Copeland Gordon: KiwiSaver Bill — Third Reading 
Copeland Gordon: KiwiSaver Bill — Third Reading 
[Volume:633;Page:5007] 
GORDON COPELAND (United Future) 
: 
 I would like to start my remarks in the third reading of the KiwiSaver Bill on behalf of United Future by thanking the officials for all of their hard work. I must confess to a splitting headache one night after I had managed to drag myself through more than 200 pages of highly detailed and technical responses to the many submissions we had received. I was a bit disappointed afterwards to find that I had needed to do only about 40 pages because that was all that the Finance and Expenditure Committee got through on the first day. We took it in stages right through the process until as Shane Jones has said we began to run out of time. 
This bill of course is about private savings for retirement and encouraging that goal. I have not been convinced by some of the macro-level advice to the select committee which attempted to demonstrate that New Zealand does not have a retirement savings problem. In my view that was a very very simplistic analysis from both a quantitative and a qualitative perception. It is true that the Crown has been saving a great deal of money in recent times. It is also true that the Earthquake Commission has billions of dollars invested that the Accident Compensation Corporation has billions of dollars invested and that we have a growing New Zealand Superannuation Fund all of which come into the definition at the macro-level of national savings. But the people who advocate that there is no problem fail to realise or fail to explain that those funds are all already effectively earmarked to cover future liabilities and that none of them is available at all to assist with accumulating private savings by New Zealanders in order to subsidise and assist their standard of living in retirement. We are aiming to provide something over and above New Zealand superannuation through the KiwiSaver scheme. 
A similar comment applies to housing. It may be true that on a per household per capita level we now have a lot of money saved in housing but that is cold comfort to those who are renting and sadly they are an increasing proportion of New Zealanders. One of the things this bill also endeavours to contribute to is reversing that trend and going back to New Zealand again being in a world-leading position in terms of the number of family-owned homes. Ideally United Future would like to see every family living in their own home for that of course provides enormous security in itself in retirement. 
 I will now talk about the quality of the savings investment. Evidence was presented to the Finance and Expenditure Committee today by the big fund managers of this country that we are actually moving backwards right now. People are withdrawing more money from managed funds right now than they are putting in. Where is that money going? It is going partly into housing—mainly into an increased number of rental properties—and also would you believe it into second-tier finance company bonds or in other words junk bonds. That is tragic for New Zealand. The whole situation we are in at the moment from a savings perspective is simply tragic. We are actually on the road not to prosperity but to poverty. The KiwiSaver Bill is the first step in beginning to change that around for the benefit of New Zealanders and for their future. 
The second step comes in the form of the tax bill now before the Finance and Expenditure Committee. It will revolutionise the taxation framework around savings particularly those through managed funds or what are now called portfolio investment entities. It is my hope and dream that those two things together will see New Zealanders begin to save. I do not think we are any different from anyone else in the world. All we need are the right climate the right incentives and the right signals from the Government and I think we will see savings happen. 
I would like to ask members today to think about this. Let us hope that in 10 years’ time private savings by New Zealanders may be let us say $100 billion. That is not impossible. Australia has just broken through the $1 trillion mark. That is the route we need to go down so that we have capital markets here that are robust and enable companies to begin to expand both domestically and internationally. As I have said earlier I hope that the level of private homeownership will also again begin to increase so that we reverse the negative trend that we have got ourselves into and go back to the ideal of a home for every family. 
There are a few things about the KiwiSaver scheme and United Future’s contribution to it that I would like to put on the record. The first thing I say is that in our bid to the Government leading up to the 2005 Budget we asked: “in the event that a workplace savings scheme is introduced that provision be made to allow holders of workplace savings schemes to make a withdrawal for the purpose of purchasing a home.” I am delighted that the Government saw fit to adopt that United Future suggestion and that this bill enables people to withdraw their funds to buy a first home. In addition of course the Government has enhanced that ability by offering a subsidy of up to $5000 per saver—$10000 for a couple—to people who qualify for it. The subsidy will be relatively small in its scope but nevertheless it will also make a very very worthwhile contribution. 
That leads me directly to the mortgage diversion proposal which has also now wisely been adopted by the Government. John Key said it had emerged as if by magic; Shane Jones said it had emerged from the ether. Well I learn things about my colleagues every day because I did not know John Key was a practitioner of the black arts and I did not know Shane Jones was an anaesthetist. But I want to tell members that it was simply the magic of common sense and it was also common sense that broke through the ether and just simply brought to the Government a well-thought-through scheme which it wisely accepted. Someone once said the only things that really surprise most politicians are straightforward dealings. It is as simple as that. There was no magic and no ether—nothing of that sort—but just straightforward dealings and a good idea whose time had arrived. Of course it will enable people to put aside money for their retirement and at the same time assist them to reduce their mortgage liabilities. And we all know that most New Zealand families today are mortgaged to the eyeballs and beyond. We need to see some real good change come about regarding that. 
The third thing I would like to mention which was in our 2005 Budget bid to the Government in relation to the introduction of workplace savings schemes is that we asked the Government to remove employee contributions from the assessment of taxable income—in other words to make employee contributions tax free. The Government has not adopted that suggestion but it has as we now know decided to make employer contributions tax free. I think that is also a marvellous enhancement to KiwiSaver. Some people seem to think—and I have seen a couple of comments in the media—this will somehow put pressure on employers to for example settle wage demands partly through an increase in wages and partly through a contribution to KiwiSaver. I have no doubt that will happen and I think it is an excellent thing to happen. Furthermore I expect that employers will be enthusiastic about it because the fact is that being a good employer is good business. That is how one builds a strong business—one values one’s staff. They are a business’s most important asset. 
I will tell the House without any fear of contradiction that I know enough about New Zealand business to know that a lot of employees will go to employers and ask them to please put 1 percent of their pay rise into the KiwiSaver scheme because they will get that tax free whereas if the employer gives it to them in salary they will have to pay tax on it at the rate of 19.5c 33c or 39c in the dollar. And most employers will say yes because they want their staff to be happy and highly motivated to be involved in the business. It is at no cost to the employer—none whatsoever; there is no compliance cost—nothing. Of course employers will do that and of course it will boost the amount going into KiwiSaver. I have no doubt about that. 
Finally I want to express my disappointment in National’s position. I was quite shocked when John Key told the House yesterday that the continuance of KiwiSaver could not be guaranteed if there is a change of Government in 2008—that National does not guarantee continuing the KiwiSaver scheme. I am really disappointed in that because I had hoped that for once we might have a non-partisan approach on this. I just hope and pray that National will not go down the road that Muldoon went down in 1975 because I regard that as probably the single worst decision by any Government during my lifetime. I think New Zealand has paid a huge price for it and I again express the hope that National will rethink its position and give New Zealanders an assurance that this new scheme will continue indefinitely. If National wants to enhance it when it is on the Treasury benches—if it gets there—we are prepared to help it to do that. But National should not for goodness’ sake make this issue into a political football.