Fitzsimons Jeanette: KiwiSaver Bill — Second Reading 
Fitzsimons Jeanette: KiwiSaver Bill — Second Reading 
[Volume:633;Page:4855] 
JEANETTE FITZSIMONS (Co-Leader—Green) 
: 
 The Greens support the KiwiSaver Bill as a useful step towards addressing the rather dangerous lack of savings in our society. The household debt-to-income ratio has risen to more than 120 percent—largely on the expectation of increasing equity in people’s houses. If the housing market were to crash we would have a lot of insolvent people. Something needs to be done. This scheme is an easy way for people to save with automatic deductions from their pay and with the opportunity to opt out if they have other ways they would rather do it. 
The Finance and Expenditure Committee has ironed out quite a lot of wrinkles in the bill with the extension of time to implement the changes in order to make sure things can actually be ready to go on the due date and with a number of ways to reduce compliance costs and risk for employers—for example by making it clear they are not financial advisers and not to be held accountable for that by limiting the information they must give to the Inland Revenue Department to what they actually receive from their employees and by simplifying the reporting requirements. That is all good work we managed to do. But the effect of the bill will be limited in terms of how much saving it can encourage because so many people do not earn enough to contribute 4 percent of their gross income to a savings scheme. The minimum wage in New Zealand is low compared with other countries and it is not being raised fast enough. 
The bill is designed to encourage people to start saving when they are young. That is because it will give them the longest time over which to accumulate some retirement savings and because it builds in a habit early. That is why the incentive in the bill is linked to first home purchase as a way of getting young people involved. But young people do not earn a lot. They probably earn the least they are going to earn at any stage of their lives. So for many young people 4 percent will be more than they feel they can contribute. 
I argued—as the unions argued—that there should be an option to save 2 percent. That is not because 2 percent will accumulate a huge amount of savings for retirement but because it gets a habit in place from the time of the first job. The time of the first job is when we need to get people into saving. That argument was opposed by the rest of the committee on the grounds that if we gave a 2 percent option then people who could afford to save 4 percent might save only 2 percent and savings might go down. The reality now though is that those who could save 2 percent but not 4 percent will not save at all. Not only will they not save at all now but later on when their incomes rise and they can afford to save 4 percent they will not have the habit of saving and they may never have the habit of saving. Or they will start saving in their 50s once the mortgage is paid off and the kids have left home and they will not have enough time left to accumulate what they need for a decent retirement income. 
There is no way of proving whether I am right or whether the other committee members are right or whether the total savings will be more or less but I have a very strong instinct that tells me that without the ability to contribute 2 percent a lot of young people will never get started at all. Of course once they have got their first home there is not the same incentive to join the scheme later. 
As a compromise the bill has been amended to allow employers to contribute half of the 4 percent. When employers do that the employees will have to contribute only 2 percent. When employers take that step that will be good but how many of them will do so? Will the owner of the little cafe who has to be forced to pay the minimum wage now voluntarily contribute an extra 2 percent to a superannuation scheme on top of that? I think many will not. Many of the employees who work in those situations are the most vulnerable and needy of all. It is great that Fletcher Building has made an announcement that it will contribute to the superannuation scheme and I expect there will be a number of big industrial worksites that will contribute as part of their employment relations negotiations. Probably they will pay a bit less in wages and a bit more in superannuation contributions. But many smaller employers whose workers are among the worst paid will not actually take that opportunity. 
Finally if we are to try to reduce household debt which is actually the first step towards increasing household savings we must do something to control the behaviour of the banks and that of course is completely outside anything this bill does. Consumer debt is being forced down people’s throats in a way that has never happened before. Credit card limits are being constantly expanded and mortgage extensions are being thrust at people. Every night in our living rooms we see advertisements saying that we should let our home pay for our overseas trip and increase our mortgage to get a new car. Bank staff are being forced under performance agreements to sell credit to their families and friends in their off-duty time. 
This is a huge push by the banks to get people into debt and I really wonder whether the existence of a KiwiSaver scheme will be enough to counter the constant advertising that says we can have all these goodies in life if we just borrow more. Billions of dollars are being spent to foster a culture of borrowing and indebtedness and we are hoping that the existence of a workplace savings scheme will counter that big push and all of those inducements. I think we underestimate the role that advertising plays in people’s behaviour. 
I have not heard any expressions of Government disapproval of that behaviour by the banks. I have not seen Michael Cullen meet with the heads of the banks and say that it has to stop or the Government will find some measure to control it. The attitude just seems to be that it is the market working and the banks can do what they like. So in addition to this bill—which we do support because it is a positive measure—let us tackle the lack of savings and household indebtedness at the source.