By Alex Tarrant
ACT Party leader Don Brash has taken a swipe at KiwiSaver, metropolitan urban limits (MUL) , the emissions trading scheme, the pension age and Resource Management Act, while also saying the minimum wage should not apply to people under 20.
If the party gets back into Parliament following the November 26 election, ACT is a likely coalition partner in government for the National Party, with Prime Minister John Key indicating he would look to do deals with minor parties even if National could govern alone. Whether ACT makes it back into Parliament hinges on its Epsom candidate John Banks winning that electorate - something that looks likely given past experience and an indication from National that it will just chase the party vote in right-leaning Epsom.
In a speech to a Workplace Savings forum in Auckland, the former Reserve Bank governor and National Party leader hit out at KiwiSaver, saying it was nothing more than a Labour election bribe, like others such as Working for Families and interest-free student loans.
"Let me make it quite clear that KiwiSaver is a wonderful scheme for savers – the subsidies from the government are so generous that if you’re a New Zealand resident under the age of 65 and don’t belong to a KiwiSaver scheme you don’t understand it," Brash said.
"But does KiwiSaver increase national saving? Almost certainly not. The only study I’ve seen suggests that KiwiSaver has probably increased private sector saving to a very modest extent – most of the private contributions coming not from reduced spending but from a diversion of saving from other areas – but at the cost of very substantial dis-saving by the government, because of the scale of those subsidies," he said.
"It’s certainly very hard to see the logic in the government borrowing a billion dollars a year – the cost of the subsidies – most of it from overseas, to achieve a very small increase in private sector savings and the creation of a bunch of KiwiSaver schemes most of which invest most of their money overseas.
"This is not to say that New Zealanders wouldn’t be better off if they saved more than they have historically. I’m simply saying that KiwiSaver is probably on balance reducing national saving – and indeed, I’m saying that governments all over the world have discovered that they don’t actually know how to increase private saving," Brash said.
Raise the pension age
Brash said it was inevitable New Zealand would have to raise the pension age - something Prime Minister John Key and leader of the Opposition Phil Goff refuse to look at.
"For the very long term, it will be important to take steps to ensure the fiscal viability of New Zealand Superannuation. New Zealand Superannuation is, by international standards, a very good scheme – it’s a major factor in New Zealand’s having some of the lowest rates of poverty among over 65 year olds in the developed world, at a relatively low fiscal cost.But of course, that situation is going to change as the baby boomers hit 65 about now," Brash said.
Brash, aged 70, is himself old enough to collect New Zealand Superannuation. Fellow ACT MP Roger Douglas is 73.
"Every objective observer can see that the age of entitlement has to rise gradually over the next 10 years or so, as is happening in many other developed countries," he said.
"Of course, that does not mean that the retirement age needs to change – people are, and should be, free to retire when they choose. It just means that the age at which other taxpayers pick up the tab will have to gradually rise, and it’s an indictment on both John Key and Phil Goff that neither of them seems willing to be honest with New Zealanders about that reality."
Urban limits 'nuts'
ACT wanted to scrap the Resource Management Act which, together with poor actions by local government, had provided major obstacles to improving living standards in New Zealand.
"One of the ways this has happened is through the way in which this interaction has pushed the price of housing well beyond the reach of far too many New Zealanders – or more accurately, has pushed the price of residential land well beyond the reach of far too many New Zealanders," Brash said.
"We know, from the annual surveys undertaken by the Demographia organisation, that housing in our major cities is now among the most expensive in the world, relative to household incomes. And why? In large part because too many local governments have quite deliberately limited the supply of residential land," he said.
"Arthur Grimes, now chairman of the Reserve Bank, found that the effect of the Metropolitan Urban Limit imposed by the Auckland Regional Council had increased the price of land just inside that Limit by some 10 times compared with the price of land just outside the Limit.
"This is absolutely nuts, in a situation where New Zealand is one of the most under-populated countries in the world, and where Auckland is one of the most densely populated cities in the world – in terms of people per square kilometre, Auckland is more densely populated than Vancouver, Melbourne, Portland, Adelaide, Perth or Brisbane," Brash said.
The emmissions trading scheme should also be done away with, given none of New Zealand's major trading partners had one, and as it increased the cost of living.
Get rid of youth minimum wage
Meanwhile, Brash continued the ACT Party's long standing opposition to the decision to abolish the youth minimum wage.
