Shaw James: KiwiSaver Budget Measures Bill — First Reading Second Reading In Committee Third ReadingText is incorporated into the Bound VolumeShaw James: KiwiSaver Budget Measures Bill — First Reading Second Reading In Committee Third Reading[Sitting date: 21 May 2015. Volume:705;Page:3800. Text is incorporated into the Bound Volume.]JAMES SHAW (Green):Thank you for the opportunity to speak on the KiwiSaver Budget Measures Bill. I am going to take I hope a slightly different approach. I would like to start by acknowledging both Mr Brownlee and Mr Bennett for actually taking full calls on this bill and actually providing some form of argument in this debate because during the previous Budget debates over the last few days Government members have not actually even bothered to speak to their own bills. They have not actually bothered to lay out their case; they have just relied on their numbers. So I do appreciate the fact that Mr Brownlee and Mr Bennett did actually take full calls on this bill even if they relied more on volume than reason to make their arguments.There are a number of key points that I would like to address and I am inviting the Government to respond directly to these points because I have not yet heard any real arguments—The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! Sorry there is noise from both sides at the moment and it is a bit hard to hear the member.JAMES SHAW: I was just saying that I am actually inviting the Government to respond specifically to these points.The first one is around New Zealand’s savings rate. We are still 22nd out of 24 OECD countries in our savings rate which even given the success of the KiwiSaver scheme over the last few years is a shockingly low rate of savings. We are a country that relies more on debt than we do on savings. We have weak capital markets partially as a result of this. National’s Savings Working Group itself said that our foreign debt is too high. This makes us vulnerable and our domestic savings are essential to try to redress that. Our investment needs to be funded from offshore because we do not have the domestic savings to provide those sorts of capital markets. Removing the incentive from KiwiSaver and reducing the likelihood that more people will be joining the KiwiSaver scheme reduces our domestic savings rate. So I would like to know absent the incentive what the Government’s plan is to increase New Zealand’s savings rate. That is the first point.The second point is around the loss of the incentive. I would like to thank David Clark for his contribution before about behavioural economics which is a more recent evolution in economic thinking. The question here is: why would you take away the incentive? Absent compulsion why would you take away the primary incentive? It is the one that most people know about. The ANZ chief economist Cameron Bagrie said in this morning’s Dominion Post that he himself—ANZ’s chief economist—would not have put his kids into KiwiSaver if it was not for the $1000 incentive.So the $1000 incentive is the most well-known component of the whole scheme. There are other incentives still contained in the scheme as Mr Brownlee said which include the tax rebate the matching contributions and so on. But actually my belief is that the Government would have been better off to cut or remove the tax rebate than the $1000 contribution. That would probably have had more fiscal impact but it would have retained the $1000 incentive. That is what people think of when they think of the incentive of this scheme. As far as I can work out what you are going to see is a reduction in the percentage of people who are taking up the scheme. So I would like to know what the Government’s response is to the loss of that incentive. How does it actually expect the same percentage or equivalent of people to continue to join the scheme absent the $1000 incentive?The third question is around the timing of the loss of the incentive. If for example you had said that this would take effect in 6 months 12 months or 2 years there would have been a window where people said: “OK there is still an incentive but I have got to get in now or it is going to be lost.” Even if you had given it a week you would have seen a rush of people joining the scheme. One of the previous speakers on the Government side said: “Well look if people have not joined the scheme now what is the likelihood that they ever will? Given that we have had the incentive for all these years what are the chances that they are going to do that?”. If there had been a time limit—and if my reading of behavioural economics is anything to go by—there are a lot of people who are out there thinking: “Oh yeah I will get to it one day but it is a bit complicated. It is a bit hard. I do not have enough money quite now. I will get to it.” If you had left a window and said: “Let us give this 6 or 12 months and then the incentive would go.” yes it would cost you a bit more money but you would get that tail of people who just had not quite got around to it. But instead by cutting it off immediately there is no chance for people to get it who were thinking about it but had not gotten around to it. I would like a response to that please as well.The next one is about intergenerational equity. The current generation of parents with young kids who are working are paying for their kids’ education through the high tertiary fees and costs. They are paying for their own retirement because they know that by the time they get to retirement age there is not going to be enough cash in the kitty to give them proper superannuation and they are paying for their parents’ retirements through taxation in the form of the existing superannuation scheme. So the current generation of families who are working are getting squeezed in terms of paying for three generations at once. In removing this incentive you are actually making it even harder for intergenerational equity to take place. I would like some kind of sense of what your plan is to redress some of the intergenerational issues that arise out of this.The fifth point is around the short term versus the long term. I think Labour have already made this point very well and frequently in the course of this debate which is that every time the Government gets concerned about its short-term books it relies on kicking the can down the road in terms of the long-term fiscal sustainability of the country. They cut the contributions to the superannuation fund in order to try to maintain the books now. Now they are cutting the KiwiSaver incentive basically balancing the books from New Zealand’s superannuation schemes and retirement schemes. I would like some sense of what your long-term plan is. How are you going to fix the long-term future rather than just deal with the short term?Those are my main points. What is the Government’s plan to deal with New Zealand’s savings rate? What is the Government’s plan to deal with the loss of the incentive that then happens and how do they expect the rate of take-up to stay the same or even increase? What is the impact on the rate of take-up of KiwiSaver when the incentive is lost? Why did they not consider a window to get people in who were thinking about it—the third point? The fourth point is around intergenerational equity. The fifth point is around the long term versus the short-term nature of this decision. There are five questions there that I would like answered during the course of this debate more bombastically or less bombastically as takes your pleasure. But I would like to hear those.Middle to low income earners are struggling to save. We know that. Under National those who are saving are the people who really can save—that is upper-middle and upper-income families. What this legislation does is this takes away the incentive and a little bit of savings for people at the bottom end of the pile people who could not get a thousand dollars together. What is your plan for the impact on inequality that the loss of this $1000 is going to have?We have got a number of Supplementary Order Papers that will come up during the next part of the debate which are in relation to restoring or retaining the $1000 kick-start for people who have got community services cards which would deal with some of those issues. We have got the Kids’ KiwiSaver programme that we launched a couple of weeks ago with a progressive savings component to it—all of which is designed to deal with some of the issues that I have raised during the course of this debate. I just wanted to flag that we will be speaking to those soon. We have got some ideas about how to deal with some of those issues. I would like to hear what the Government’s plan is for dealing with those kinds of issues. Thank you.