Cullen Michael: Taxation (Urgent Measures and Annual Rates) Bill — In Committee Third Reading 
Cullen Michael: Taxation (Urgent Measures and Annual Rates) Bill — In Committee Third Reading 
[Volume:651;Page:236] 
Hon Dr MICHAEL CULLEN (Labour) 
: 
 The point I was making was whether the Government had checked with Australia which it had not. The Government drafted this scheme—or launched its policy—without thinking to ask the Australians whether it would affect portability. National did not even bother to ask. I know for a fact that no check was made with the Australians. I still think the previous speaker would be wise to wait longer for definitive statements from Australian Ministers not from Australian bureaucrats whom he was quoting in that particular respect. 
Let me take another point. The unions were not asking for a “2 plus 2” scheme. The unions were asking for the retention of the “2 plus 2” entry point which then goes up to “3 plus 3” or “4 plus 4”— 
Craig Foss 
: No. 
Hon Dr MICHAEL CULLEN 
: Yes; over the next 2 years which is what the current law provides but is then phased out. The unions did not want to stick to “2 plus 2”; they wanted “4 plus 4” but they wanted to make it easier for people to start in the scheme. The reason I said no to that was that it would have become much more complex for employers. If employers have to run 4 percent for them and 3 percent for them and 2 percent for them it means large compliance costs for employers. But if the National Government had decided just to make that change well one would have accepted that it was always an arguable point. Nobody was arguing for a “2 plus 2” scheme because it does not add up. 
Craig Foss 
: Yes they were. 
Hon Dr MICHAEL CULLEN 
: It does not add up to anything like enough to make a difference. Why do members think Sir Roger Douglas had “4 plus 4” in 1975! Why do they think the Australians are on 9 percent now and talking of going to 12 percent or 15 percent? The sums do not add up particularly when the National Government has removed the fee subsidy which was a flat-rate subsidy designed to ensure a higher net return for small savers within the KiwiSaver scheme whereas that now has gone. 
This is a scheme now that is so much less attractive. National opposed the KiwiSaver legislation when it was first passed. National opposed the extensions to KiwiSaver and National has hated the success of KiwiSaver. The fact that well over 800000 New Zealanders have joined KiwiSaver has got National members’ bitterness their bile their envy and their jealousy wrapped up. We have just listened to a member who is eligible to join a superannuation scheme based on a salary of $131200 with an 8 percent employer contribution. He gets up on his hind legs—he who is eligible for a more than $10000-a-year employer contribution to his superannuation scheme—and tells people on 30000 bucks a year that they cannot get a 4 percent employer contribution for $1200 a year. That is his idea of equity. No doubt it is because he thinks he is a hard-working New Zealander whereas people on $30000 are not hard-working New Zealanders. Talk about the politics of envy! 
Why are those members over there always envious of those on low incomes? A kind of strange reverse envy always comes across from them. Those members think that low-income earners do not do any work because they do not earn as much. They grade people according to their income—the more one earns the harder one must be working. Well I tell Mr Foss that in the real world life does not work like that. A lot of people on low incomes work a lot harder—and at much less attractive jobs—than a lot of people on higher incomes. That is the reality. KiwiSaver has been hugely successful. 
Mr Key has gone around the country in the last few years saying that New Zealand does not have a debt problem. Actually we have the second-highest national debt as a proportion of GDP—after Iceland—in the developed world. What has happened to Iceland? It has gone down the tubes. The way that Iceland has gone over the last few months Icelanders are almost hoping that the ice cap will melt so that half of them will drown. We will probably end up being the outstanding country in terms of national debt. We have an appalling savings record. We have had a net dissaving for year after year after year at the household level and all that has disguised that in the last few years has been the strong growth in house prices. Now that that growth has gone the reality is being revealed very very clearly that New Zealanders are as a collective divesting themselves of assets at a fairly substantial rate. That is why so few people in retirement in New Zealand have any significant additional income. Some have a lot but most people have next to nothing in addition to superannuation. They may get an extra couple of thousand dollars a year—that is all. 
KiwiSaver was going to give ordinary people the chance to get into a subsidised superannuation scheme lift New Zealand’s saving rate and change our whole psyche about savings in New Zealand. But National members are again telling us that we can consume our way to victory. It is as though we are in World War II and are being told we should—not dig for victory but—eat potatoes for victory. That would have been the National Party’s slogan in the United Kingdom during World War II. People would not have grown things; they just would have been told to eat more because that would somehow or other solve the problem. National says we can solve New Zealand’s economic problems just by consuming more—much of it produced offshore—rather than producing more and exporting that. We have to save more in New Zealand to produce more of our own capital for investment both here and offshore. 
There is nothing wrong with New Zealanders owning more offshore as that spreads the bets for our future retirement income within New Zealand. That income should not all be based on the New Zealand economy. In that respect it is wise for us to spread our bets internationally. Sir Roger Douglas agrees with that. National is cutting the possible KiwiSaver contribution from both employers and employees from 4 percent to 2 percent. Employers will initially not be able to take the percentage off gross wages but National will change the law again so that from next year employers can give employees who are in KiwiSaver a 1 percent pay increase and those who are not in KiwiSaver a 3 percent pay increase. Because National is taking away the employer tax credit there is no incentive at all for any employer to contribute 4 percent. 
Finally let me deal with the question of the $20 a week employee tax credit. National has worked a con job on the media by convincing them that everyone will get the $1040 a year—rubbish. National has said that if an employer is contributing 4 percent—that is above the 2 percent—it will match that dollar for dollar up to $20 a week. But if an employer is contributing 2 percent National will still match it dollar for dollar up to $20 a week. So those on $26000 a year will see their employee tax credit halved from $1040 to $520. The media have completed misunderstood that. The Minister of Finance has done a con job in that regard. For ordinary employees the total contribution to KiwiSaver has gone from 4 percent plus 4 percent plus $1040 to 2 percent plus 2 percent—and they may pay the lot themselves—plus something less than $1040. Their savings have effectively been halved and in many cases they will be paying the same amount they were paying previously. In practice they will end up paying 4 percent to get a bit over 4 percent when they would have been paying 4 percent to get something like 10 percent. Is this addressing New Zealand’s savings problems? Is this building a habit of capital accumulation? Is this a property-owning democracy? Is this driving stronger growth? Is this turbo-charging New Zealand? It is nothing like that at all. Like the research and development tax credit this is yet again a short-term gain for long-term pain. It is the exact opposite of what Sir Roger Douglas used to argue for. To be fair he did get the long-term gain eventually; it is just that we had to undergo a lot of short-term pain. 
This provision is fundamentally wrong. It fails to address one of our most important structural economic problems in New Zealand—it has gone into the air as if somehow or other it is not important. It is crucially important in this country. We are in the middle of an international financial crisis in part driven by the growing gap between savings countries and spending countries. National says we should be a spending country continue on this huge long historic shopping binge and not worry that someone some day will call in the bill. We have to get off that shopping binge. We in New Zealand have to start working saving producing and exporting but this bill—and this part in particular—will help to destroy that ambition and destroy this programme that has not been given the chance to work.