3. Hon BILL ENGLISH (Deputy Leader—National) Link to this
to the Minister of Finance
What will a person on the average individual wage, working full-time, who starts a job after 1 July 2007, pay into KiwiSaver per week if they are automatically enrolled in the scheme at the default rate of 4 percent?
Can the Minister confirm that to get a tax incentive of about $11 a week, a person on the average wage of $45,000 will need to put $34 per week into KiwiSaver?
Hon Dr MICHAEL CULLEN Link to this
That is a very interesting question. I rely upon the member’s answer.
R Doug WoolertonCan the Minister confirm that Australia has in excess of $750 billion in its superannuation fund, with compulsory contributions having started at 6 percent of people’s salaries and now being 9 percent; if so, what would the total amount of New Zealand savings be if we had decided to commence compulsory savings of that proportion in 1997, as proposed by New Zealand First?
Hon Dr MICHAEL CULLEN Link to this
Off the top of my head I find it fairly difficult to answer that question, given the number of variables that would come into play. But I think something approximately in the order of $100 billion—or getting towards that figure—would be about right.
Hon Mark GoscheHon Dr MICHAEL CULLEN Link to this
I have received reports of support from a wide range of sectors, including business, the unions, and overseas experts. I am also surprised to see a recent report from Mr English stating that his party now supported this scheme, which his leader had slated as being a cheque book that we had used to pay for the pool boy.
Can the Minister tell us what proportion of people on the average wage who are facing significant increases in interest rates are likely to be able to afford to lock away $34 a week in extra savings until they turn 65, in order to reduce their taxes by $11 per week?
Hon Dr MICHAEL CULLEN Link to this
The member is making a number of assumptions in that question, which I think he should be encouraged not to do. Let me go further than that and say that the assumption when the KiwiSaver scheme was introduced in 2005 was that 25 percent of the workforce would join up within 5 years of the scheme starting. Some recent opinion surveys suggest a considerably higher figure than that may be likely, and, indeed, a report out sometime today, I think, will show that propensity to join is actually largest amongst households in the income range of $30,000 to $69,000 a year.
Charles ChauvelHas he seen any reports on the impact of KiwiSaver on the sustainability of New Zealand superannuation?
Hon Dr MICHAEL CULLEN Link to this
Yes, I have seen a report from Standard and Poor’s saying that New Zealand is one of the best-prepared nations for dealing with the challenges of an ageing population. I have seen a rather strange report from Mr English questioning whether the political consensus on superannuation still holds. After reports from Business New Zealand calling for cuts in New Zealand superannuation, this suggests that National is now really moving towards suggesting that New Zealand superannuation should be cut by means of income and asset testing in the future.
Can the Minister confirm that for KiwiSaver to make a significant difference to national savings, he would need to use the traditional tax incentive that works for higher-income people who can afford to save, or who will shift savings from bank accounts or shares into KiwiSaver in order to get the tax benefit?
What advice would he give to middle-income New Zealand households facing increases in interest rates: should they pay off debt in order to avoid the higher interest rates that he has partly caused, or should they opt to stay in KiwiSaver and lock up a weekly amount until they are 65 in return for either a tax benefit or some kind of donation from the Government?
Hon Dr MICHAEL CULLEN Link to this
What I would advise those people to do, first of all, is not to vote National. They should not vote National, because a $2.5 billion a year across-the-board tax cut would place more pressure on interest rates. They should not vote National, because Mr English has said the only problem with monetary policy is that the Reserve Bank governor has not put interest rates up enough. They should not vote National, because if there is a National Government, when they get to 65 they will find that their superannuation is less than it otherwise would have been. That is what he did the last time he was Minister of Finance; he cut New Zealand superannuation.
Can the Minister tell the House why he is including in his Budget a reduction in company tax rates, which he has always argued against, and savings incentives, which he has always argued against; is it because economic policy is now run by Winston Peters, who forced him into tax incentives, and Peter Dunne, who forced him into a company tax cut?
Hon Dr MICHAEL CULLEN Link to this
The member will have to wait until Thursday afternoon to find out what is in the Budget. Unfortunately for him, what is in the Budget is neither a cock-up nor a conspiracy—his two favourite explanations of life.