NOW I BEGIN TO UNDERSTAND why David Cunliffe was able to keep on smiling through all the bad news. What he knew, and we didn’t, was that David Parker had come up with a weapon to win the September war.
Labour’s “upgrade” of New Zealand monetary policy represents the single most important – and original – contribution to social democratic economics in more than 40 years. Parker has provided the crucial mechanism which unlocks and enables all the other policy mechanisms Labour has announced.
The party has been promising to rebalance the New Zealand economy to the point where the exchange rate falls and the manufacturing export sector resumes the vital capital investment needed to generate the high-skill, high-wage jobs that Labour is counting on to boost living standards maintain a steady rate of economic growth. The problem was that, until the release of Parker’s new monetary policy, it was by no means clear how this could be done.
With the Reserve Bank ratcheting up the Official Cash Rate (OCR) every six weeks for the foreseeable future, the NZ Dollar was bound to remain seriously overvalued. Capital investment in manufacturing continues to be high-risk, and jobs are not being created in anything like the numbers required. Barring the addition of some major new economic lever, it was difficult to see how simply swapping National for Labour in September could alter these circumstances in any meaningful way.
Well, that’s exactly what Parker did. On 29 April Labour’s finance spokesperson announced the creation of a major new economic lever – the Variable Savings Rate (VSR). In Parker’s own words:
“We propose an important new tool – varying the employee contribution rate for work based savings. TheVariable Savings Rate mechanism – or VSR – would allow the raising or lowering of savings rates, rather than interest rates, to reduce or boost local consumption.”
Reducing and boosting local consumption are, of course, the core objectives of Keynesian economics. With a small miracle, Parker has figured out a way to smuggle these imperatives into that most monetarist of statutes – the Reserve Bank Act.
It’s brilliant!
The key purpose of the Reserve Bank Act was to take from the hands of politicians all responsibility for determining the pace of economic activity. By requiring the Reserve Bank Governor to focus on the rate of inflation, to the exclusion of all other economic variables, the Act made any extended period of growth – especially in wages – impossible.
As soon as there is an upsurge in job growth and wages begin to rise the Reserve Bank, in its legally mandated quest for “price stability”, raises the Official Cash Rate (OCR). This, in turn, raises the price of borrowing (i.e. we all pay more for our mortgage, credit cards, hire purchase agreements and car loans). Growth is slowed, unemployment rises, real wages fall and … all is well.
Except that all is very far from well. By raising New Zealand interest rates the Reserve Bank Governor is, in effect, hanging out a big sign saying: “Buy Your NZ Dollars Here! Excellent Return On Investment Guaranteed!” Not surprisingly the value of the NZ Dollar gets bid up to levels which sends the “return” on New Zealand’s exports into the toilet.
Not that we, the consumers, care. After all, an overvalued NZ Dollar means cheaper imports. All those flat-screen TVs and designer-label clothes. All those European cars and the petrol needed to run them. All those wonderful overseas holidays. They all cost less. For those with money it is pure bliss. For those without money the banks have credit cards.
The result? Massive debt.
It has been more than 40 years since New Zealand earned enough from its export sales to pay for the cost of its imports and the interest on its borrowings. Bluntly, we’ve been living off the national credit card ever since the first year of Norman Kirk’s government. Sure, countries have bigger credit limits than people do, but even for sovereign debtors a day comes when the bank says “No more.” If you doubt that, just ask Greece.
Classical Keynesian economists will tell you that in times of recession the most important thing a government can do is SPEND. And, in times of rapid economic growth, those same economists will tell governments to SAVE. There are two ways a government can save. The first is to cut back on the jobs and services it provides for its people. The second is to withdraw money from circulation by raising taxes on income and consumption.
Economically-speaking, it’s a pretty simple prescription. Politically-speaking, however, it’s an extremely difficult sell – especially in a democracy. Everybody loves a government that spends, but hardly anybody loves a government that cuts jobs and services and/or raises taxes.
Actually, not quite everybody likes a government that spends. Spendthrift governments tend to put too much money into circulation and that, in turn, leads to inflation. It’s really good news if you’ve just raised a huge mortgage to buy a house or set up a business because, essentially, you’re able to pay off your loan with dollars that are worth less than they were when you borrowed them. But if you make your money out of money (like a bank, or a widow living off an annuity) inflation is a killer. When you inherited your late husband’s $100,000 of savings it was enough to buy a decent house. Factor in ten years of high inflation and it’s barely enough to buy a decent car.
