Dom Post on Planet Peters

October 24th, 2013 at 1:00 pm by David Farrar

The Dom Post editorial:

Things are simple on Planet Winston Peters. There, all that is necessary for something to happen is for Mr Peters to declare it to be so.

Hence, delivering inhabitants of Planet Peters a higher rate of return on their retirement savings is simply a matter of him promising a “world class model unsurpassed by anything in the world”. Protecting those savings from sudden market drops is an equally simple matter of guaranteeing the capital invested in the scheme. No downside, no need for individuals to monitor the performance of their investments. Just leave it all to Mr Peters. In fact, vote for Mr Peters and you can have your cake and eat it too.

Unfortunately, Planet Earth orbits a different sun from Planet Peters. In this universe, the value of investments is determined not by political decree but by events beyond the control of individuals and governments. The price someone is prepared to pay for a hectare of land in Dannevirke, 500 grams of butter in Paris or a shareholding in Air New Zealand is influenced by the weather in southern Europe six months ago, the progress of negotiations over the debt ceiling in the United States, the political situation in China and a thousand and one other imponderables.

Mr Peters, for all his claims to omniscience, does not control those things. Markets go up and markets go down. What was a solid investment last week is a poor investment this week and vice versa.

The only way Mr Peters can guarantee the capital invested in any particular fund is to require those who have not invested in it to foot the bill if its managers misjudge the market. The only way he can guarantee a superior return for his “KiwiFund”, especially when he proposes to handicap its performance by directing where it invest its funds – “substantially in New Zealand” – is by pumping public moneys into it when the inevitable happens and other funds outperform it.

The editorial is spot on. Peters is proposing that taxpayers underwrite $20 billion dollars or more of investments.

As I said earlier this week, Peters should set up his own KiwiSaver Fund and lets see how many people actually trust him enough to invest in it.

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Winston should set up his own KiwiSaver fund

October 21st, 2013 at 12:00 pm by David Farrar

Hamish Rutherford at Stuff reports:

Winston Peters is proposing to establish a new state-owned KiwiSaver fund, saying private schemes were a “pot of gold” for providers, but not savers.

Speaking at the NZ First conference in Christchurch today, Peters said KiwiSaver providers had extracted excessive fees from savers. Since it was formed five years ago, providers had “sucked off $325 million from the people paying into the scheme”.

According to Peters, an “independent source” had told him that over the next 30 years, the amount of fees would climb to $22 billion.

“KiwiSaver is a pot of gold – for the providers – not the savers.”

Peters today proposed that a scheme on the same footing at the New Zealand Superannuation Fund, called KiwiFund, which would be government guaranteed.

Return would be “a lot higher” than they were in private providers, Peters said.

“Our plan is to change KiwiSaver so that it is a truly Government backed and managed retirement fund. 

I’m in Carmel Fisher’s KiwiSaver Fund and very happy with the returns thank you.

If Winston thinks KiwiSaver Funds are not delivering a good enough return, then there is a simple solution.

Winston should set up his own KiwiSaver Fund. This would allow all those who believe in the financial genius of Winston to invest their life savings with him, and get this guaranteed higher return he talks of.

The Herald reports that Winston’s policy may cause problems with Labour:

New Zealand First has put a potential roadblock between itself and a post-election coalition deal with Labour by setting a bottom line on retirement savings that Labour is lukewarm on at best.

Leader Winston Peters told NZ First’s annual conference in Christchurch yesterday that the party wanted to effectively nationalise KiwiSaver by putting it “on the same footing as the New Zealand Super Fund”.

So many politicians wanting to nationalise so many things – it is like being back in the 1970s.

The KiwiFund policy was “most definitely” a bottom line for any post-election coalition talks next year.

But while Labour leader David Cunliffe said his party was happy to look at the policy in more detail, “we don’t think that the KiwiSaver industry is fundamentally broken.

Some sanity from Labour. Yay.

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Minimum wage and KiwiSaver

August 22nd, 2013 at 11:00 am by David Farrar

Stuff reports:

An employment case that could effectively raise the minimum wage for workers enrolled in KiwiSaver is being “watched closely” by employers, a lawyer says.

The case, which was heard in the Court of Appeal yesterday and could mean an extra $450 a year for those on the minimum wage, was described as of “considerable public interest” by one of three judges assigned to make a final ruling.

Lower Hutt caregivers Vasivasi Faitala and Dalrene Goff took employer TerraNova Homes & Care to court last year, arguing it was unfair that they had to pay their own and TerraNova’s KiwiSaver contributions under their employment agreement.

At the time, the women earned the minimum wage of $13.50 an hour, made up of $13.24 plus 26c for TerraNova’s KiwiSaver contributions.

Most employers pay the contributions on top of an employee’s salary, but some favour a “total remuneration” approach that includes their contribution, on the grounds that it treats all staff equally.

Although that approach was legal, Ms Faitala and Ms Goff argued it was a breach of the Minimum Wage Act, and the Employment Court agreed, ordering TerraNova to pay any compulsory contributions in addition to the workers’ gross salaries.

TerraNova’s lawyer, Elizabeth Coats, told the court yesterday that although the KiwiSaver Act said compensation should be paid on top of a salary, there was a provisional clause that allowed it to be included if both parties agreed.

It will be interesting to see how the Court of Appeal rules. For my 2c I think the employees are in the right, and likely to win.

While you can agree for KiwiSaver to be based on total remuneration, and hence deducted from what would be your gross salary, I don’t think such an agreement can over-ride the minimum wage requirement.

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Competing for the most lunatic policy

April 22nd, 2013 at 9:00 am by David Farrar

Just as I thought you couldn’t get a crazier policy that Labour and Greens on energy, Winston has upped the stakes and is basically proposing to steal money from all our retirement accounts.

NBR reports:

New Zealand First is proposing the Cullen Fund and Kiwisaver funds be used to re-nationalise Mighty River Power and possibly Contact Energy. …

But speaking on TV3’s “The Nation”, Mr Peters said the Government had the ability to access the Cullen Fund. 

You’ve got the ability to access Kiwi Saver in the short term,” he said.

He said buying back Mighty Rover Power would be bottom line for NZ First support for any Government.

You’ve also got the ability to internationally access the market and borrow, which as you know according to Treasury, because this is a high yielding asset, that makes economic sense to do that, he said.

Mr Peters said to use Kiwisaver funds the Government would need to change the investment rules.

