How do you define success?

August 16th, 2010 at 3:00 pm by David Farrar

The Herald reports:

Labour leader Phil Goff said yesterday that – which workers can opt out of – had been a great success, but had had little impact on overall net savings.

Well then, how can you claim it was a great success? Was that not the entire purpose of KiwiSaver?

This was what many people said at the time – KiwiSaver will not increase overall savings – it will just lead to people moving them into KiwiSaver due to the subsidies.

“We absolutely have to increase our savings as a country. If we want to own our own future we’ve got to have the money to invest,” he told TV3’s The Nation.

“We’re looking to have a universal KiwiSaver programme. Now how we do that, the details of how we do that we’re still working through.”

So because KiwiSaver has failed to increase the overall savings rate of the nation, we will make it compulsory?

Here’s what will over time impact the savings rate – lowering the tax rates on earning and investing, and increasing the tax rate on consumption – the very stuff just done by the Government but opposed by Labour.

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30 Responses to “How do you define success?”

  1. backster (2,184 comments) says:

    ““We absolutely have to increase our savings as a country. If we want to own our own future we’ve got to have the money to invest,” he told TV3′s The Nation.”

    If the various funds invest say 90% of the money overseas, and the Government borrows 250 million a week from overseas in part to provide the subsidies what kind of future does that help us to own?

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  2. Jibbering Gibbon (198 comments) says:

    “…lowering the tax rates on earning and investing, and increasing the tax rate on consumption – the very stuff just done by the Government but opposed by Labour.”

    Is this entirely true? If so, what are figures. In a rough impression sort of way it seems earnings have stalled (as usual) and taxes have been reshuffled. Yes personal tax rates have dropped, but GST is set to increase, ACC increases, ETS increases on the way. What’s the overall gain (other than ideological)?

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  3. RightNow (6,995 comments) says:

    If it has to be done, it has to be done fair. A levy, taken out of the pay packet along with the ACC levy, at something like 5%. Out of every pay packet, beneficiaries included. No subsidies, no wealth redistribution.
    Campaign on that Phil.

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  4. Murray (8,847 comments) says:

    Simply repeating “we have to increase savings” is not a plan. Too many people simply are not left with enough of their own money to save anything.

    Untill thats changes its all just noise and trying to poit at australia as a model only reinforces it. They make more money than we do, they save more. Who would have thought?

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  5. ben (2,384 comments) says:

    John Key was on Breakfast this morning saying a) most borrowing is done by the private sector, and b) he is concerned that we are borrowing from foreigners.

    So let me get this straight. People who demonstrably do not care where the money is coming from are borrowing money in their own names and their own personal risk. And Key is going to step in on their behalf and force everybody around them to save so that the borrowing can be done locally.

    What kind of evil is this? What is the problem Key imagines he is solving here? Has it not occurred to Key that borrowers are borrowing precisely because that suits their personal circumstances? Does he really think he can make things better from his desk in Wellington?

    Now there are two ways to increase saving. One is to raise the real interest rate, either via rate hikes or tax cuts, and pay for it. The other is to leave interest rates where they are and just force, ultimately at gun point, people to save and not consume a share of their own incomes. Compulsory saving = nationalisation of workers.

    Remember the only reason the is an issue is because the government has made promises on superannuation it can’t keep. Rather than put its own books in order, it will just write a law and then send out the police if you do not comply.

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  6. lastmanstanding (1,300 comments) says:

    I am one of the three people who admit to voting for Luigis complusory super scheme back in 1998. The reason was I looked at the Aussie example as saw what they created and like most other Kiwis I have the greatest desire to save for my retirement but too many other things get in the way.

    So I need to have retirement savings taken from me so I dont spend them in the sweet shop.

    Its like Taxes. I know I have to pay some taxes for all the rights reasons.

    But HEH You let me pay these voluntarily and well……………………………… you probably wont see them.

    Its called human nature for all those anal retentives who will scoff at my admittance.

    WE babyboomers have had the best economic and social condition that any generation has had in NZ. I could list all the benefits for those whose eyes and ears are painted on but I wont.

    WE now need to ensure we give Gen X and Y a reasonable break by not imposing too much on them for our retirement.