That’s why we have a Reserve Bank Act. It put an end to spendthrift governments by making inflation Public Enemy No. 1 and by taking the responsibility for beating it out of politicians’ hands. Wonderful for banks and widows, not so hot for first home buyers and small business people.
And it is here (at last!) that we come back to the talented Mr Parker. By making Kiwisaver compulsory he will ensure that just about everybody will become a work-based saver. This, in turn, will allow the Reserve Bank Governor a choice of instruments when it comes to taking the heat (i.e. inflation) out of the economy. No longer will he or she be restricted to the blunt instrument of raising interest rates (with all its malign effects on the exchange rate and our export industries). If Labour is elected in September, the Governor will be able to seek from the Government an increase in the sum workers must transfer to their Kiwisaver accounts.
Rather than have their money siphoned out of the New Zealand economy by the big Aussie banks, New Zealanders will see their money shifted into savings – where it will be waiting for them when they turn 65.
Yes, it’s Keynesianism, Jim, but not as we know it. The VSR is not a tax, but it has the same effect as a tax. It is also not an initiative that can be taken by the Minister of Finance – but only by the Reserve Bank Governor. In other words the whole process retains its spurious claim to being “apolitical”.
The neoliberals have been hoisted by their own petard. Keynesian aims are achieved by monetarist means.
Let’s hear it for the talented Mr Parker!
Notice how the news this evening (on TV) is trying DESPERATELY to make this an anti-Chinese thing……though they also mentioned (but less so) India.
This is NOT an anti Asian thing. It’s an anti foreigners buying up NZ (and moving here) at the GREAT EXPENSES of the vast majority of NZ’s citizens.
Also why are we allowing so much immigration? When was this last discussed in any great detail? How large should NZ population grow to?…..AND In what time frame?
Why have immigration when we have SERIOUS unemployment and a housing shortage? It’s purely and simply INSANE………unless you’re a wealthy land owner, desperate to sell to anyone at a great profit and don’t care a one iota about NZ………they can just move to another country (with their HUGE wealth) when we’ve destroyed this one !!!!!
………I accept humanitarian immigration and the ODD special case of specialist etc. But that is NOT what is REMOTELY happening at present.
This IS an important NZ issue and WE ARE SUFFERING due to a lack of discussion about immigration.
Ask the citizens if they’re happy and I VERY MUCH DOUBT they will be, which is probably why (the anti NZ) National party isn’t asking us and why they’re using smear tactics when others do raise the point.
Forming a govt with Winnie and putting that portfolio in his hot little hands will surely take care of that circumstance once and for all I would say..
Winnie is actually saying a lot of things that traditional Labour voters want to hear, and has done consistently for years, no wonder a big chunk of ex-Labour supporters now vote for him. Try to get past the labels that he has been smeared with over the years.
Yes Mr Parker is articulating Labours economic message very well and more like him are needed but I like to think a Labour/NZ First/Green alliance would be formidable – Peters has the vision that Labour are too scared to admit to and if he gets too hot for the fem/gay/pc wing they can at least say it’s not our policy. He also has a spine, I’m still not convinced that the Labour party has.
Lack of discussion about immigration? Lol. Wake up and smell the flowers, NZ youth is not up to standard. College kids would rather get drunk and laid rather than have their nose buried in books like asians and indians do. You really have no idea how your country is supported by immigration do you. So close minded, pitiful.
What a completely ridiculous statement, Asian and Indian kids are just as much into getting drunk and laid as NZ kids they often just hide it better from their parents due to unrealistic expectations from the family.
Hmmm, missing out, are you, Rahul? 😉
Nice one Frank – it’s possibly your most insightful piece of work yet!
Bullshit!
My kids are all hard workers and tertiary educated. So they’re in debt and are treated like filth by NZ employer’s who work them like they are robots pay them fuck all ( so they can’t save) and never offer permanent employment( unless they are are apprentices and cost nothing).
Yeah they all got drunk intheir teens, so what ? .
They didn’t kill themselves by driving drunk. But unlike their Asian peers( who cheat at exams and NEVER mix in NZ society ) they can repair their own cars, build their own computers and renovate their own properties, even sew their own clothes. In fact pretty much turn their hand to any task. Asians unless raised in Sth Africa or another predominately European culture can’t do that. No we need Nz for New Zealanders . We DO NOT need any more whining poms and dishonest LAZY Asians.