“You could quite easily do that in the short term …

This shows what happens when politicians start competing for the most extreme policy in order to win votes.

KiwiSaver funds do not belong to the Government. They are the private property of those who have one. My KiwiSaver fund is just as much my private property as my bank account, my shares, my house, my car etc.

Winston has said that he wants to forcibly legislate to force anyone with a private KiwiSaver account to purchase back Contact Energy and MRP shares on behalf of the Crown.

That is outrageous. This is like saying we will force every homeowner to take on an additional mortgage, so the Government can build a new office block.

If you elect a Government that treats your private retirement savings as a play-thing for the Government to take over, then the boundaries between public and private will be shattered for ever.

These crazy policies will see us become a banana republic. Who the hell would invest in New Zealand? Why would I keep my money in a KiwiSaver account if Winston and his allies plan to take control of it after the election?

3 News reported last week:

JBWere has sent a strong message that it and other investors will flee the New Zealand stock market if the state intervention signalled by Labour and the Greens this week comes to pass.

“The steps the Labour/Greens are suggesting, if enacted, are significant enough for JBWere to consider a reduced allocation to the local share market,” the firm which oversees $1 billion of client funds in the New Zealand share market said.

“We doubt we would be alone in making this judgment.”

Of course they won’t be alone. We live in a globalised world where capital and labour are highly mobile. The combined policies of Labour, Greens and NZ First will send investment fleeing. And it is investment that creates jobs.

Labour and Greens want to nationalise the electricity industry. NZ First want to nationalise KiwiSaver. How confident are you that is where they’ll stop?

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Hypocrisy

April 2nd, 2013 at 1:00 pm by David Farrar

Radio NZ reports:

Budgeting services and opposition parties say struggling workers will be hit hard by increased costs that came into effect on 1 April.

Minimum KiwiSaver contributions rose from 2% to 3% …

The Labour and Green parties say some workers already struggling financially may choose to opt out of KiwiSaver rather than make the higher payments.

Again, such hypocrisy. Labour not only bitterly complained about National dropping the minimum contribution from 4% to 2%, they also have a policy of making KiwiSaver compulsory so struggling workers get no choice about contributing!

Would be nice if the media reported their policies, not just their releases!

 

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Trying to have your cake and eat it too!

March 27th, 2013 at 10:00 am by David Farrar

David Cunliffe blogs at Red Alert:

Next week thousands upon thousands of New Zealanders will wake up to a cut in their take-home pay because of policy decisions by the National/United Future government.

From 1 April 2013 the minimum KiwiSaver contribution is increasing from 2% to 3%, while the Student Loan compulsory repayment jumps a whopping 20% to 12 cents in every dollar earned over the repayment threshold.

Just a second. A Labour MP is complaining that KiwiSaver contributions are going from 2% to 3%?

Under Labour the minimum contributions were 4%, and they complained bitterly when national reduced it to 2%.

Now Labour stands for a gradual move to universal, employment-based KiwiSaver contributions over time, because that will grow the economy and secure savers in retirement.

And while KiwiSaver is currently voluntary, meaning those who can’t afford a drop in the take home pay don’t have to join, Labour propose to make it compulsory to force every worked to take a drop in their take home pay (to use DC’s rhetoric).

There are valid arguments for and against compulsory KiwiSaver, but it is a bit rich to criticise a KiwiSaver contribution increase as being a cut to take home pay, when your policy is to make it compulsory!

But with unemployment today at record levels, and with so many families only just getting by, it’s crucial that changes which hit people in the pocket are well-signalled and well-understood before they take effect.

Umm, the policy was announced well over 12 months ago. And if you are unemployed you are not contributing a portion of your salary to KiwiSaver.

Unless Labour is proposing that KiwiSaver not just be made compulsory for employees, but also for beneficiaries?

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Cullen on KiwiSaver and superannuation

December 12th, 2012 at 1:00 pm by David Farrar

Vernon Small reports:

The architect of KiwiSaver, former finance minister Sir Michael Cullen, is proposing a revamp of the scheme to help cut the long-term costs of superannuation to the Government.

Under his plan KiwiSaver would be made compulsory in 2016 and contributions would rise to 4 per cent for employees and 4 per cent for employers, followed by further increases to 6 per cent or 8 per cent for employers.

But half of a saver’s nest egg would have to be used to buy an annuity.

If that provided an income lower than the current superannuation formula, the state would top it up to the guaranteed retirement income.

“In effect this means that for many people the shift from state funding to private funding would result in half of their retirement KiwiSaver savings being income-tested away,” Sir Michael said.

This approach has some considerable merit. We have not adjusted superannuation policy o take account of KiwiSaver. I recall when KiwiSaver came in, the projections were that someone who earned the average wage would receive in retirement a higher income from KiwiSaver and NZ Super combined that they did when working. This is clearly not sustainable.

Labour’s proposal to lift the age from 65 to 67, while a step in the right direction, is just tinkering. What Cullen proposes would make a huge difference to the long-term financial sustainability of retirement savings.

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10% KiwiSaver

June 18th, 2012 at 1:00 pm by David Farrar

Stuff reports:

 Politicians are divided over a suggestion by the Financial Services Council for an increase in KiwiSaver contributions to 10 per cent of incomes to help pay for Superannuation.

The council, which represents investment and life insurance companies, says raising KiwiSaver contributions by 1 per cent a year will enable people to still retire at 65, despite the growing costs of the scheme because of the ageing population.

There may be merit in an increase in KiwiSave contributions, but it is important to note the not inconsiderable self-interest the FSC has in the proposal. It would see KiwiSaver funds and revenue for their members triple.

Chief executive Peter Neilson said New Zealanders surveyed by the council said they could not live on the current Super payment of $349 a week.

Expanding KiwiSaver would enable them to use that saving to pay for their retirement at 65 until the future eligibility age, of perhaps 67, kicked in.

It would also enable people to double the amount they received in Super.

The trade off is not that simple. First of all, we do need to look at retirements savings as a whole. You should not treat superannuation and KiwiSaver separately. What no politicians have done is look at whether the current floor for super should be lower in future – in recognition of the level of private savings in KiwiSaver.

For someone on the average wage, they would under this proposal have a higher net income in retirement than they would have had while working. Now that is actually nuts, as when you are working you have the greater expenses, and are raising a family etc.

