Gosche Mark: Questions for Oral Answer — Questions to Ministers 
Gosche Mark: Questions for Oral Answer — Questions to Ministers 
[Volume:633;Page:4889] 
4.  
Hon MARK GOSCHE (Labour—Maungakiekie) 
 to the  
Minister of Finance 
: What reports if any has he received on the reaction to the changes to the KiwiSaver scheme he announced last week? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I have received a large number of overwhelmingly positive responses. According to Jonathan Eriksen they transform KiwiSaver into a state of the art elegant simple yet effective retirement savings scheme. They have been welcomed by the New Zealand Exchange and its head by the insurance and savings institute and by “even the ranks of Tuscany” in the forms of the  
Dominion Post  
and the  
New Zealand Herald 
 which “could scarce forebear to cheer”. 
Hon Mark Gosche 
: What reports has he seen on the inflationary impact of the changes to KiwiSaver announced last week? 
Hon Dr MICHAEL CULLEN 
: I have seen a report—a somewhat isolated and unusual one—arguing that increasing savings will be inflationary and could lead to greater consumer spending. That report comes from John Key who now seems to have joined the Jacqui Dean school of economics. 
Chris Tremain 
: Does the Minister agree with the report in Friday’s  
New Zealand Herald  
from Craig Macalister tax director for the Institute of Chartered Accountants which stated that KiwiSaver was receiving favourable treatment over other savings schemes; if so what message does that send to the hundreds of thousands of hard-working Kiwis who are saving for their retirement already? 
Hon Dr MICHAEL CULLEN 
: That of course applies only when there is already an employer contribution which in most cases is above the level that qualifies under the KiwiSaver scheme for the favourable tax treatment. 
R Doug Woolerton 
: Can we take the Government’s willingness to use tax incentives within the KiwiSaver scheme as an indication that it will look to extend the use of tax incentives within its policy programme; if not why not? 
Hon Dr MICHAEL CULLEN 
: I was told that the first time would be the hardest and the second might be easier in that respect. 
Tariana Turia 
: Tena koutou katoa. What reports has the Minister received from Te Pukenga Here Tikanga Mahi the Public Service Association regarding the retirement income report that noted that 30 to 40 percent of New Zealanders with low incomes were unlikely to have disposable incomes to save for retirement; does he agree therefore that KiwiSaver unfairly discriminates against a group of New Zealanders a high proportion of whom are Maori? 
Hon Dr MICHAEL CULLEN 
: It is important to understand what the purpose of retirement savings is. Fundamentally the purpose of retirement savings is to smooth out one’s lifetime income—in other words to produce in retirement a reasonable replacement rate in comparison to one’s income during a working life. For people who are on very low incomes New Zealand superannuation represents a reasonable replacement rate. That is why it is very important to maintain a strong consensus in favour of the current provisions around New Zealand superannuation and to secure the funding for that which of course is what we have done with the New Zealand Superannuation Fund. 
Te Ururoa Flavell 
: What reports has the Minister received from the independent actuary Kelvin Prisk that the $1000 initial incentive for KiwiSaver is too low compared with the tax incentives in many jurisdictions? 
Hon Dr MICHAEL CULLEN 
: On the one hand I have been advised that it is so large that everyone will rush in just to get it then will have to continue to contribute for a year to KiwiSaver; on the other hand I have been told that it is not big enough. I think it depends to a large extent on what one’s income is. To the kind of lofty people who write those kinds of reports $1000 is not very much. For a lot of people in the target group for KiwiSaver that as a sweetener to get into the scheme is actually a significant increase particularly spread over a lifetime as that money accumulates. 
Craig Foss 
: Why did the Minister reject the unanimous opinion formed after months of consideration of the Finance and Expenditure Committee—which includes members of the Labour Party and United Future—and of senior Inland Revenue Department and Ministry of Social Development officials as stated in the commentary on the KiwiSaver Bill not to proceed at this time with a mortgage diversion facility? 
Hon Dr MICHAEL CULLEN 
: There were of course objections from some of the banking sector which is why the scheme originally did not include that. [ 
Interruption 
] It was not in the bill in the first place; Dr Nick Smith should read the first reading version of the bill. It was a decision taken by the Government. However certainly United Future was keen to see that provision included in the bill but more important I was always keen to provide a mechanism whereby people could stay in KiwiSaver while repaying their mortgage as opposed to withdrawing completely from the scheme while they repaid their mortgage. I think the new version which is different from that originally proposed will achieve that kind of balance. 
Chris Tremain 
: I seek leave to table the article in the  
New Zealand Herald  
dated Friday 25 August 2006 in which Craig Macalister points out that KiwiSaver is receiving favourable treatment over other savings plans. 
Madam SPEAKER 
: Leave is sought to table that document. Is there any objection? There is objection.