by Niko Kloeten
At the Tower Investments quarterly media briefing today, Stubbs said governments were engaging in "financial repression" by keeping interest rates artificially low.
While this tactic gave the governments more "headroom" to try and sort out their shaky finances, it punished savers and risked creating high levels of inflation, he said.
Asked by Good Returns whether there was also a risk of creating market bubbles such as the tech bubble and the more recent housing bubble, Stubbs said that was a definite possibility if interest rates were kept too low for too long.
"Artificially low interest rates create distortions in the investment market," he said.
"I'm worried that a KiwiSaver fund gets set up to take advantage of this - most people think KiwiSaver is a government-guaranteed scheme."
Stubbs said the Financial Markets Authority would need to be vigilant to ensure KiwiSavers weren't being taken for a ride by shady operators investing in bubble activities.
"From a New Zealand investment point of view you need to be wary of what your KiwiSaver fund is investing in."
Stubbs also said the debate over whether to make KiwiSaver compulsory was "almost settled" with polls suggesting most New Zealanders thought compulsion was a good idea: "the big issue is the contribution rates."
He said contribution rates of 2% or 4% wouldn't be enough, pointing to Australia where the rate is 9% and will eventually rise to 12%.
However, an increase to that level would need to be phased in over time to allow people to adjust, particularly those on low incomes who would struggle with 9% or 12% of their pay coming out.
"If contribution rates were to increase by 0.5% or 1% every year for 10 years it would give people and employers time to get ready and it would create a very positive environment for New Zealand - we would go from a capital poor to a capital rich country."
The best superannuation programme in the world was a three-hour flight across the Tasman, he said.
"Australia is a very capital rich country... if you want to raise money you can raise that money domestically."
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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