This is why we need a first principles review – what is the minimum and what is the desirable level of retirement savings, and how much should come from public super, from workplace super and from private super.

NZ First leader Winston Peters said the council’s call was “hopeless”.

“We offered people a straight tax-break so they could painlessly save.”

The crisis in Super was “manufactured” by certain elements in the finance sector, he said.

The council’s idea was the first step in privatising Super, Mr Peters said, but would not elaborate how.

Now this is ironic, as Winston championed the 1997 referendum which would have essentially privatised superannuation entirely.

It was fair that over 65-year-olds who were still working received the pension.

“For decades we all believed in a universal scheme whereby if you worked hard and you saved, you should not be punished.”

Why should Winston get public superannuation while an MP? That’s outrageous. And when he leaves again, he’ll get his gold plated parliamentary pension plus his public super.

Public superannuation should be used to assist those who do not have adequate savings of their own. It should not be used to give Winston an extra $15,000 a year income.

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Kiwisaver returns

June 7th, 2012 at 1:00 pm by David Farrar

The Herald reports:

A retirement policy expert says KiwiSaver providers should not be allowed to publish investment performance returns based on gross figures because they are “meaningless” and cannot be easily compared.

Finance Minister Bill English announced as part of the Budget that all KiwiSaver providers will have to produce quarterly reports from April including information on investment performance, fees and assets.

A report gives an example of how the information would be set out, placing the gross return percentage at the top of a table, which would also include dollar figures on the gross return based on a $10,000 investment, as well as dollar figures for the tax and fees paid and an explanation of how much in the hand investors would get.

But Retirement Policy and Research Centre director Michael Littlewood said publicity that emphasised gross returns should not be permitted or, if published, they should be given a lower prominence over the net return.

“Gross returns are almost meaningless and are certainly not comparable across providers,” Littlewood said.

“Providers will naturally want to emphasise larger numbers, even if they are not meaningful.”

There is a lot of crappy info about KiwiSaver returns – especially from the self-appointed champion of transparency, and commentator on everything (you know who I mean).

Net returns are harder to do, but should be the default information provided. One can show them for various tax rates if necessary.

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Does KiwiSaver increase savings?

December 19th, 2011 at 10:00 am by David Farrar

Stuff reports:

KiwiSaver has been only “modestly successful” at getting poorer people to save for their retirement, a new Treasury report says, warning that the scheme “may in fact reduce national savings”.

The working paper on the initial impact of the scheme on retirement savings argues that, because of the subsidies going to those who would have adequately saved anyway, the government may be paying out $13,000 a year for every person at whom KiwiSaver is aimed.

That does not surprise me. Those better off and already saving are the ones most likely to take advantage of 2:1 and 3:1 subsidies for saving.

The Treasury report said as many as 93 per cent of those in KiwiSaver were outside the target group, so the vast majority of the public cost of the savings scheme leaked away from those who may be poor in retirement.

A brave Labour Party would perhaps say we do not believe in middle class welfare where huge tax subsidies go to those who don’t need it, and we’ll restrict savings subsidies to low income NZers only.

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Labour’s wage reduction policy

October 27th, 2011 at 4:12 pm by David Farrar

The other part of Labour’s policy is to make KiwiSaver compulsory and lift the employer contribution from 3% to 7%. This is dumb for two reasons.

First of all it removes all flexibility and choice for employees. They may wish to pay their mortgage off rather than pay into KiwiSaver. National’s policy opts then in, but allows them to opt out. Labour will remove any choice from the employee. They may wish to save to start their own business, but Labour knows best and will force them into a default KiwiSaver fund – one which incidentally has the fund fees chew up close to 50% of the income in the first few years.

The decision to lift the employer contribution to 7% flies in the face of their campaign for higher wages, and helping struggling families. Most Labour MPs have never been in business, but let me explain how things work. Employers factor in the total cost of labour when they make hiring and pricing decisions. For example in my business I don’t just work out my labour cost as someone’s hourly rate. I add on 8% for holiday pay, 2% for ACC levy, 2% for KiwiSaver costs. So if someone is on $25 an hour the cost to the employer is really $28.10. One might factor in public holidays and sick leave also.

Now if you lift the employer contribution to 7%, it will mean that pay rises in future will be smaller, because otherwise the total cost of labour gets inflationary. Anyone who thinks this won’t happen, is not an employer I suggest. So what Labour’s policy will mean is that over the next few years employees will earn up to 4% less than otherwise would be the case. No, not every employee, but on average. So this is in fact a policy to reduce wages.

The other impact of their policy will be on jobs. You put up the cost of labour, and there are less jobs. Well in this dimension anyway.

UPDATE: Labour admit their policy will lower wages:

We recognise that the 0.5 per cent annual increase in the employer contribution could be taken into account as part of wage negotiations.

So Labour are officially campaigning for lower wages.

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KiwiSaver to have auto-enrolment

October 18th, 2011 at 3:00 pm by David Farrar

Bill English has just announced that when the Government returns to surplus (in 2014/15), they will run an automatic KiwiSaver enrolment campaign for employees. This will apply in the same way as when you get a new job – you can opt out within a month.

The estimated cost (based on 55% of those auto-enrolled staying enrolled) is $550 million over four years. They will not do the auto-enrolment before the return to surplus as this would mean the Government is borrowing to pay for the savings subsidy, which mean overall national savings do not increase – you just increase private savings and public debt.

English has said National will not make KiwiSaver compulsory as some peeple prefer to save for retirement in other ways.

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KiwiSaver v Parliamentary Super

May 13th, 2011 at 7:50 am by David Farrar

Vernon Small reports in Stuff:

MPs’ generous superannuation schemes will not be cut, despite Government plans to slash the subsidies paid to KiwiSaver accounts. …

Since 1992, MPs have been entitled to a subsidy of up to 20 per cent of their salary, receiving $2.50 for every dollar they put in. Those elected before 1992 receive a subsidy equal to 23 per cent of their gross salary.

Asked why taxpayers should subsidise MPs up to 20 per cent when he was winding back KiwiSaver subsidies, Mr English said they were different schemes.

“The MPs’ scheme has been wound down over the last 20 years to something that is pretty similar to what everyone has available to them. In fact, I think a number of MPs are probably members of KiwiSaver.”

There is a vital fact missing from this article. The Remuneration Authority operates on a “total remuneration” basis and the value of that 20% superannuation subsidy is effectively deducted from their salary. If the subsidy increases 5%, then their salary drops around 5%. If the subsidy is decreased, then the salary increases.

