Parker David: Taxation (Annual Rates Trans-Tasman Savings Portability KiwiSaver and Remedial Matters) Bill — Second Reading 
Parker David: Taxation (Annual Rates Trans-Tasman Savings Portability KiwiSaver and Remedial Matters) Bill — Second Reading 
[Volume:664;Page:12183] 
Hon DAVID PARKER (Labour) 
: 
 The previous speaker Craig Foss made reference to the fact that the Government is borrowing money. Why then did the Government increase the amount of money that it was borrowing in order to fund tax cuts that go so disproportionately to the people in society who are already best off? 
I turn to the Taxation (Annual Rates Trans-Tasman Savings Portability KiwiSaver and Remedial Matters) Bill. As previous speakers have said on behalf of the Labour Party we support this bill which improves the portability of retirement savings between New Zealand and Australia. There are some restrictions on portability that I know will disappoint some people. For example KiwiSaver contributions can be used by a first-home purchaser to go towards the deposit. But as I understand it the agreement in respect of portability with Australia means that the savings that are transferred from an Australian scheme to a KiwiSaver scheme cannot be used towards a house purchase in New Zealand and that is a sad detriment. Let us hope that sometime in the future that might be able to be fixed. 
A couple of points need to be made in the discussion about KiwiSaver. Firstly New Zealand has an abysmal savings record. We really do have a poor savings record. New Zealand has for many years spent more than it earns and that is reflected in our current account deficit. Increasingly it is reflected in the non-tradable part of our current account deficit in the amount of interest and dividends that flow to other parts of the world as a consequence of us owing ever-greater amounts to overseas jurisdictions. Of course this bill which improves portability of retirement savings between Australia and New Zealand exists only because the previous Government introduced KiwiSaver. Were it not for that we would not have portability of retirement savings. 
It is notable that the National Government opposed the Budget when we introduced KiwiSaver. Its mantra at the time was that we should have been having more income tax cuts which would have meant we could not afford the incentives that were put in place by KiwiSaver. Indeed following National’s election to Government the National-led Government faced with a choice between keeping the generosity of KiwiSaver and delivering income tax cuts opted for income tax cuts ahead of improved savings. This was a bad mistake for New Zealand. Even though KiwiSaver has begun to improve New Zealand’s savings record it is still lamentably poor when compared with for example Australia’s. Australia is going in the opposite direction. Australia announced in its latest Budget that over the next few years it is increasing compulsory savings through its workplace superannuation scheme from 9 percent of earnings which it currently is to 12 percent. That makes our savings look lamentably poor. 
The National Government has a mantra that says that this latest Budget is the greatest tax switch or something like that in the last 20 years and that somehow it is changing the shape of the New Zealand economy in a dramatic way following its last Budget. We all know that that is an exaggeration. There is a change towards taxing consumption through GST with reciprocal decreases to income tax but of course there are two things to be noted about that. Most of the net benefit of that goes to the people who are the highest earners. The total proportion of tax that is paid by the lower two-thirds of earners goes up and the proportion of tax paid by the higher earners goes down. The other point is that low to middle income earners generally have to spend all of their earnings to live. Although they might have an increase in their income after the deduction of income tax they spend it all. They have to pay GST on everything that they spend essentially or most of what they spend and therefore they do not end up much better off. 
If the Government was really interested in catching up with Australia it would have addressed the biggest difference between New Zealand and Australia which is savings and investment. Australia has more savings it has deeper capital markets and it has more money to invest in profitable sophisticated enterprises that generate foreign exchange earnings and Australia also avoids ownership of its own country by overseas interests to the same extent. Of course if we sell something to an overseas party because we are running such an enormous current account deficit as New Zealand is in the end the overseas party gets the dividend flows from the future profits of the enterprises that it has purchased from New Zealanders. In the case of lending to New Zealanders via banks that overseas party also get the interest flows. 
If people do not believe that that is the biggest difference between New Zealand and Australia and if they really do think the big difference between New Zealand and Australia is mining they are sadly mistaken. I saw a presentation recently from Rick Boven from the New Zealand Institute who told us that mining accounts for approximately 10 percent of the difference between the earnings in Australia and New Zealand. It is not even the majority; it is 10 percent. There might be some other flow-on benefits to other parts of the economy but essentially 10 percent of the difference lies in mining which is not as the Minister for Economic Development Gerry Brownlee would have us believe. The big difference lies in capital markets and savings. If we want an example of that we should reflect on the fact that in 2007 the combined profit of the four biggest banks in New Zealand was more than the combined profit of the rest of the NZX 50—that is the 50 largest companies in New Zealand listed on the New Zealand Exchange. The combined profit of those four banks was greater than the profits of the balance of the NZX 50. 
We should then reflect on the fact that those four banks are Australian-owned. The Australians own not just their own banks they own ours. The collective profitability of those banks is bigger than the rest of the NZX 50. We do not have much left there that we own either. It is absolutely clear that the big difference between New Zealand and Australia lies in the fact that over the years Australia has saved. I am pleased to see Sir Roger Douglas in the House. I am pleased to again acknowledge him in respect of the changes that he has tried to make in New Zealand for close to 40 years on this issue. It goes back to the Kirk savings scheme which Sir Roger was responsible for the design of and subsequent moves. Every time a Labour Government takes steps towards the progress that Australia has made—actually the Australians started later than Kirk and look what it has done for them—National comes in and undermines it. 
It is good that this portability legislation is before the House today. It would not be here but for the introduction of KiwiSaver by the previous Government. But more important it is an opportunity for us to reflect on why New Zealand is so much less economically well off compared with Australia and it relates to savings. I really cannot emphasise that point enough. The big difference between New Zealand and Australia is savings and investment. 
Another area that is related to this which is not addressed by the bill but which I think needs to be considered is the tax mix in New Zealand. Our tax mix is different from that of Australia and the rest of the OECD. Despite Bill English’s comments to the contrary his so-called tax switch did nothing significant to change that. National’s tax switch not only was unaffordable in terms of the effect on the Government deficit but has also increased the tax burden of businesses as opposed to individuals. Given that we rely upon businesses to generate the wealth that we need to earn incomes and generate the taxation revenue that the Government needs to pay for health and education it seemed to me to be a retrograde step—particularly the reduction in depreciation for short-lived assets that are so expensive for our export businesses to purchase. 
Trans-Tasman portability of retirement savings is a good thing. It is sad that we cannot enable people to use them for a first-home purchase deposit if they bring back money from Australia. It is progress none the less. But the big difference between New Zealand and Australia is savings. This bill is an opportunity to highlight that. Thank you.