I agree with almost everything you said. The last sentence should have been left off.
What an ignorant baseless load of misinformed garbage.
Go back to Newstalk ZB, they’d love this.
Ostrich!
That was intended at Rahul
Yes they are we just have policies that force them to look elsewhere for their careers.
Immigration is part of the reason why so many NZ graduates leave.
Rahul are you saying we should live in a society where college kids don’t get laid? That would actually be a miserable place to live in. The idea that working 10-12 hours a day is an ethic or is even productive is a foolish pathology.
So your idea of a perfect life is to study hard, work hard, make lots of money, live a narrow insular life and die completely unfulfilled? Go for it if that’s what you want, the problem I have with your attitude is that me and my kids will be forced to compete with you just to survive and miss out on what it really means to be a NZer.
There is nothing stopping the opposition parties from bringing this up. What is The Greens and Labour’s position on immigration?
Gosman, you’re been told before; don’t be so fucking lazy. As Tim Selwyn told you before, we’re not here to hold your hand.
If you’re interested, go google it.
I suspect the question was rhetorical?
I suspect some people here have trouble understanding what that means.
The NACT Party are basically a branch of the Wall St Brotherhood and the Tea Party.
The Greens and Labour dont say anything otherwise the NACT Party and MSM will accuse themof being racist better to say nothing and try and win the coming election on solid economic policy something the NACT Party know little about.
Are you stating The Greens and Labour lack the courage of their convictions to come out and state what they really think on immigration?
I am dipping a single toe tentatively into the sea of hope.
Nice to hear you sounding so positive Mr Trotter, I had stopped reading you because you were glum and right, and now you sound joyous and still right, I hope.
Regards
Yeah, this policy is OK, but it’s effectiveness will depend on Labour’s major economic policies.
If this is one of Labour’s major economic policies, then all we have is a tinkering of trickle down.
What about the potential negative affect on lower income families, Chris? If anybody found themselves in my dear old mother’s situation from twenty years ago, and was suddenly forced to save 3-9% of her income, they’d go under.
It’s a strange world when National -pretends- to care and Labour doesn’t even bother with the charade.
It will be gradually introduced starting at 1% for the lowest income..so where is the negative??? …or have I listened wrong
Hmmm. Im not opposed to compulsory savings but KiwiSaver? WOW – the last Bush Administration could only dream of such a scheme – the compulsory privatisation of social security.
Absolutely, it is privatisation of something we should all be entitled to in our older years. It should be paid by taxes end of story. This dam government could give tax cuts to the rich and has gone on borrowing huge amounts. I am not at all in favour of this being compulsory, people should at least be able to choose what to do. I think you will find that even 1% is not possible for lots and lots of people. 50% of Auckland’s population have an income of less than $25,000! Some kids will be going without breakfast adding to those who already don’t have breakfast.
Yeah. And I’m not in favour of taxes and high interest rates or a high kiwi dollar. I refuse to pay them.
I concur 100%, Chris. And as Meconsm wrote above, this is one of your better pieces thus far.
Mind you, to be fair, you’ve got excellent material to work with here. David Parker’s Variable Savings Rate is a very clever piece of policy which is so elegantly simple but so wonderfully clever at the same time. The question I keep asking is why no one has thought of it before!
It’s intriguing that thus far the only criticism seems to be based on Labour-bashing rather than any serious analysis.
Although it’s interesting to note that Federated Farmers (http://www.fedfarm.org.nz/publications/media-releases/article.asp?id=1454#.U2AJXFfNuM8) and the Northern Employers and Manufacturers’ Association are open minded about it (http://www.radionz.co.nz/news/political/242861/labour-makes-monetary-policy-change) – which is all anyone can ask, really.
For the Nats – they are panicking. The common spin is that Labour’s policy is “confused”. Not exactly a resounding rebuttal of the Variable Savings Rate – but expect their Party strategists to get into high gear very shortly.
The funniest thing though, is the number of right wingers who seem to prefer their cash to be siphoned off to overseas banks – rather than invested and returned to them. I know right-wingers are blinkered and see the world in Black & White terms but this is a whole new level of dogmatic dumbness even for them.
If Labour can come up with more initiatives like this – September 20th will see a new government.
