Chauvel Charles: Taxation (KiwiSaver and Company Tax RateAmendments) Bill — Second Reading In Committee Third Reading 
Chauvel Charles: Taxation (KiwiSaver and Company Tax RateAmendments) Bill — Second Reading In Committee Third Reading 
[Volume:639;Page:9458] 
CHARLES CHAUVEL (Labour) 
: 
 I want to speak just briefly in support of the bill and to take some real-world examples in response to some of the issues that have been raised by previous speakers. I am looking at the second page of this morning’s  
Dominion Post 
 where a couple of calculations really give the lie to some of the sillier claims we have just heard. 
There is the example of a single person on the minimum wage earning $11.25 an hour or $450 a week. If that person decides to join KiwiSaver on 1 July he or she will have to put away $18 a week. We have heard from polls and surveys of people’s savings habits and intentions that people really want to be able to save and they really want incentives to join this scheme. I think that many New Zealanders even if they are on modest incomes will look at that requirement of $18 a week look at the incentives that now exist—or that will exist when this legislation passes—and will think they will make a real effort to put that sort of money aside. Now if that person puts $18 a week aside which is the minimum contribution—4 percent of gross salary—then the Government would add under this legislation another $18. From 1 April next year the employer will pay $4.50 a week. Then stepping up the scheme by 2011 the employer would have to match the contributions up to 4 percent. Assuming that the person retired in 35 years there would be $150000 in the bank which is enough to earn about $8000 a year in interest in today’s dollars. That assumes a very conservative rate of return on the funds of about 2.5 percent. 
It seems to me that there will probably be quite a high uptake of the scheme if those figures are correct. People have been crying out for some assistance and some incentivisation to help them to save. That will now exist and it is the answer to the question of what the kiwifruit worker in Kerikeri or the school bus driver would do—questions that John Carter raised earlier. That is a living example of the figures those people will have to think about in order to join the scheme and of the benefits that they will get. 
There is another example: that of a single person on the average wage. If a 50-year-old who earns a gross salary of $45000 contributes 8 percent which is about $70 a week by the time that person retires at 65 there will be accumulated funds of $110000 which is enough to generate $8000 a year during retirement over and above the superannuation contribution. Now that is real money. It is the sort of fund that people have been wanting to build up—the sort of nest egg that ordinary Kiwis would like to have but that they have not had the assistance or wherewithal to put together. I am very proud that this legislation and the accompanying package will allow that to happen. 
This scheme will be good not only for the average Kiwi worker but for the country. If members look at the projection of the funds that will be built up over time they will see that KiwiSaver funds under management by about 2030 again assuming a very conservative rate of return—2.5 percent—will be $100 billion. Now when members look at that and at the Cullen fund they will start to see a strategic reserve for the first time being built up in this country and will understand the importance of saving. Of course we know about the wider economic benefits of having a decent savings scheme and a decent capital fund such as this. We will have stronger and deeper capital markets leading to a lower cost of capital over time and easier access to capital for New Zealand businesses. 
The scheme will also reduce the pressure of inflation. We know we have a current account problem. Well finally we have the opportunity not only to help ordinary Kiwis but also to build up the sorts of strategic reserves that our neighbours across the Tasman whom we have heard about in speeches today did some time ago. It was interesting to hear the model from across the Tasman being idolised by David Carter the previous speaker. I wonder whether that means he wants the Australian model of a 9 percent payroll tax on employers rather than the sort of scheme that has been designed for New Zealand and will be presented through this legislation. 
Like the rest of this Budget this is good legislation for ordinary Kiwis for the country and for all of us.