    Alas as regards medicare we will impose on them but hell at least lets try and be a bit independent instead of the usual Kiwi mantra

    The GUmints gotta do it

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  7. Jibbering Gibbon (198 comments) says:

    “…Rather than put its own books in order, it will just write a law and then send out the police if you do not comply.

    For the love of god, won’t somebody vote ACT?

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  8. Le Grande Fromage (145 comments) says:

    Maybe Phil can drive around the streets on his hard man motorbike brandishing his 20″ Stihl, scaring people into saving.

    “Save some money or I will cut you bad. Just like I cut off Chris Cater from the Labour party…oh wait”

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  9. ben (2,384 comments) says:

    Jibbering Gibbon: re: ACT – the party whose leader is driving the super city? Defender of liberty and freedom? Please.

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  10. ben (2,384 comments) says:

    Grant Scobie at Treasury showed, I believe, that saving is actually hard to measure and, calculated differently to what Stats calls saving, NZ doesn’t have a savings problem at all. I haven’t read his paper, but add his findings to the list of “what problem?”

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  11. OTGO (559 comments) says:

    Ben – my memory is not as good as it used to be. Is Rodney “driving the Super City” or was he appointed the minister by John Key to oversee the formation of the Super City? Big difference.

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  12. ben (2,384 comments) says:

    OTGO – i don’t know. He’s the guy who’s been telling anyone who will listen for nearly two years what a great idea increased centralisation of control is. Ok – somebody had to do it, but I’ll question anybody’s commitment to liberty, whoever they are, when they’re out there saying that.

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  13. Murray (8,847 comments) says:

    If it gets rid of Andy Williams I’m for it.

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  14. Lucia Maria (2,609 comments) says:

    Here’s what will over time impact the savings rate – lowering the tax rates on earning and investing, and increasing the tax rate on consumption – the very stuff just done by the Government but opposed by Labour.

    Absolutely, totally agree David. I am so dead-set against compulsory super, having experienced it’s negative side in Australia, that this compulsory super idea being floated is really, really annoying me. And I thought I couldn’t get any more annoyed at National than I already am.

    Why not ask the people via referendum at the next election if we want compulsory super OR a raised retirement age. I know what I’d vote for.

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  15. Origen (23 comments) says:

    “increasing the tax rate on consumption”

    How is increasing GST an incentive to save?

    People don’t save for no reason – they save today so they can consume in future. If I observe a higher consumption tax today and save more as a result, I’ll still end up paying the higher rate of GST in the future when I spend my accumulated savings…

    Maybe you can be the first one to explain this to me David.

    [DPF: If people save more today, then during the 30 years or so that money is invested, it can be used as capital etc]

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  16. ben (2,384 comments) says:

    So anyway – coming back to Phil Goff’s brilliant idea of forcing everyone who didn’t choose to save to do so anyway – let’s think about that. Who are the people compulsion is going to turn into savers? That will be the people who are now working but who are so against the idea of saving that even a large subsidy and opt out can’t convince them. So what, other than demonstrably force people to do something against their will, is Phil Goff trying to achieve. Does he really think it appropriate that the will of these people is appropriately sacrificed to the collective in this way, in the name of not relying for savings on the imaginary threat foreigners impose? A product of his own government’s recklessness?

    There is only one reason we are borrowing from foreigners, and that is because they are willing to save and then lend us their money for less in interest than Kiwis need before saving.

    And why pick on saving? New Zealand relies on foreigners for just about everything else in the economy, to our massive, massive benefit. After all the good foreign goods and services deliver, why suddenly get nervous about saving? And why saving? Why not petrol, or t shirts or Boeing aircraft?

    Of course, the answer is “because that’s what the focus groups tell us” but actually what is the problem? I can’t tell the difference between National and Labour any more. Both are populist, anti-rational, socialist non-leaders.

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  17. OTGO (559 comments) says:

    Ben, its just that I went to a breakfast last Tuesday where JK was the guest speaker and he was pumping the Super City big time. Seems that Hide is the focus for any negativity surrounding the as yet unproven Super City. I’ve only lived in AKL for 23 years (god it seems like a lifetime already) and the place is a leaderless mess so I for one am looking forward to a change.

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  18. ben (2,384 comments) says:

    OTGO – well I’ll just add JK to my list of people who pretend to like liberty. No doubt Hide operates under instructions from Key.