Hardly simple. It is reasonably complex for example who will be exempted from the compulsory savings rate and how will you enforce this amongst people like the self employed.
Gosman, if you’d rather see the OCR raised and pay higher interest rates, rather than into a Kiwisaver account which you will be paid back upon retirement, I suggest your dogma is getting in the way of your financial common sense.
That is a separate matter entirely to the question of whether this is a simple solution or not. You have already been adised that claiming savings is better than interest payments is also not as simple as you make out. in short there is a number of issues still to work through on this.
“It’s intriguing that thus far the only criticism seems to be based on Labour-bashing rather than any serious analysis.”
On the contrary, people like John Minto and Karol at the Standard have talked about how the policy might have merit but will hurt lower income families. That’s not Labour-bashing.
Indeed, Disraeli – low income families will have to be compensated in some way. My suggestions thus far,
1. Making the first $30,000 tax free
2. Removing gst from all food
3. Implement a UBI
The cost of this can be off-set by implementing,
A. A capital gains tax
B. A financial transactions tax
C. Raising the top tax rate to pre-2009 levels
But the Kiwisaver Variable Savings Rate (VSR) will go a long way to the current RBNZ policy which dampens economic growth; destroys jobs; and suppresses wage-growth.
On the flip-side, New Zealand can finally correct the horrendous mistake it made in 1975 when the country elected Rob Muldoon, and the Kirk Governments super scheme was ditched. That was an economic blunder which we’ve never recovered from and which allowed the neo-liberal “revolution” an excuse to plunder our assets.
There are factors to consider with Parker’s plan, but I sincerely hope the Left does not dismiss it out of hand.
That is something the Right is doing for us.
I absolutely support most of your ideas. They would be a great combination.
But I don’t see Labour campaigning on them. And I don’t think lower income families should be hit with compulsory Kiwisaver and rising contribution rates without this type of compensation.
Labour is doing it in the wrong order.
I think Labour should take GST off fresh fruit and vegetables and staples. How hard can that be really? Ok we might get into issues of definition but you know fresh fruit and verges can’t be that hard to work out. Make the decision and allow some variation where necessary. Can’t always be hard and fast, black and white.
I noticed that The Dom Post editorial today considered this new monetary policy was a potential election game changer. First thing I’ve seen in the Dom that was even half sympathetic to Labour in weeks. What’s that noise? It’s the right squirming in discomfort in their Italian leather office chairs.
That would be Mr Cullen, not Mr Parker:
http://www.interest.co.nz/kiwisaver/62443/could-universal-kiwisaver-be-used-monetary-policy-means-former-finance-minister-cull
Cullen posed a quiz question.
Parker found a workable solution.
No, Parker didn’t. He has regurgitated Cullen’s suggestion with a ‘we will investigate’ prefix.
Citation please. Or you’ve made it up. Like so much of your National-ACT disinformation.
I listened to Morning Report yesterday and this morning regarding these new monetary policies. Guyon Espiner was trying his hardest to make all his interviewees say how stupid these policies were. Espiner got increasingly huffy and angry when most of them actually voiced support rather than condemnation of Labour’s policies. He probably won’t be getting his bonus from the National Party this week.
I question why it is portrayed as an anti-Asian thing as the Real Estate Institute Surveys tell us that it is Australians buying up NZ Real Estate.
The Neo-Liberal Experiment has been an abject failure here in NZ over the past 30 years, Jolly Roger Douglas the architect of the schemes merely handed over State Assets to the Rich Listers for chickenfeed and now we as New Zealanders are paying for it in spades with Aussie Banks stripping record profits out of New Zealand. Thanks Roger and the Reserve Bank.
Complete nonsense Chris, adding the ability of the central bank to recommend variable savings rates (ie raising kiwisaver contributions during booms and lowering them durin busts) still allows politicians to say no – which they are likely to do in all but the most dire of circumstances.
While technically the policy is very good combing fiscal as well as monetary tools to control inflation – which would mean interest rates wouldn’t have to rise so far to hold back demand, politically its a no goer.
Try telling the public – the economy is booming, job prospects are good and christmas is coming up – but we have decided to raise your taxes, cut spending and or raise your compulsary savings to take some heat out of the economy – dog tucker.
Funny how some people are mad-keen to see their hard-earned cash go to banks (never to be seen again), rather than to their Kiwisaver accounts (which will be paid out upon retirement).