Personally I would just pay MPs the full remuneration for their jobs (which would see their pay increase 20%) and leave it up to them to decide whether they put some of it into a savings scheme or not.

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Dom Post on Savings

May 12th, 2011 at 11:51 am by David Farrar

The Dom Post editorial:

The $10 billion deficit for the first nine months of this year confirms, if confirmation was needed, that the last government made bad choices. At a time of plenty it chose to buy popularity rather than to save and invest for the future. Worse still, it created an expectation that the bounty would continue to flow in bad times as well as good.

Yep. Labour thought that the economy would never go into recession, ignoring that the tradeable sector had in fact been in recession since 2004/5.

It cannot – a point Prime Minister John Key and his ministers have been trying to get across in advance of next week’s Budget. New Zealand has to get back to living within its means. There are a number of obvious targets for a government looking for what Finance Minister Bill English has quaintly termed the “nice-to-haves”. They include the extension of welfare to families with incomes far in excess of the average wage, interest free student loans and the 65-year age of entitlement for superannuation.

I support increasing the age of eligibility for superannuation. It will happen one day also. But any increase would have to be signalled a good decade or so in advance, so don’t think any change to the age will help get the books back into surplus in this decade. Lifting the future age of retirement is important for the long-term sustainability of superannuation, but again that is a different issue to the shorter-term fiscal challenge.

Instead, Mr Key’s Government is taking aim at the KiwiSaver scheme introduced by its predecessor to tackle New Zealand’s chronically low savings rate.

Under the scheme, people who agree to set aside a percentage of their income for their retirement receive a one-off Government grant of $1000 and tax credits worth up to $1040 a year. The scheme has proved remarkably attractive. It now has almost 1.7 million members. However, Mr Key has classified it among the “nice-to-haves” and is signalling that the annual Government contribution will be reduced, probably halved.

He and his finance minister appear to believe the public will not be deterred by the change. If so, they are graduates of the same University of Spin and Hope as their Labour predecessors, who believed that scrapping interest on student loans would not increase the take-up rate. New Zealanders are not stupid. The year before loans were made interest free, 53 per cent of eligible students borrowed from the Government. By 2009 – the last year for which figures are available – that figure had increased to 71 per cent.

KiwiSaver membership involves sacrifices. Contributing the amount required to secure the maximum Government contribution means many members have to make choices between other “nice-to-haves” and even some essentials. However, they calculate that, together with employer contributions, the Government top-up makes the sacrifice worthwhile. Reduce the top-up and many will review their participation.

For most employees, they will still be getting a massive subsidy. Someone on $28,000 will still get around $2.50 into their KiwiSaver account for every $1 they put in. That’s a 150% return on investment compared to 10% most funds deliver. I doubt too many people will dump KiwiSaver becuase their return on investment is 150% instead of 200%.

Those who get most hard done by the Government’s changes are self-employed like me. As I pay both my employer and employee contribution, then I’ll personally be quite a bit worse off by the Government’s proposed changes. But I had been saving plenty anyway, prior to KiwiSaver, so to some degree the KiwiSaver subsidies were just a way to maximise my return. And the Government should be focusing its scarce tax dollars on those who most need it, not people like me.

The Government has a choice. It can encourage the current generation of workers to save more, or it can pander to the “grey” vote by maintaining the pretence that superannuation for all at age 65 is affordable when it is patently not. It cannot do both.

It has made the easy choice, not the right one.

The reality is the age does need to increase, but not until around 2025 by my calculations.

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A speech by John Key

May 11th, 2011 at 12:36 pm by David Farrar

John key’s speech is here. Key points:

  • WFF, interest free loans and KiwiSaver costing $5b a year, and why we now have a structural deficit, and all has to be borrowed from overseas
  • All changes will take place after election, so there is a mandate for them
  • KiwiSaver will be changed so that over time employees and employers contribute more, and the Government less
  • KS changes will lead to an improvement in the rate of national savings and reduce foreign debt by 2% of GDP over the decade
  • Will reduce amount spent on WFF, but target a greater proportion at the most vulnerable families
  • For every $100 of student loans, taxpayers get only $55 back
  • Half of the overdue student debt is students living overseas – will make sure they live up to their responsibilities

The exact details will be in the budget. To me it looks like a good step in the right direction.

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KiwiSaver

May 10th, 2011 at 7:58 am by David Farrar

I like KiwiSaver, as it provides an incentive for people to save. In fact you have to be very very poor or very very stupid not to go into KiwiSaver as you effectively get a 200% subsidy for the first $30,000 of income you earn. For every dollar you put in, the employer puts in one dollar and the Government one dollar.

The Government is signalling that the Government contribution may be removed or reduced. This is not entirely surprising as when Labour established KiwiSaver there was huge surpluses. KiwiSaver was set up to reduce that surplus.

Today the Government is borrowing $300 million a week. Borrowing money to save money has never been a sustainable strategy, so the changes are not unexpected – especially as there is doubt if KiwiSaver has increased overall savings.

What I would love to see going forward is a co-ordinated approach and policy around retirement savings – looking at public superannuation, workplace superannuation and other private superannuation schemes.

How much of someone’s retirement income should be funded by public super, and how much by KiwiSaver or other private savings?

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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 KiwiSaver – 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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Editorials 11 March 2010

March 11th, 2010 at 12:00 pm by David Farrar

The Herald approves of mooted KiwiSaver changes:

Commerce Minister Simon Power deserves praise for his decision to fast-track tougher reporting requirements for all KiwiSaver providers.

Not so David Ireland, the chairman of superannuation industry body Workplace Savings, who described the move as a “knee-jerk reaction”.

Like some other near-sighted individuals in the funds management industry, Mr Ireland seems to be struggling to come to terms with the idea that investors’ interests must come first.

When the subject is the integrity of KiwiSaver, which holds the investments of 1.3 million New Zealanders, there is every reason to move quickly to plug any gaps in regulation.

What scares me is the poll showing around half of KiwiSaver investors think their fund is government guaranteed.

The Dominion Post wants the public service reined in further:

The public service is a dollar-devouring behemoth that has thwarted many attempts to rein it in.

