KEY POINTS:
New Zealand First leader Winston Peters says the economy is fundamentally weak and must be strengthened by a compulsory savings scheme.
Mr Peters has campaigned for compulsory savings for more than a decade, and said today it was a tragedy that National and Labour had both rejected his proposals in the past.
"We are now in a position where we have no choice -- we must have compulsory savings," he said in a speech to the Canterbury Club.
"It's time to take the medicine, institute compulsory savings and deal with the long-standing blemish on our economy."
Mr Peters, who is Minister of Foreign Affairs, said the economy appeared to be performing well but a facade was hiding a fundamental structural weakness.
"We cannot sustain the policy mix of a high dollar, high interest rates and a massive current account deficit and expect to have the growth we want.
"We never could, and after 22 years we should have learnt that."
He said New Zealand was hugely indebted to the rest of the world and export growth was being undermined.
He described the Reserve Bank Act as a blunt instrument, and said vain attempts were being made to change consumer behaviour by raising interest rates.
He said debt was not just a national problem, it extended to households as well.
"Put simply, too few of us are saving too little for our futures," he said.
"Household debt has risen from 30 per cent of GDP (gross domestic product) to 100 per cent in 2005.
"Overseas banks have been quite happy to prop up our economy by lending us as much money as we have asked for -- but they are now at the stage of wanting us to make good those debts."
Mr Peters said it was time for the Government and Parliament to take the lead, and positive steps had been taken by establishing KiwiSaver and the superannuation fund.
"KiwiSaver has the potential to deliver the right outcome and the Cullen fund (the superannuation fund) already has the capacity for individual accounts.
"The mechanisms are in place. We just have to have the courage to use them."
- NZPA
