Low wages cited as real bogey

Low wages, not low savings, are New Zealand's real economic problem, says Auckland University economist Tim Hazledine.

Finance Minister Michael Cullen's new KiwiSaver scheme was tilting at the wrong target, he said.

"I don't think there is a savings shortage, not in the sense of people who want to invest not being able to get funding," said Professor Hazledine.

"It's the lack of desire to invest that is the problem. Even the foreigners who come to this country don't invest in new things, they invest in existing assets.

"The biggest investment this year is going to be Shania Twain's house in Wanaka."

Professor Hazledine said low investment meant low wages, which had risen just 10 per cent more than prices in the last 12 years - a period when rents increased about 60 per cent and house prices 130 per cent.

The result was that the average wage dropped from 31 per cent of the average house price 25 years ago to just 15 per cent now.

Professor Hazledine said house prices were rising in every country with a growing population. But other countries, such as Australia, had been smarter at keeping high-wage industries such as car-making and regearing them to make specialist car parts for the world market.

"We should pretend we are like a state of Australia and do clever things to try to divert the investment that is around from, say, South Australia to New Zealand."

Dr Cullen's policy of forced saving through the NZ Superannuation Fund was "unethical" because it took money from this generation to give to future generations who would be richer than us, even after allowing for the rising ratio of retired people to workers, Professor Hazledine told a post-Budget meeting of the Child Poverty Action Group.

Paediatrician Dr Innes Asher said poor families who were not able to save would miss out on Dr Cullen's $5000 subsidies for first-home buyers.

She told of a Porirua family with almost no furniture who had to spend $80 for an evening visit to a doctor and medication when their child had an asthma attack.

"This was their entire food budget for the following week. I don't think this family will be saving."

She said the Budget did nothing to give people free medicine or after-hours doctor's visits, which were needed to tackle high rates of Third World illnesses such as meningococcal disease, rheumatic fever, pneumonia and chronic lung infection.

Economist Dr Susan St John warned that low-income parents might be "sucked into" paying 4 per cent of their income into the KiwiSaver scheme "when the money should be putting food on the table or repaying the mortgage or other debt".

Housing researcher Alan Johnson said parents should not be driven to work long hours in order to buy their own homes.

"I think of a case I came across: a solo mum trying to support her family. One of her sons is going off the rails and she has to decide whether to cut her overtime and spend more time at home.

"Should people be spending more time with their families rather than putting money in the bank?"