Prime Minister John Key will need to do better than he has so far, if he is going to succeed in slipping on the halter. It is vital that he does. …

Now the Government is treading so carefully it risks making no progress. Mr Key, through a spokeswoman, has denied there is any proposal that might be described as “radical reform”. Instead, all indications are of a process that smacks of the ad hoc, and of being driven by fear of public reaction as much as by any coherent strategy.

That is not good enough. Despite improvements in government finances, the Treasury is still forecasting deficits will continue to 2016. Finance Minister Bill English rightly wants the focus to remain on getting out of deficit as quickly as possible.

Once we are out of deficit, then we get far more palatable choices. We get to decide whether surpluses are spent on reducing debt, cutting taxes or increasing spending. But until we get back into surplus, it is all fairly unpalatable.

The Press looks at the progress in Iraq:

With so much attention focused on the violence in Afghanistan, there is a risk of downplaying significant events in Iraq, notably its recent election.

The result of this election, in terms of the shape of the coalition which will govern the nation, is likely to take weeks or even months of deal-making.

But the manner in which the election was conducted is one of the most positive developments in Iraq since the United States and its “coalition of the willing” allies toppled Saddam Hussein in 2003. US President Barack Obama could ultimately be proved correct when he declared that the election was an important milestone in Iraq’s history.

The most notable feature of the election was the turnout which defied many observers’ expectations by reaching 62 per cent. This figure might not seem high by New Zealand standards, but it is worth reflecting that it is comparable to the most recent US election.

In a decade or so, Iraq may be doing relatively well.

And the ODT commemorates International Women’s Day:

New Zealand has much to be proud of in its gender equality record, and with the marking on Monday this week of International Women’s Day, there is cause for celebration.

In the most recent Global Gender Gap Report of the Geneva-based non-profit World Economic Forum, New Zealand is ranked fifth out of 134 countries in an index that assesses countries on how well they are dividing their resources and opportunities among their male and female populations – regardless of the overall levels of these resources and opportunities. …

But not so good:

In New Zealand, one in five women will be subjected to violence in their lifetime, compared to one in 20 men.”

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A good thing about KiwiSaver

November 1st, 2009 at 12:00 pm by David Farrar

I had lunch yesterday with three of my staff at Curia. Two of them are at university and one has just graduated.

Over lunch we got onto KiwiSaver, and all three of them started talking about which KiwiSaver Fund they are with, how much they have earned, what the rate of return has been, and how they aim to use it to help get their first house mortgage.

Now one can debate KiwiSaver at the macroeconomic level – about whether there should be employer subsidies and Government subsidies.

But what struck me, was the difference it has made at an individual level. I can’t imagine before KiwiSaver, three young women (who still have massive student debt) would be talking about their investments, who is getting the best rate of return etc. Developing that culture of savings and investment literacy at an early age is possibly KiwiSaver’s greatest claim to fame.

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Less people saving despite KiwiSaver

June 22nd, 2009 at 9:13 am by David Farrar

The Herald reports:

The number of New Zealanders saving regularly has dropped in the past four years despite more than a quarter of adults joining KiwiSaver.

A Retirement Commission survey carried out in March and April has found that only 49 per cent of adults aged 18 and over are now saving regularly, down from 53 per cent in the commission’s first survey in 2005.

Although 29 per cent have joined KiwiSaver, this has been partly offset by declines from 23 per cent to 18 per cent in the numbers in personal superannuation schemes, and from 16 per cent to 14 per cent for those in workplace super schemes.

This is what some predicted may happen – KiwiSaver seems to be just changing the way people save, but not increasing the number of people who save.

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Lies and Fearmongering

May 7th, 2009 at 4:15 pm by David Farrar

David Parker manages both with this press release.

The National Government has given its clearest signal yet that superannuation entitlements will be cut in the future, Labour Associate Finance spokesman David Parker says.

Fearmonger No 1

A reminder. John Key has said he will resign his seat in Parliament if he cuts superannuation entitlements. But not even that will stop Labour trying to prey on the insecurity of retired or near retired persons.

“The pensions of tomorrow need to be protected today. National said before and during the election they would continue with payments to the Super Fund, but have now resiled from this.”

And if Parker reads the announcement from Michael Cullen, when the Fund was established, he will see that Cullen explicitly said that contributions are funded out of surpluses and would be suspended temporarily when there is no surplus.

Not even Dr Cullen was foolish enough to advocate borrowing money to save money.

“Mr English argues that he’s not prepared to borrow to fund the investment in the Super Fund, but he’s already done that to pay for his tax cuts – an astounding third of which go to the top three per cent of income earners,” David Parker says.

Then we have the lie – the claimed borrowing for tax cuts. The extra tax cuts by National were fully paid for by reduced expeniture on KiwiSaver. This is a fact. Parker knows this. He just hopes if you repeat a lie enough times, people will believe it.

“Those tax cuts were not just unfair, but they are a substantial cause of the structural deficit New Zealand now faces and are behind the Government’s plan to now cut investment in the Super Fund.

And he lies again. National’s tax cuts are considerably less foregone revenue that the reduction in KiwSaver subsidisies. The structural deficit would be worse, not better, if National tax cuts and KiwiSaver changes had not been made. This is indisputable. The quantum of each is known and the foregone revenue from tax cuts is les than the reduction in KiwiSaver subsidies.

Everytime you hear Labour talk about borrowing for tax cuts – they are lying. They are desperate to have people beleive it, but it is not true, as National reduced expenditure by a greater amount than the tax cuts to pay for it.

If Labour were honest they would campaign on how National reduced KiwiSaver subsidies for tax cuts, and debate the merits of that. Of course they don’t want to, as anyone economically literate now concedes the KiwiSaver subsidies were far too generous.

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Littlewood’s Five Suggestions

February 23rd, 2009 at 5:58 am by David Farrar

Superannuation expert Michael Littlewood has five proposals for the Government:

  1. Review the need for the New Zealand Superannuation Fund
  2. Change the NZSF’s investment strategy
  3. Stop pre-funding the ACC’s liabilities
  4. Remove the rest of KiwiSaver tax breaks
  5. Fix the income tax system

I very much agree on (1). We are now borrowing every dollar we invest in the fund. At a minimum contributions should be suspended.

In (2) Littlewood proposes that there be no minimum proportion to be invested in NZ (as National proposed) but instead it should be directed to “invest in new businesses or in the growth of existing businesses that, for example, have export potential.”

