Celebrating 25 Years of Scoop
Bank highlights savings problem
Hon Dr Michael Cullen
Minister of Finance
8 March 2007 Media Statement
Bank highlights savings problem
The wisdom of KiwiSaver has been underlined by the Reserve Bank's monetary policy statement today, which describes household dissaving as "unsustainable", Finance Minister Michael Cullen said.
"This is a wake-up call for all New Zealanders," said Dr Cullen. "We must do better at saving if we are to have sustainable economic growth without the inflationary pressures we currently suffer."
The Reserve Bank estimates that currently the household savings rate is negative 17.5 per cent. In other words, for every dollar a household earns, it is spending $1.17.
"This is clearly not sustainable because the more we are in debt as a nation, the more we are dependent on foreign capital, the more vulnerable we are to economic shocks.
"The government is doing its bit – it is a net saver if the assets of the New Zealand Superannuation Fund are considered.
"And on 1 July all working New Zealanders will have a chance to develop better long term savings habits thanks to KiwiSaver. We are encouraging workers to forego some spending today so they can have a brighter tomorrow.
"But where are National's solutions? It voted against KiwiSaver. Its only answer to inflation is to slash government spending. Bill English wants to return to the failed policies of the early 1990s.
"His solution really means fewer doctors and nurses, no pay rises for our key civil servants like teachers and police. He's quite prepared to sacrifice a quality public service.
"We have the business tax package to encourage greater competitiveness and innovation among our exporters. The Reserve Bank notes the measures will boost business investment.
"However, Bill English wants to cut that too.
"Once again it starkly exposes the divide between the co-leaders on fiscal policy. Bill English wants tighter fiscal policy, which means bigger surpluses. John Key wants looser fiscal policy with big tax cuts and big spending promises.
"Will the real finance spokesperson please stand up," Dr Cullen concluded.
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