NZ among worst savers - OECD

By JIM EAGLES

New Zealand is one of only two OECD members whose gross savings fell in both the private and public sectors between 1995 and last year.

That worsening of the country's already disappointing savings performance is shown in a new OECD study on savings and investment.

The report has little specific mention of New Zealand, reserving most of its analysis for economies of larger nations.

But a table recording changes in gross savings position between 1995 and last year clearly shows it to be the odd one out.

During the five years, 20 of the 24 countries studied recorded lower levels of private saving and higher levels of public sector saving.

The most extreme example was provided by Greece, where private savings fell by 11 per cent of GDP and public sector savings rose by 10 per cent.

Of the exceptions, Japan achieved the opposite, with private savings rising and public sector savings falling.

Mexico had no change in the level of private savings, but public sector savings rose by about 0.5 per cent of GDP.

Only Turkey and New Zealand recorded falls in gross saving in both sectors.

Turkey's savings decline was fairly modest, but in New Zealand private savings dropped by 2 per cent of GDP and public savings by 1 per cent.

OECD economist Alain de Serres said New Zealand was one of the very few countries where public sector savings had fallen since 1995.

On the positive side, he said, that fall followed a tremendous improvement in public-sector finances, especially in the period 1992-94.

"Since then the Government surplus as a ratio of GDP has fallen by half but it does still remain in surplus."

On the negative side, the low level of national savings was reflected in New Zealand's large current account deficit.

"Considering that New Zealand already has the highest net external debt-to-GDP ratio among OECD countries [around 85 to 90 per cent], national saving will likely have to rise in order to maintain high investment rates."

Mr de Serres said the topic would be looked at in more detail in the next OECD economic survey of New Zealand, which was being prepared.