I disagree with both National, and Michael. I want the NZ Super Fund Trustees to focus on just one thing – maximising returns over the long term. This fund is designed to help fund future Superannuation.

If there is a desire to have the Government invest in businesses to help with job growth (I am not convinced), then that should be done from a seperate fund – maybe through NZ T&E.

Also not sure I agree on (3) but open to persuasion. I don’t think we should move to full funding of liabilities too quickly, but it is a desirable end goal. Partly because it would also allow private sector to compete fairly also.

On (4) I agree. The employer contributions provide enough of an incentive to go into KiwiSaver – an effective 1:1 subsidy.

And totally agree on (5) that the tax system needs a total overhaul.

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Littlewood on Superannuation

December 24th, 2008 at 2:53 pm by David Farrar

I blogged on Monday my thoughts on the fiscal crisis, and talked about the stupidity of borrowing money now, as a means of saving for the future.

Michael Littlewood has sent me a response to my post, which I’m delighted to publish. Michael is an expert on superannuation policy and is with the Retirement Policy and Research Centre of Auckland University.

My initials comments are shown in italics and quoted below, and Michael’s comments in normal text below them. My thanks to Michael for his contribution:

The Cullen Fund

The Cullen Fund was based on a premise that as we are going to have surpluses for the next 30 years, then we should save some of those surpluses to meet the future cost of superannuation, so we won’t have to borrow money in the future.

The fatal flaw was always the assumption about surpluses

Not the only flaw – there were at least three others: one that New Zealand in 2020 onwards could not afford to pay for NZS from tomorrow’s economy (there is no evidence of that, despite the ageing population); that somehow, partial pre-funding was better for the economy than the previous PAYG approach; finally that having higher taxes now (to create today’s surplus) was cost-free. This all evidences the previous government’s cookie jar approach to financial management. In fact the Cullen Fund does not change the cost of NZS by $1 but, as has now been demonstrated, can add significantly to New Zealand’s financial risks. And, if I wanted to appoint an investment manager to look after part of my future retirement savings, the government would be last on my list of contenders mostly because no Chinese wall can ever insulate the Guardians from the political process.

but as the years went on and they continued unabated, the opposition to the Fund diminished, and even National signed up to it

Only because it was one of those memorable “dead rats” they had to swallow. Bill English said that you have lost the argument on this kind of policy if you have to explain it. Somehow, New Zealand has to grow up so that we can sensibly discuss this kind of thing.

But we are now in a very different situation. We have a structural deficit, and face massive borrowing for at least a decade.

So the Cullen Fund is now based on borrowing heaps of money today, so we do not have to borrow heaps of money in 25 years? Anyone else see the fatal flaw? Borrowing money to save money is the sort of stuff that caused the credit crisis.

Yes, I agree that leveraging the Crown’s balance sheet to invest in financial markets is a silly idea. But increasing taxes to do the same thing (and creating apparently costless ‘surpluses’) is only marginally less silly.

The Government should seriously consider suspending contributions to the Cullen Fund. We can’t save money we do not have.

And we should also seriously discuss consider selling the Cullen Fund’s investments, even in today’s market. If it makes sense to stop contributions then it makes just as much sense to sell. Not selling in the face of increasing debt is similar to borrowing to invest.

KiwiSaver

KiwiSaver has much the same problem as the Cullen Fund. It is all well and good to help subsidise people’s savings

There is no credible international evidence to support the notion that tax subsidies increase saving. Your statement assumes that, in good times, subsidies are a good thing. They aren’t – tax subsidies to saving are complex, regressive, expensive but, worst of all, seemingly don’t work – based on the best evidence available.

but not if the taxpayer is having to borrow money to do so

No, having to borrow to pay for the subsidies is just a worse idea than having the subsidies in the first place – the need to borrow to pay for them should call their wisdom into question more dramatically.

Because who is going to have to pay back and pay the interest on all that borrowing?

The same argument applies to the higher taxes needed to create the ‘surpluses’ that paid for the incentives in the first place. The counterfactual should be no incentives/lower taxes. Apart from anything else, you ignore the deadweight costs of higher taxes to pay for the incentives.

Those same savers

No, all taxpayers, some of whom are savers.

So once again we have the stupidity of borrowing money today, to help people save. That is not sustainable.

So is having everyone, including the poor who can’t afford to save, paying higher taxes to feed richer citizens’ retirement savings.

I like KiwiSaver

see below

If we were going to continue with record surpluses, it would be great to have a scheme which provides massive incentives for people to save

especially if they don’t actually increase saving (as opposed to savings)?].

But we don’t. Does anyone think Labour would in 2009 have announced the KiwiSaver subsidies they did in 2007? Of course not.

National has wisely already cut the cost of taxpayer subsidies to KiwiSaver. Arguably they need to go further and also look at whether the employee subsidy is affordable. If we need to borrow to find it, then it isn’t.

And what about the tax incentives through the PIE tax regime? That should be up for debate as well.

You see the employer matching contribution is a 1:1 subsidy already, which is massive

but not cost-free to employees. All employees, including the poor who can’t afford to join KS, will help pay for that through lower future pay rises.

Hell most people are happy to get a 10% return on investment and the employer contribution gets you an instant 100% return

Actually no because the 100% is spread over the life to age 65 – you can’t get the money until then.

Now the employee subsidy gets you a further 100% return

No, for the same reason.

so those earning up to $52,000 get a 2:1 subsidy or a 200% return on investment.

Unless the fiscal fortune improves, maybe the employee subisdy has to go also. Sure that means only a 100% return instead of a 200% return, but that is a lot better than the standard 10% return and I doubt it would discourage people going into KiwiSaver. Maybe raise the employer contribution rate to a maximum 3% so the total saved isn’t decreased.

A bad idea for the reasons already given.

We need, as a country, to discuss the retirement saving issue. We never had a proper discussion about these sorts of things in the nine years of the last government. What about the evidence that, before KiwiSaver, most New Zealanders were saving ‘enough’ or ‘more than enough’ for retirement? If you want to see some of the evidence, here is a sample from www.PensionReforms.com – you can see more by sorting the abstracts by New Zealand as the country:

New Zealand’s taxpayers will be spending a lot of public money on new retirement income saving initiatives after nearly 20 years of spending none. Was this decision based on sound analysis of data on New Zealanders’ savings behaviour? Is this policy shift likely to meet any of the stated objectives? Probably not.

