4. Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this
to the Minister of Finance
Has he ever ruled out compulsory KiwiSaver; if so, is that still his position?
Hon BILL ENGLISH (Minister of Finance) Link to this
I cannot recollect every statement I have made on New Zealand superannuation, having been involved as a politician in this issue for 20 years now. The Government has an open mind, and it has set up the Savings Working Group to explore all options, including Government savings, improvements to the tax system and its effect on savings, and the development of KiwiSaver.
Hon David Cunliffe Link to this
Why, then, did he tell a constituent less than 1 year ago: “I note your comment that KiwiSaver should be made compulsory or the contribution rate returned to 4 percent. The Government does not support either of these options.”; and when did he change his mind and decide it was an option worth considering?
The member will be aware that National put together a significant tax package in Opposition, which we implemented soon after we were re-elected, that included changes to KiwiSaver. The letter to my constituent accurately quotes the Government position, and it remains the Government position.
Hon David Cunliffe Link to this
If savings options from the working group must be fiscally neutral, must increased savings, then, come from either households or businesses, or both?
There is an iron rule about saving, and that is one can save more only if one spends less. That is how savings works.
Hon David Cunliffe Link to this
I raise a point of order, Mr Speaker. Taking your advice from yesterday, I asked an absolutely straight question: given that the Minister had said that savings options must be fiscally neutral, must the savings, therefore, come from households or businesses, or both? The Minister did not address that either/or trade-off, at all. He needed either to confirm or not to confirm. It was quite simple.
Mr SPEAKERMinisters have never been forced to confirm what members might like them to confirm. The member asked whether the policy was for savings to be fiscally neutral, and I think the Minister responded to that part of the question. He said that the only way that savings could be achieved was if spending was reduced, which seemed to agree with the first part of the member’s question.
Hon David Cunliffe Link to this
I appreciate that. The first clause of the question was not the question; it was the presupposition: “If savings options … must be fiscally neutral,”. The question then asked whether it must therefore be true that increased savings have to come from households or businesses, or both. He did not address the operative part of the question.
I think the Minister’s answer pointed out that the only way savings can be achieved is if spending is less. I imagine that means spending right across the economy. The member has further supplementary questions to use if he wants. I do not believe that the Minister evaded the question. The answer may not have been exactly the answer the member wanted, but he does have further supplementary questions. In fact, I will let him ask a supplementary question before I accept one from the other side. No?
Chris TremainI expect that the impact will be one of the issues debated by the Savings Working Group. There is no doubt that for some individuals it has increased their savings, but it is not obvious that it has made an immeasurable difference to national savings. In fact, it has become clear that during the period when the New Zealand Superannuation Fund was set up and KiwiSaver was set up, New Zealand ended up with record balance of payments deficits, averaging over 8 percent of GDP per year, and foreign liabilities climbed from $100 billion to $170 billion. That is why we believe that it is somewhat simplistic to think that higher household savings naturally means higher national savings. That is not necessarily the case. That is why the Savings Working Group has to look at national savings—that is, savings by Government, households, and businesses, not just households.
Hon David Cunliffe Link to this
Can the Minister, then, confirm that one of his first acts on taking office was to reduce the level of incentives to save with KiwiSaver, and can he further confirm that the Government’s very serious net international liabilities are overwhelmingly driven by private dissaving and the building up of housing debt, which his Government has done precious little to address?
We do not claim to have addressed international liabilities directly. Certainly, the recession has had the effect of stopping household debt from rising. In answer to the member’s question about our cutting KiwiSaver, we have put fewer incentives into KiwiSaver, which means the Government has smaller deficits, and the net effect on national saving is neutral.
Hon David Cunliffe Link to this
If, according to the Minister, the Government is able to save on the public’s behalf, does he now take the position that the level of personal or household savings is irrelevant to the total national international debt?
Clearly not; as I have said before, national savings are made up of the savings of households, Government, and business. I have made the point a number of times that the Government borrowing from overseas lenders in order to look like we are increasing savings in New Zealand simply does not make any sense. It does not increase our national savings, at all. We end up with a bit more household savings, but with more debt owed to foreigners. Eventually, foreigners will stop lending us money so that we can pretend we are increasing savings.