Have those people taken leave of their senses? Since when were we ever concerned at the welfare of (mainly) Aussie-owned banking corporations?!
Sometimes, I despair for this country.
Meantime, the latest news from “Stuff”;
“Fears rate rises will hit builders ”
http://www.stuff.co.nz/business/industries/9994720/Fears-rate-rises-will-hit-builders
Let no one be under any illusion here; higher OCR/interest rates will hit homeowners and many renters.
It will also dampen growth and job creation. It will also hit family incomes.
We’ve been through this boom-and-bust cycle so many times, and I’ve commented on it ad nauseum, that I wonder at the short-term memory of my compatriots.
We have to be more clever than this. The Nats are opposed to any reforms by Labour (remember their opposition to Kiwisaver? WFF? ) because it suits the businesses they represent.
This time, though, Labour’s bold plan benefits business as well as ordinary New Zealanders. The fact the Nats and other rightwingers oppose it should tell us it’s a move in the right direction.
This will hardly impact Bank profits at all. Bank profits are mainly impacted by the margin between the cost of capital and the lending. This doesn’t really impact that at all.
Gosman that’s a pretty lame piece of trolling there, it’s just a pointless nit pick at an irrelevant little strawman – which is a sign of just how clever the policy suggestion. True right beleivers such as yourself are really struggling to make any mud stick at all.
“This time, though, Labour’s bold plan benefits business as well as ordinary New Zealanders.”
Wrong! This plan has little or no chance of working, in which case ordinary NZ’ers will pay both higher interest rates and be having more of their disposable income syphoned off by the Govt. into Kiwisaver.
It’s a dog.
Which is what happens now except that the increased taxes go, primarily, to the private banks. That’s what the raising the OCR does.
It hasn’t stopped yet either – we’ve been paying that ambulant lipid vesicle Gerrymander Brownlee a grand a day for the last three years apparently just to glom distressed property in Christchurch.
How did we reach a point where our erstwhile representatives imagine they can get away with manifesting such gross corruption? Sun Tzu would lay the blame on the system of punishments and rewards, and given that Gerald has been handsomely rewarded, it really looks like it’s time the public was a bit more generous with punishments.
A Labour/Green remedy for Gerry would be forcible liposuction of all that taxpayer funded subcutaneous fat. It would hurt, but it would be good for him, and rendered into (carbon neutral) biodiesel it would be sufficient to save a couple of dozen minke whales. Everybody wins, especially Christchurch, who really need someone to get off their absolutely massive bottom and start fixing things.
Stuart I just love your description of Brownlee and what you’d like to see done to him. A fantastic piece of language! Can we include Meteria Turei in that as well?
Meteria is actually pretty busy IV, and Christchurch isn’t drowning under the weight of her lethargy, but I’m sure if you asked her nicely she could find you a good biodiesel operator with heavy lifting gear that’ll handle Gerry.
By the way, re Chris’s comment;
Chris is 100% on the nail. We ignore his assessment at our peril.
This is what John Key had to say on New Zealander’s high personal debt on February 18, 2013;
Source: PM John Key says record high NZ$ doesn’t help exporters, but is making NZ more competitive and making New Zealanders wealthier
– http://www.interest.co.nz/currencies/63182/pm-john-key-says-record-high-nz-doesnt-help-exporters-making-nz-more-competitive-an
This demonstrates how far Key will twist negative economic indicators to paint a problem in a positive light.
Since when was massive private debt and living beyond our means any indication that “consumers are much wealtheir” [sic]?!
This is the sort of mendacity that our Prime Minister engages in to hide the social and economic problems (I refuse to call them “issues”) we face.
Make no mistake; a higher OCR will push up the value of the Kiwi Dollar. As such, imports will be cheaper – but exporters will be harmed, costing jobs.
Any feeling of “wealth”, created by cheaper imports, is an illusion – a $186 billion illusion…
http://www.stuff.co.nz/business/money/9513472/Interest-increases-with-OCR
When John Key calls cheap imports a sign of “wealth”, there is something seriously wrong with this picture.
The value of the $ is what it is. The less Politicians have to do with setting it;s value the better. Exporters are doing just fine thanks, and ordinary NZ’ers can afford a lifestyle they only dreamed about even a decade ago.
The really big problem with the NZ$ is that the private profiteers are setting the value for their own enrichment and that is causing NZ to become poor. The value of the NZ$ (or any currency) should not be set by speculators but as a function of international trade.
