and Bank of New Zealand head of research Stephen Toplis.

A NATION'S DEBT
* $100bn in 2000
* $180bn today
* $250bn by 2014

Three work streams for savings work group:
* KiwiSaver
* Interaction of the tax system and savings
* The role of Government savings