Savings key to lifting economic game

The Government plans to help people establish the savings habit, not just for retirement but for tertiary education and home ownership, Prime Minister Helen Clark says.

But there were no details in a speech outlining the Government's policy programme to Parliament yesterday.

However, Clark's language echoed that of the New Zealand Institute, which has been making the case for policy changes to encourage savings and an "ownership society".

In a paper released yesterday, institute chief executive David Skilling said lifting household savings was key to lifting the nation's economic game.

Relying on importing foreigners' savings was costly, risky and unlikely to deliver the business investment the economy needed.

"New Zealand cannot spend its way to prosperity but rather needs to increase investment in the productive base of the economy to improve its economic performance."

Although foreign investors have more than $200 billion at stake in New Zealand, most of that was debt rather than equity, lent either to the Government or to banks. Much of the latter was used to finance housing or consumption rather than investment that would boost the productive base.

Skilling said the high level of overseas debt pushed up interest rates and the cost of capital.

And foreign capital could become harder to get and more expensive as the countries which have been major exporters of capital reduce foreign investment as their populations age.