?!?!
Are you for real?!
What planet are you living on???
Jeezus, you make Nth Korean propagandists look like they are sticklers for 100% truth and accuracy!
The guys understanding of economics borders on bufoonery the guy is a fraud.
Sadly the Heralds usual suspect Fran O’Sullivan has poured scorn on this even though its sensible and innovative. No surprises there and it must be of concern to National if they are dedicating column space to it. However Brian Fallow is somewhat more balanced so to me if the someone from the Herald is positive then this policy must have genuine legs.
Two things from this. National know its damned good and will be desperately playing catch up to plagiarise it but in half arsed and completely ineffective, but heavily spun version, simply to make it look like they are doing something. Why, because they didn’t have the brains to think of it in the first place.
Secondly with each RBNZ interest rate rise that is potentially eating into Nationals ratings we must brace ourselves for their next big diversionary announcement. Shane Jones came to the party last time helping out but what or who next?
Fran O’Sullivan doesn’t pour scorn on it at all. She stated it is at least worthy of consideration. She did point out that it is not as effective tool as the Labour party would like to make out it is. That seems accurate.
Fran O’Sullivans typical National Good Labour Bad Senario, no critical political or economic analysis to support her arguments Tory Tabloid Trash.
Don’t kid yourself. A government would have a huge amount of difficulty even getting close to the amount of spending that the private banks encourage with their creation of money through lending.
Making money out of money is the supreme example of being a bludger. And, of course, the widow has welfare support and so doesn’t really need the annuity. The fact that the welfare support isn’t enough is a function of capitalism that gives too much to the already rich as Piketty just spent 700 odd pages and years of research proving (its that bludging bit again).
It may have put the end to spendthrift governments but it massively increased how much we’re spending – note the housing bubble. What it did was to shift the responsibility of the spending from the government to the private sector and the private sector went to town on our credit card.
Great. Take money off people who already can’t manage week to week. Then make them struggle with inadequate income for another two years after they hit 65. Talented? Maybe, but which class is being served by these talents?
If Muldoon han not scraped big Norms super scheme,just think of the money we would have now as a country.
Long overdue a Government stepping in and taking some responsibility for monetry control,rather than the let the market decide.Also good that it is a positive policy that the Nats cannot hang their hat on.
About $278 billion, Finbar. Enough to pay for our own investments and not have to rely on parasitic investors from Berlin, Beijing, or Boston…
http://www.stuff.co.nz/business/money/9916584/Compulsory-super-would-be-worth-278b
Thing is, we’ve never needed a cash stockpile to pay for our own investments. That’s what the government’s ability to create money is for.
Chris, to say that this proposed change is “brilliant” is a bit of a stretch.
At best it will enable the RB to make small changes around the margins and at worst it may be a case of ‘unintended consequences’, which I detail below.
Where I might agree with you is that this is actually an interesting policy statement that can, at last, be taken seriously. It is good politics although I doubt the average voter is going to be highly motivated to change their vote because of a detail change in the Reserve Bank Act.
If I was a Labour voter my prime concern would be a new law *forcing* me to donate my savings to a pack of bankers & investment fund managers. (Their chequered & corrupt history in NZ is known to all so I won’t bother to reiterate.)
My secondary concern would be my inability to budget because the RB could arbitrarily decide to increase my donation to the aforsaid bankers without due notice.
My third concern would be the requirement that the RB had to ask the government of the day permission to change the kiwisaver donation. Thus undermining the independence of the RB.
Lastly I would suspect that allowing a group of politicians and civil servants prior knowledge of the RBs intentions would open a Pandora’s Box of potential for market manipulation by their friends and relatives…
Otherwise fine!
Surprised that it’s taken so long for this policy to come out. Bryan Gould outlined the case for a move away from pure monetarism in the Democracy Sham. The damage a higher currency deals to the productive exporting segment of the economy has been outlined elsewhere.
Economics 101 outlines both monetary and fiscal policy levers to control inflation; is it political expediency or something more malicious that sees taxes discarded (no one likes high taxes) whereas interest rate rises (a tax on debt) seems to be fine. It’s just a simple hop from using taxes (again political expediency might dictate that floating tax rate rise be used to pay down foreign debt to allay the public’s fears about an increase in the slosh pit) to actual just withdrawing people’s own money, but leaving it aside for them in future. Everyone’s a winner.