Changes to the way retirement incomes are financed should be based on good evidence that is subjected to robust investigation over time. New Zealand missed those steps with its new KiwiSaver scheme, justifying its existence on seemingly dubious economic analysis.

For the last 20 years, New Zealand has had a two-pillar retirement income system – an elegant, universal, PAYG state pension plus voluntary saving. There have been no tax incentives or compulsion for the second pillar of private provision. So, how have New Zealanders responded? Apparently, mostly quite rationally. So what’s the problem?

Strongly negative household ‘saving’ might tell us something about the behaviour of New Zealanders but not whether they are saving for retirement, let alone saving enough. A ‘stocks’ measure of wealth is much more useful than the ‘flows’ of income and spending. more

And here is a report that shows how the existing retired are faring – the answer is “quite well thank you very much”:

The living standards of different types of households cannot be adequately measured without asking the people affected how they are managing and how they perceive their living conditions. That must be done in a systematic way. A new measure allows living standards to be compared across groups and over time. more

I do not favour the government rushing to change things (as it has done with KiwiSaver III). I do favour a full-scale, research based debate on all the things that should matter when we talk about financial preparation for retirement. And the objective of this process must be nothing short of consensus – on the evidence, on the things that matter and on the appropriate public policy settings. Anything less than consensus will sow the seeds for future policy uncertainty. We have had far too much of that over the last nine years.

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Who to blame, and what to do with the economy

December 22nd, 2008 at 9:00 am by David Farrar

The set of economic forecasts inherited from Labour were bad enough reading last week. But then on Friday, I noticed that Finance Minister Bill English said that the economy is already nearly at Treasury’s worst-case scenario.

So how bad is the now likely worst case scenario:

  • Unemployment peaks at 7.5% in mid 2010
  • Economy contracts in year to March 2010 as well as March 2009
  • OBEGAL deficits of $32 billion from 2009 to 2013 – averaging greater than $8 billion a year
  • Gross debt to increase from $35 billion to $82 billion over four years – a $47 billion increase
  • Net debt to increase from $6 billion to $54 billion
  • Gross debt as % of GDP to go from under 20% to 39% in four years, and to 76% by 2023

This is a worse outlook than Labour left National in 1990. And you can’t even compare to the 1999 PREFU which was:

  • Operating Balances growing to almost $2.5 billion
  • net debt falling from 22% to 18%
  • Economic growth of over 3% a year
  • Unemployment to reduce from 7% to 5.7% over two years

Cullen was left with a wonderful set of projections.

So the next few years are going to be a disaster in fiscal terms. So who is at fault? Well of course the main responsibility is the global credit crisis – that goes without saying. But why are our fiscal fortunes so fragile, than a crisis such as this fucks our economy for the next decade or more? Let’s look at some of the possible culprits.

National’s tax cuts

If anyone blames the deficits and debts on National’s tax cuts, then they are incompetent or lying. The tax cuts were 99% funded from changes to KiwiSaver, and other expenditure savings. They have no impact on the deficit or debt.

In fact National’s tax cuts are (in hindsight) an even better idea than when first mooted? Why? Because they contribute towards a total fiscal stimulus package of 5% of GDP – this is one of the largest in the OECD and may help soften the recession.

But even better, the tax cuts are not funded from cutting current spending (which would detract from the stimulus) but by reducing subsidies into KiwiSaver which would lock the money up for decades.

We’ll come back to the issue of KiwiSaver.

Labour’s tax cuts

So how about Labour’s tax cuts? Is all this fiscal doom and gloom because Labour finally gave in and delivered tax cuts? Well it is certainly true that Dr Cullen has indicated he would have not cut taxes to the extent he did, based on PREFU’s numbers. And many people suspect Labour, if re-elected, would have cancelled some or all of their tax cuts.

The cost of Labour’s tax cuts over four years is $10.8 billion. So yes, if Labour did not cut taxes at all in their nine years of office, then the fiscal situation would be slightly better. Of course taxpayers would be worse off, but who cares about them!

But compare that $10.8 billion to OBEGAL deficits of over $30 billion and an increase in debt of almost $50 billion.  If Labour had not delivered tax cuts (and had not spent the money saved – a big if), it would have somewhat improved the fiscal outlook, but left households worse off, and made the recession worse.

Labour’s tax cuts were equivalent to a one off $3.3 reduction in taxation – the only personal tax reduction in nine years, where taxation went from $32 billion to $57 billion.  It is probably the most modest tax reduction program in the western world.

Labour’s Spending

What has really left us with a massive problem, isn’t Labour finally doing a $3.3 billion annual tax cut, but the massive increases in annual expenditure.

Expenditure has increased from $34 billion per year to $57 billion. That is a $23 billion hike – or seven times as great as the belated tax cuts.

Now of course some of this is necessary increases – even Sir Roger advocates you should increase spending in line with inflation and population growth. But off memory that is still $18 billion a year in extra spending.

And this is the problem Labour has left us. They massively increased spending in non-essential areas, on the assumption that we would have record growth and surpluses forever. They didn’t just keep funding and improving existing programmes (schools, hospitals) but they invented new schemes. Now these schemes were arguably good things – but they were funded based on an assumption of growth and surpluses. And together they combine to remove flexibility from future Governments.

Let us look, at just three of them:

The Cullen Fund

The Cullen Fund was based on a premise that as we are going to have surpluses for the next 30 years, then we should save some of those surpluses to meet the future cost of superannuation, so we won’t have to borrow money in the future.

The fatal flaw was always the assumption about surpluses, but as the years went on and they continued unabated, the opposition to the Fund diminished, and even National signed up to it.

But we are now in a very different situation. We have a structural deficit, and face massive borrowing for at least a decade.

So the Cullen Fund is now based on borrowing heaps of money today, so we do not have to borrow heaps of money in 25 years? Anyone else see the fatal flaw? Borrowing money to save money is the sort of stuff that cuased the credit crisis.

The Government should seriously consider suspending contributions to the Cullen Fund. We can’t save money we do not have.

KiwiSaver

KiwiSaver has much the same problem as the Cullen Fund. It is all well and good to help subsidise people’s savings, but not if the taxpayer is having to borrow money to do so.

Because who is going to have to pay back and pay the interest on all that borrowing? Those same savers. So once again we have the stupidity of borrowing money today, to help people save. That is not sustainable.

