English Bill: Taxation (Urgent Measures and Annual Rates) Bill — In Committee Third Reading 
English Bill: Taxation (Urgent Measures and Annual Rates) Bill — In Committee Third Reading 
[Volume:651;Page:238] 
Hon BILL ENGLISH (Minister of Finance) 
: 
 It was interesting to hear the previous Minister of Finance recast a number of his arguments. Today is the first time I have heard him describe KiwiSaver as the equivalent of the original Douglas scheme or the Australian scheme. Well New Zealand has quite a different context from the Australians of course. They have a sharply income and asset tested public pension; we do not. We have a relatively generous—by international standards—universal pension and we are one of the only countries in the world to have that. On top of that we have the Cullen fund—named after Dr Cullen—which has been pre-funded on a scale matched only by Norway with its oil reserves. It is not matched by Ireland despite the Irish economic miracle. Its pre-funding is about half the size of ours. 
In terms of public provision for pensions we already have universal national superannuation which is paid to everybody regardless of income and we have pre-funding—which I might say for the next 5 years will be funded from borrowed money. Now Dr Cullen has said that on top of that he meant KiwiSaver to be the equivalent of the Australian scheme. Well the Australian scheme is designed to replace public superannuation—that is why the employer contribution is 9 percent. Dr Cullen did not go around the country telling the public that it was always Labour’s intention to replace national superannuation. That is a new rationalisation he has dreamt up today to criticise this policy. The fact is that New Zealand is providing adequately for retirement income with a universal pension which the Aussies do not have with pre-funding which the Aussies do not go anywhere near and with the significantly subsidised KiwiSaver. 
In fact the jury is still out on KiwiSaver. A lot of people have signed up but it will take time to see whether it achieves what Dr Cullen claims it will. Dr Cullen says that unlike almost all other incentivised schemes in the world it will unambiguously lift private savings. Well it is not clear that it will. I hope it does—I surely hope it does—because the taxpayer is contributing billions of dollars to KiwiSaver to incentivise savings. But the fact that 800000 people have signed up does not of itself mean that private savings have increased. They are increasing because the cost of debt is high. 
Well here is one thing that Labour has not thought of: KiwiSaver takes away from people their choice to repay debt. If they join KiwiSaver they reduce their ability to repay their debt. People are not just some kind of automaton. They make complex financial choices across their consumption their investment and their debt. If many New Zealanders have a top priority now it is to address directly the problem that Dr Cullen diagnosed—and I agree with him—and that is very high household debt. How do we get debt down? We pay it off. That is what we do. That is why this Government is putting tax cuts back into people’s pockets and reduced subsidies for KiwiSaver will make up for some of the reduced tax take. 
New Zealanders have the option to spend more. Well to keep the economy ticking along they do need to spend something or to pay off debt. Most assuredly they should pay off debt. Why would the Government automatically make a better choice than everyone else about whether to pay off debt? New Zealanders now understand the risks of debt. They have dropped their consumption remarkably and with lower interest rates they will be able to pay off debt. In fact one of the problems that this economy will have is everyone paying off debt instead of spending money. That will hold growth down in the shorter term and cost people their jobs but in the longer term it is an adjustment that may well be good for the country because people will pay off debt. The simplistic notion that putting big subsidies into KiwSaver will fix everything is wrong. 
The other argument is that KiwiSaver provides a pool of capital for local businesses. How many local businesses got $1 out of a KiwiSaver provider’s investment? None actually and none will for some time because a lot of providers like a lot of Kiwis rightly see that as somewhat risky. Let us have a more nuanced and intelligent debate about savings in this country instead of these mindless slogans.