Key John: KiwiSaver Bill — Third Reading 
Key John: KiwiSaver Bill — Third Reading 
[Volume:633;Page:4997] 
JOHN KEY (National—Helensville) 
: 
 So often our Minister of Finance lives in a state of denial and we heard in that speech another example of the state of denial he lives in. He took the moment of his speech when he diverted from the notes written for him by Treasury to say that New Zealanders would not increase their mortgage if they had the opportunity to do so. This is the Minister of Finance who came into office in 1999 when New Zealanders owed $80 billion. Well today I hate to tell the Minister of Finance the debt owed by New Zealanders is $140 billion. In the last 7 years they have racked up $60 billion worth of debt and in the last 3 years they have racked up $40 billion worth of debt. If Michael Cullen does not think that New Zealanders when they have the opportunity to increase their mortgage because they have paid some down will do so then he lives in a world that does not understand basic banking tenets in the modern world and he does not understand just how easy it is. 
There is probably one point on which National agrees with Labour at least in some form—that is New Zealand does face some savings issues in my view. I think New Zealanders do have a concentration of assets that are held mainly in their home and unless they diversify their assets into financial assets they will inevitably have to eat their home in retirement—and many New Zealanders will. That said the question is whether KiwiSaver will do the job. 
The Government bases its entire premise at this point around the view that inertia is the reason New Zealanders do not save. In fact there is little evidence to prove that inertia is the reason they are not saving. There are many reasons why they are not one being that they are over-taxed and another being that they do not earn enough. I refer to those New Zealanders who the Minister of Finance seems to claim will all of a sudden become participants in KiwiSaver. If that is to be the case then it is rather remarkable that the Government earns around about $550 million a year from the specified superannuation contribution withholding tax yet believes that those who undertake KiwiSaver will have a fiscal cost of only $35 million. 
 Something just does not add up. If so many people are going to flock to KiwiSaver if so many people are going to use this scheme and they are genuine New Zealanders who are not saving today then one would have expected the changes to specified superannuation contribution withholding tax which the Minister of Finance announced a few hours before the bill was released for its second reading would have been much greater. The truth is that the Minister of Finance knows that before he made any changes to specified superannuation contribution withholding tax the scheme was hopelessly flawed and would never have worked. 
Despite the fact that he said the Finance and Expenditure Committee had done its process he knows as well as I know and as well as every member on the committee knows that in fact they did not do their work. In fact we heard a great many submissions and not one of them was about mortgage diversion because no one had had the opportunity to discuss mortgage diversion because even Labour members on the committee had decided that it was not a good idea. When Gordon Copeland introduced it about 30 minutes before the end of the whole session Labour members agreed with me when I told them that I had had a look at that option around the Central Provident Fund in Singapore. 
Michael Cullen knows full well that when there is mortgage diversion a savings account is turned into a chequing account. That is a fact of life and if Michael Cullen does not know that he had better get up to Singapore and have a look at how much is sitting in the accounts for which there is mortgage diversion. He knows as well as I know that in fact the number is zero. Money flushes through the account and goes out the other end. 
I do believe that New Zealand has some savings issues and in that regard he is right about one thing and I do not entirely agree with Roger Kerr of the Business Roundtable who says that the only issue is national savings. I personally think household savings do matter. If national savings is the only calculation that has to be worried about the assumption always has to be that New Zealanders will be able to rely on the Government to pay for anything they want; they will not and we know that and there should be some behavioural changes and we agree with that. 
But there are many problems within KiwiSaver. There are many unanswered questions and National will not be voting for it for very good reasons. The first is that while a workplace scheme is likely to achieve change one of the questions that has to be asked is why the deduction or the benefit that has been given under specified superannuation contribution withholding tax is applicable only to KiwiSaver. Today we saw a press release from Jill Spooner the vice-president of the Association of Superannuation Funds of New Zealand who made the point—I think quite correctly—that those New Zealanders who saved for years in the 1990s who stuck with their workplace schemes and who loyally contributed when there was no incentive to do so are now finding out from the Minster that they are somehow left out in the cold.  
Secondly inevitably we will see more and more schemes become KiwiSaver-compliant. Why is this? Because they will want to have the benefit of the reduced specified superannuation contribution withholding tax. But what we will see in effect in my view is that many people who are saving in existing schemes will exit those schemes as they transition into a new KiwiSaver scheme. As we heard from AXA New Zealand today—interestingly enough—around about 20 to 40 percent of all money that is able to be transferred from one scheme to another never gets re-invested; that is a reasonably interesting point.  
I also make a point around mortgage diversion: if it was such a good idea and it was going to work and provide the incentives then why was it not introduced much earlier on? What was the magical process that occurred after the select committee had heard the submissions and long after they had had the opportunity to listen to them? What happened that changed the Minister’s mind? What happened to the position that Michael Cullen had adopted for the better part of 10 years that savings incentives would not work in any form whatsoever? That position went out of the window as the Government scrambled to try to change KiwiSaver. They knew the architecture might have been all right but the basic process would never have worked in any form whatsoever and they decided at the last minute that they had no option.  
This is a Government with its back to the wall and facing plummeting internal poll ratings. Today I was interested to hear someone who had seen an even more up-to-date poll by Labour. Interestingly enough that person told me that the gap between Labour and National now is not as wide as it was on  
Agenda 
 on Saturday morning when we saw National leading Labour by 4 ½ points. But in fact the gap is even wider. We know that this is a Government that thought it could get away with stealing $882000 to buy an election and thought it could prop up a member of Parliament whom even its own Prime Minister does not believe in. That is the reason we have seen tax changes. Michael Cullen has written out a cheque on behalf of the people of New Zealand—a far bigger cheque than the one Labour wrote out on behalf of the taxpayers to steal an election. It wrote out that cheque in desperation to try to get some good news. That is the reason we saw the changes. Michael Cullen knows that and he was blushing not just his normal pinky self when he was in front of the KiwiSaver billboard the other day; he was blushing with embarrassment. Even he had to say when asked what had changed his mind about saving incentives: “Let’s just suck it and see.” They are hardly the words of a man of great conviction. 
National will not support KiwiSaver. We do not think it will work enormously in its current form. There are many things that could have been done to make KiwiSaver work. If the Minister of Finance had not been so lazy he could have gone and had a look at what President Bush did. He would have learnt from the US Treasury that the real thing that drives savings is the real thing that has driven their 401 (k) plans and their individual savings accounts—reduced taxation treatment on the savings of those funds. That is where the exponential grunt is and that is the thing that has been driving great economic growth in the US as Treasury knows. The Minister of Finance knows he has tackled the completely wrong place. He has made no difference to employers. There is no incentive on employers to encourage this scheme and the Minister of Finance has once again—as he so often does—got it horribly wrong.