    A visiting academic was in town recently (Peter Holle) and he pointed to the Canadian supercity experience from the 1980s and 1990s. These were argued for on the same basis as Auckland – cost savings, co-ordination benefits, but these benefits have failed to materialise. What has materialised is sharp increases in spending, which Holle argued was a product of the increased ease by which the newly-centralised city could be captured and held up by unions. I like to think the loss of Tiebout competition might have had something to do with it. I would not expect any real change from the Supercity.

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  19. Jeremy Harris (319 comments) says:

    I fully support Labour on this one, if superannuation saving isn’t made compulsary soon I’m off to Perth…

    When I was in Aussie in Feb they were talking about how troubling it was that they were only going to have their baby boomers covering 60% of their own retirement – the response – the stupid mining tax (instead of just putting up the percentages), the point is they give a shit… Here our baby boomers are going to cover 12% of their own retirement meaning I’m going to have far, far higher taxes in a couple of decades or our elderly people are going to be much more destitute than theirs… Either way hard to justify to my future children not making the shift across…

    This is one area where National fails massively in comparison to Labour, what planet is JK living on where he thinks we can keep 66% at 65 and richer countries like the US, UK, Canda and Aus have all signalled or confirmed rises to 67 and 68..?

    “Here’s what will over time impact the savings rate – lowering the tax rates on earning and investing, and increasing the tax rate on consumption – the very stuff just done by the Government but opposed by Labour.”

    Keep dreaming DPF, as we know only 3% of people will save, invest and re-invest till they reach financial freedom (and 1% of these people will have inherited their freedom), 47% will acquire a few assets by 65, and 50% will have exactly the same amount of money (or less) at 65 than they did 18, Kiwisaver needs to be compulsary for these people, the 50%, who’s only response to having $10 in their pocket is to get a HP or secure a loan or buy some fast food, they couldn’t care less what the tax rates on investing are they are never going to save a dime no matter what…

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  20. fatman43us (166 comments) says:

    It amazes me. We set a compulsory savings target for people to pay 2% of wages, and add a further 2% from their employers if they have them. We then make this voluntary. We then express concern when this becomes the savings standard!

    To change this we need to remove the incentives to use the Social Welfare systems. Reduce the benefits to the levels of a minimalist existence, and term limit them. Ensure then they are only used for ambulance cases.

    Use the savings from this to incentivise people to carry their own insurances and savings plans themselves. Teach them to care for themselves financially as we do in other ways, and then stand back and allow it to work. There will be tradgedy, because there are those who cannot and will not learn, but gradually the market will reassert itself. And bleaters like Sue bradford will be silent because they now HAVE to find and hold a job like the rest of us.

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  21. Jeremy Harris (319 comments) says:

    @fatman, I don’t think you can term limit benefits when we have a reserve banking system that ensures a minimum of 3% unemployment… What is fair and possible is eliminating minimum wages and introducing a negative income tax…

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  22. Viking2 (11,553 comments) says:

    Frankly, I think you all have the donkey by the arse end. The issue in NZ is not saving, that’s a consequence of so many other issues. (cause begets effect OK).

    This today which some of you may have seen.

    Gap between rich and poor stays the same

    Monday, 16, Aug, 2010 2:58PM

    The gap between rich and poor hasn’t changed since National took government.

    That’s according to the latest Household Incomes in New Zealand report, released today.

    It shows the median household income grew by just under nine percent between 2007 and 2009.

    Now while thats true I actually thought for a moment that this was about the wage gap between Australia and NZ.

    Its true that since the early 70 ‘s when our wages surpassed the Aussie’s, we have slowly gone further and further behind. Not because we don’t want to save but because they have grown their economy while ours has stagnated.
    That is totally down to repressive legislation and controls and constraints on business, poor quality financial controls and the attitude that Govt is the best business.

    We have become obsessed with legislation about rights and what we can and can’t do on a daily basis. We have ground the crap from our productive sector and have imposed costs such as the RMA on everything we do.
    Just heard on the telly that Aussie doesn’t even have a human rights legislation. (Thanks MR Palmer now fuck off to Gaza you prick).

    How the hell we are supposed to raise our savings when we can’t raise our incomes and therefore our standard of living God only knows. Just taking more from those left earning ain’t going to do it.

