Minister Comments on NZIER Saving Report Incorrect

Minister’s Comments on NZIER Saving Report Incorrect

The New Zealand Business Roundtable said today that comments by finance minister Michael Cullen on the report on household saving by the New Zealand Institute of Economic Research reflected a misunderstanding of relevant data.

Business Roundtable executive director Roger Kerr said that Dr Cullen’s claim that New Zealanders “spend more than we earn” was simply untrue.  For many years net national saving has been consistently positive – New Zealanders overall consume less than they earn.  Aggregate saving (including saving by business and government) has been reasonably stable since 2000.  Dr Cullen appeared to be confusing national savings with the current account balance which reflects other factors, notably investment.

Moreover, nothing in Dr Cullen’s statement supported his assertion in the 2007 budget that the household saving trend was “a movement into negative household saving.”  Experts on saving had long pointed out that this claim was implausible – it would mean the value of New Zealanders’ net household assets was actually declining.  The NZIER report indicates that on more reliable data household saving has been positive and rising.

In his statement, Dr Cullen also argued that there is “a real need to lessen consumption to ease inflationary pressures”.  However, the government is not leading by example.  Central government consumption spending is up 23 percent in the past 7 years, and in the last 2 years it has risen by 8.6 percent whereas private consumption spending has gone up by just 6.6 percent.  Total Crown spending now amounts to around $36,000 per New Zealand household.

Mr Kerr added that citing the uptake of KiwiSaver is not a valid response to the NZIER report’s criticisms of the scheme.  As the report noted, the very large taxpayer subsidies associated with KiwiSaver will clearly encourage the switching of savings from other savings vehicles, but the net impact on savings, if any, is unclear.

The study was an initiative proposed by the NZIER in 2006 and co-funded equally by its budget for public good projects and the Business Roundtable.  “We had no influence on its findings”, Mr Kerr said.

“Public debate on savings needs to be based on sound analysis.  Academic and other commentators have long disputed claims about New Zealanders’ poor savings performance.  The NZIER study adds weight to their views and provides a basis for journalists and others to promote a more informed public debate”, Mr Kerr concluded.

ENDS

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