I like KiwiSaver. If we were going to continue with record surpluses, it would be great to have a scheme which provides massive incentives for people to save. But we don’t. Does anyone think Labour would in 2009 have announced the KiwiSaver subsidies they did in 2007? Of course not.

National has wisely already cut the cost of taxpayer subsidies to KiwiSaver. Arguably they need to go further and also look at whether the employee subsidy is affordable. If we need to borrow to find it, then it isn’t.

You see the employer matching contribution is a 1:1 subsidy already, which is massive. Hell most people are happy to get a 10% return on investment and the employer contribution gets you an instant 100% return. Now the employee subsidy gets you a further 100% return, so those earning up to $52,000 get a 2:1 subsidy or a 200% return on investment.

Unless the fiscal fortune improves, maybe the employee subisdy has to go also. Sure that means only a 100% return instead of a 200% return, but that is a lot better than the standard 10% return and I doubt it would discourage people going into KiwiSaver. Maybe raise the employer contribution rate to a maximum 3% so the total saved isn’t decreased.

Working for Families

This is another major spending commitment that falls into the category of unaffordable with hindsight. Basically whenever Labour had spare cash they hoovered it up into this targeted welfare assistance programme. And now taxpayers are going to have to borrow billions of dollars to fund this programme.

Unlike the other two programmes though, this one can’t be easily reformed. Families have grown used to having the extra cash, and in the midst of a recession, it would be quite wrong to take the money off them.

But what does need to be done, is some medium-term work on a better tax and welfare system that has less tax churn.

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Reaction to Tax Cuts package

October 9th, 2008 at 6:59 am by David Farrar

In no particular order.

The Herald Editorial compares the parties:

There has been a striking contrast in the response of the two main parties to the disturbing news that after 14 years of budget surpluses the Treasury now calculates the public accounts are set for a decade of deficits. …

Finance Minister Michael Cullen merely congratulated himself again on having saved previous surpluses for a “rainy day” and looked forward to the problems it would cause for National’s intended tax cuts.

There was evidently nothing he thought necessary to change, either in his own programme of reluctant tax cuts that started this month or in the Government’s spending programmes that might have seemed affordable in better times. If Labour’s “rainy day” could last 10 years, as the Treasury forecasts, Dr Cullen and his colleagues seemed strangely relaxed about it.

In other words Labour has no plan at all.

The fiscal crisis is indeed the first real test of the mettle of leader John Key and his team and it is rare that voters get such a measure before an election.

National could have taken the easy option of confirming its previously indicated tax cuts, offering no specific savings in public expenditure and pretending that tax cuts would actually cure the deficit in quick time. Conservative parties are prone to that belief.

Instead, National has faced the need to balance its tax cuts with specified savings, notably the removal of business tax breaks on research and development and employer contributions to KiwiSaver. The wisdom of reducing the incentives to save is questionable but the courage is not.

And National is willing to take the hard decisions, and not pretend that the decade of deficits is acceptable.

Paula Oliver in NZ Herald:

National has risked alienating people who have embraced KiwiSaver, as the party goes into the election with a tax-cut package that would leave more money in the pockets of most earners – but takes away two business tax breaks to pay for it.

Mary Holm says the changes improve KiwiSaver:

The National Party’s proposed changes to KiwiSaver would considerably reduce two of the biggest gripes about the scheme – that some people can’t afford it and that it ties up savings. …

The contributions of anyone earning less than $52,150 would be tripled by employer and government input. And that means three times bigger retirement savings. …

The reduction of the minimum employee contribution from 4 per cent to 2 per cent of pay means it would be easier to afford KiwiSaver, especially after taking tax cuts into account.

John Armstrong says it is a bit of a fizzer:

The door banged shut in Labour’s face following Monday’s mind-numbingly pessimistic economic forecasts. Labour can thank National’s underwhelming tax package for reopening it at least slightly.

Colin Espiner reports on a snap poll:

A snap poll for The Press yesterday showed National may have pitched the package about right.

The poll of 212 people by Futurescape Global found 43% felt the tax cuts matched their expectations, with 34% feeling it fell short. A slim majority of those polled felt the country could afford National’s package, but people were split over whether they were confident in National’s ability to manage the economic crisis, while 55% said the tax package had not altered their vote. The poll has a margin of error of 6.7%.

Brian Fallow sees a shortage of growth:

National claims its tax package will stimulate the economy in the short term and improve incentives and drive growth in the longer term.

The first claim is plausible, the second not so much.

Reducing the top tax rate faster will be better for growth long term, but quite simply the money was no longer there.

James Weir in the Dom Post surveys business opinion:

Business New Zealand also disagreed “pretty seriously” with the decision to drop R&D tax credits but said the planned tax cuts and target to cut personal tax rates to 33 per cent over time rated a “seven out of 10″ score overall.

The Press editorial is positive:

Even if tax cuts were not on the agenda, there is a case to argue that the levels set for KiwiSaver were too ambitious from the start. As it stands, some young people entering the scheme and earning the average wage throughout their working lives could end up earning more in retirement, when their National Super entitlements were added to their KiwiSaver earnings, than they did in their lifetime.

Yep, and that is daft. The 4%/4% KiwiSaver forced people on the average wage to save too much, taking money they need during their working life.

Clark has said this election will be one of trust. If this is so, then the question for voters will be who do you trust in the turbulent world we now face? With these tax cuts, and with some detail of its longer-term economic plans, National has placed its cards on the table. It has produced figures to show that its plans are fiscally responsible. Voters must decide whether Key and his colleagues can be trusted to deliver on them, or whether Labour can be trusted to manage difficult times as well as good ones.

Will Labour produce a plan? Or is Labour saying it will run a decade of deficits and not make any changes to tax rates or spending?

Tracy Watkins blogs:

A year ago, Key might have risked over promising and under delivering on those amounts.

But that was a vastly different world..

The failure to deliver more may peel off some soft support among those who were leaning toward National but, because of Working for Families, will not be a whole lot better off.

But the rest will probably agree with Key that it’s a package that’s right for the times.

So is it enough? You’d have to say yes.

And finally NZPA reports that least surprising news of all – that unions and political rivals don’t like it. Some get their facts wrong:

United Future leader Peter Dunne, who is minister of revenue, said it was complicated and would be difficult to administer.

“Superannuitants and low income earners are the big losers,” he said.

Bzzt. Wrong. By 2011 superannuitant couples will get $15 a fortnight more.

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