    Daily I am confronted with young people looking for jobs. Demoralized, taken to the cleaners by polytechs and universities, Govt. loans for education et al, when all they want to do is work and contribute.
    When will we see some leadership from any party that will get NZ working again and remove the road blocks and remove the social welfare once that’s done.
    All these goons want to do is remove the welfare and hope the problem will solve itself.
    Its business we want. Jobs come from business, money comes from business, savings come from earnings.
    Its just not that hard.

    And a reminder that while the super fund have some 80% of our money offshore they are not the only Govt. organization to do that. Count in ACC,earthquake and War damage, many council funds,various trusts that were left over form various banks etc. Is there any funds left in NZ. Wonder why we all pay so much interest.
    Add our dividends etc that are repatriated out and there is no money left in NZ.

    Remind me again why we don’t save. Doh.

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  23. CharlieBrown (1,027 comments) says:

    Heres a simple suggestion to help increase savings into a super scheme – Get rid of the BS where people have to invest a percentage into their Kiwisaver schemes, allow them to choose to invest whatever they choose, whether it be 1% or 100 dollars a week.

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  24. Origen (23 comments) says:

    “[DPF: If people save more today, then during the 30 years or so that money is invested, it can be used as capital etc]”

    Think you misread my point. Of course it can be used as capital.

    That doesn’t answer the question of why, as you assert, there is an incentive to save more after a GST increase. You’ll still have to pay GST on your accumulated savings when you come to spend it.

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  25. Bullitt (141 comments) says:

    I will begin saving for my retirement as soon as I pay off a mortgage. Till then theres no way i can beat that return after tax.

    No matter their other policies i will never vote for any party which advocates compulsory super.

    Kiwisaver is the biggest have put on the public in recent memory. How many financially illiterate people think theyll retire to live like a millionare just because of kiwisaver? Kiwisaver will have made it when Mary Holm tells people to invest more than they need to get the govt money. How many people who would vote for compulsory super would do so because of the govt bribes, not like theyll be necessary once everyone is forced to put THEIR money in.

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  26. bchapman (649 comments) says:

    Whats better, paying off your mortgage (6-8% AFTER tax) or trying to get returns from super shares, bonds, fixed interest) before having to pay your advisor, the funds manager and then the tax man (yes we tax super returns) who all get their mitts on your hard earned savings.

    On top of that there is the threat of a share market wipeout which many US 401K holders suffered in 2009.

    Best way to boost savings is to increase wages.

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  27. Rich Prick (1,720 comments) says:

    Phil Goff speaking on the subject of success …. HAHAHAHAHAHA.

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  28. Luc Hansen (4,573 comments) says:

    Let’s give Labour it’s due credit.

    Twice it has instituted superannuation plans that have been either eliminated or gutted by National. Both were individualised pension plans, and that aspect provides motivation to contribute. I was in my twenties when the Douglas scheme started, and although my refund from Muldoon was handy for building my garage and laying my concrete driveway for my first house, I would much rather the scheme had been allowed to continue and flourish.

    Never mind.

    Kiwisaver is in the same boat – intended to build to a realistic 4 + 4 contribution rate, similar to Australia’s, it’s been halved already by National and I suspect JK’s idea of compulsory super does not include employer contributions (but I could be wrong).

    And what the guts here? If Goff admits that Kiwisaver hasn’t improved the savings rate, why does JK think his scheme will do the trick? And if it is no more than 8% contribution then why not just stick with the original Kiwisaver?

    The Douglas scheme, the Winston First scheme and Kiwisaver all had one very important attribute – individual accounts.

    Anything other than that is just taxation. Income tax.

    Just by the by, a recent LSE (London School of Economics) report showed that the average life of national savings funds, aka the Cullen Fund, is about seven years. I predict that if National is reelected, the Cullen fund will be gone by the end of their second term. I’m not saying that is necessarily bad, but as usual this government is sending very mixed and muddled signals.

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  29. MikeNZ (3,234 comments) says:

    Good point .
    So on an individual level we need individual accounts and on a macro level a cullen fund that isn’t interfered with and goes for 40-50 years will have real clout?

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  30. Jeremy Harris (319 comments) says:

    @Mike, look at Temasek and the other Singaporean government account, the Norwegian resources fund and the Alaskan State Fund, all have been going for at least 10 years and have massive holdings securing retirement and giving their top economic minds excellent investing experience and credibility…

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