Couple of concerns on it – previously I would have thought the financial burden of controlling inflation would have fallen more heavily on the home owning middle classes (with working class renters dodging this portion of it) this will now be transferred more heavily onto working classes through enforced savings.
I’ve started to read the official policy announcement but haven’t go to compliance / implementation yet. Has it been said how this would be implemented, at present the Reserve Bank delivers its edicts to the banks, and they pass on this requirement to their borrowers, will this new policy require employers to continue to change their employee contributions in-line with what would previously have been OCR changes.
If so there are going to be some unhappy accounts folk out there, and the RBNZ will have effectively outsourced the administration portion of these changes going forward.
…”will this new policy require employers to continue to change their employee contributions in-line with what would previously have been OCR changes. ”
No. Parker has confirmed that the VSR would apply only to employee contributions to KiwiSaver – not to employer contributions, and not to self-employed people and employers who choose to pay voluntarily into their own KiwiSaver accounts.
It is also worth noting that Labour’s commitment to the VSR is actually only luke-warm. The policy release states clearly that the VSR is ‘to be investigated’. In other words they have released a policy they are not committed to and haven’t investigated.
@ Anonymous User IV –
No. Parker has confirmed that the VSR would apply only to employee contributions to KiwiSaver – not to employer contributions, and not to self-employed people and employers who choose to pay voluntarily into their own KiwiSaver accounts.
Citation please.
You are noted for cherry picking; taking comments out of context, and outright lying. In fact, you should have a job with the National Party – your disinformation is legendary.
Rubbish. You’re spinning more of your National-ACT bullshit yet again. Show us where Labour’s committment is “actually only luke-warm”.
Like most of your crap, I’m picking you’ve made it up.
A policy that would mean more of our money would come back to us rather going to Aussie banks in this economy speculators game – brilliant!
Reminds me of this clever ad about everyone getting excited because the banks had made yet another record profit! Sorry for sharing a link to an ad but it is still funny nonetheless!
http://www.youtube.com/watch?v=ItemDqh1C6E
And as more detail emerges, even more problems emerge with it.
According to Simon Collins…”More than 300,000 business owners and self-employed people would be exempted from Labour’s new policy to make workers pay more into KiwiSaver to dampen inflation in boom times. Labour finance spokesman David Parker confirmed yesterday that his variable compulsory saving proposal would apply only to employee contributions to KiwiSaver – not to employer contributions, and not to self-employed people and employers who choose to pay voluntarily into their own KiwiSaver accounts.”
So Labour have devised an idea, that they won’t even commit to implement, that they won’t be compelled to implement even if the RB recommend it, that tells everyone not only that they have to save but where they have to save, that at the same time has so many apparent exemptions that it is rendered useless as a tool for controlling inflation.
Is this yet another gift for National?
You and Simon Collins have missed out one salient point, Anonymous User IV; if Kiwisaver becomes compulsory then everyone – including employers and self-employed will be paying into it.
Capiche?
Agree totally Chris – wow what a revolutionary idea! Just like 1988 all over again – if you had said to most people in 1988 Labour is going to bring in a new Act that will get interest rates down to single figures and inflation under 2% within the next 2-3 years, people would have thought you were crazy! Once again it is Labour who comes up with a brilliant idea. Singapore have a scheme that is probably the closest and look how wealthy they are? National are all over the show on this – they really don’t know how to respond…I guess that’s what happens eventually after borrowing $60 billion, the banks say no and you run out of ideas!
Having a high dollar decimates our exporters and screws our domestic manufacturers here in NZ, Key and the Reserve Bank Governor dont give a rats arse, thank God for the Canterbury Eartquake and MILK.
Key has done his dash he has maxed out NZ’s overdraft and does not know what to do next all he can do is bag Labour and play the fear game typical Bankster.
I’ll go one further: Forced Kiwisaver contributions will be bad for a large number of us.
Anyone with a mortgage would almost certainly be better off focussing on paying down their debt rather than handing their hard earning money to the banks to make a bet on the stock market.
A dollar used to pay off a mortgage is effectively a zero risk investment paying a good return, whereas a dollar going to Kiwisaver carries considerable risk, incurs a management fee and has to make a return better than the bank lending rate.
So is David Parker financially illiterate or is he in the pocket of the banks?
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