by Susan Edmunds
The policy, part of an announcement by the party’s finance spokesman, David Parker, this week, called for the Reserve Bank to be given an additional tool: Instead of relying solely on the official cash rate, the party proposes to give the Reserve Bank the ability to alter compulsory KiwiSaver contribution rates as a way to alter consumer behaviour and slow inflation.
Claire Matthews, of Massey University, said KiwiSaver contribution rates should increase, but not in the way Labour is proposing.
“The spectre of the government meddling with KiwiSaver is not welcome,” she says. “It’s the realisation of the fears of many Kiwis, especially those who have not signed up to the scheme.
“Using KiwiSaver as a form of monetary policy is really straying away from the purpose for which it was created.”
ANZ’s Cameron Bagrie agreed. He said if the Government was willing to give the Reserve Bank control of KiwiSaver accounts, it might as well hand it the Super Funds as well. “I can see a Tui billboard.”
BNZ chief economist Tony Alexander said the proposal ran counter to most investment strategy. “As the economy is booming and share prices rise, KiwiSaver contributions would increase and purchases of shares would increase, exacerbating upwards pressure on share prices. People would buy more overpriced shares at the top of the market. Then when the prices were falling, the falls would be exacerbated because KiwiSaver contributions would be reduced.”
Matthews said the compliance costs of changing contribution rates would be hard on small businesses.
“Each time the KiwiSaver contribution rate changes, businesses will need to update their payroll systems to deduct the appropriate amount requiring additional, non-productive compliance activities.”
Those on low incomes, or trying to save for things other than their retirement, would also be adversely affected.
“Even five dollars per week can be a significant sum for someone on a low income. And, as usual, the focus is on achieving lower rates for mortgage holders with no thought given to those with bank deposits earning lower interest income. I also question David Parker’s claim that lower interest rates would mean lower credit card rates. Credit card interest rates tend to be very inelastic.”
| « Support for changing KiwiSaver: FSC | Kiwis want to be forced to save: FSC » |
Special Offers
No comments yet
Sign In to add your comment
© Copyright 1997-2024 Tarawera Publishing Ltd. All Rights Reserved