"ACT would promptly re-introduce youth minimum wages – or better still, abolish minimum wages entirely for those under 20," Brash said.
"The most important thing for a teenager coming straight out of school or tertiary education is to get into a job without delay, whether that job pays NZ$8 an hour or NZ$13 an hour. We know that Labour’s abolition of the lower, youth minimum wage in 2008 has hugely increased unemployment among teenagers, as the National Party predicted it would at the time. It’s a scandalous indictment on the Government that they’ve failed to reverse that cynical decision," he said.
47 Comments
DB "governments all over the world have discovered that they don’t actually know how to increase private saving"
Well they could start by not taking every little bit of surplus in the form of taxes. Central government at 40% + of the economy is absurd.
See the link from AndyH on how to completely stuff up an economy (thank you Gordon Brown) - should be compulsary reading for any one entering Parliment.
http://www.tullettprebon.com/Documents/strategyinsights/Tim_Morgan_Repo…
Dr Brash is talking a lot of sense...many lefties will come out with the "they are a bunch of rich white men", which is an emotional criticism and not constructive...don't know about the MUL proposal though? wouldn't this just encourage urban sprawl...more highrise within the MUL would be a good starting point...
From citymayors.com/statistics list of 125 densest cities in the world , Auckland comes in at 115 ........ ooops , think you caught Donny telling porkies , Gareth !
#1 : Mumbai has 29 650 folk per sq. km . , a total population of 14 350 000 .
# 43 : London : 5100 / km sq ... 8 278 000 pomsters .
# 113 : Sydney : 2100 / km sq .. 3 502 000 ocker rockers
# 115 : Auckland : 2000 / sq. km ... 1 050 000 Yucklanders !
Nz cannot afford universal super therefore the age is not the issue it is the lack of targetting of the tax redistribution.
NZ needs to decide on a level of subsidisation i.e. a $ amount annually and rebate the balance so that wealthy individuals who do not require super do not recieve it. This needs to be phased in over time and the savings paid back by reduction in tax rates. This feeds on itself by giving people incentive to save for their old age and giving them more of their income to save with. People need to get real about welfare payments and define welfare for what it is and what it is trying to achieve. In my view it is to lift the bottem 10% out of poverty at present the welfare system is making payments to over 70% of the population which deprives the bottem 10% of real welfare pushes up the size and cost of government and pushes up taxes which stifles the economy and breeds welfare dependence that can only end in the mess we now have.
" in a situation where New Zealand is one of the most under-populated countries in the world,"
We rank 202nd in the world for population density with 16 people per square km according to Wikipedia and Australia is far lower (235th) with only 3 people per square km. It seems reasonable to expect Australia cities would have less population density
"and where Auckland is one of the most densely populated cities in the world – in terms of people per square kilometre, Auckland is more densely populated than Vancouver, Melbourne, Portland, Adelaide, Perth or Brisbane," Brash said."
Auckland ranks 680th out of 790 possible places in Demographia's analysis of population density (http://www.demographia.com/db-worldua.pdf) The paltry 2300 people per square km hardly ranks up there with Dhaka's 35,000 per square km.
And if we allow more sprawl we get the private good of cheaper sections while the public pick up the cost of the externalities - extra infrastructure to service the sprawl.
I would be interested to know what Brash thinks of Australia's compulsory super scheme. They now have over $1 trillion to invest and the government's own super bill has halved (because it was made means tested at the same time as the saving scheme was introduced). Eventually the government will have almost no superannuation bill.
Kiwisaver is minuscule by comparison. The so-called "government contribution" is really just a lower rate of tax on your super savings. (In almost all other OECD countries you pay no tax at all on super savings. But then NZ has to be different.) The government "contribution" looks big relative to the total amoun in kiwisaver only because the savings rates are so low. To be able to live off your investment income in retirement you need to save about 20% of your income from your whole working life. Such schemes (eg 7% from employee, rest from employer) are common in other countries.
Brash is right that the 3rd Labour government damaged the public finances with too many goodies we couldn't afford, some of dubious value, however they weren't the only government not to see the GFC coming. John Key gave us a $6b tax cut after the GFC and now finds himself $6b short & is relying on rosy growth projections to close the gap. $6b is the cost of running all the schools in the country.
Since I am hiding behind a pseudonym you have every right to assume whatever you like about me, but I will expand the point a bit.
If the Kirk fund had been maintained as intended and all Governments since that time had been able to keep their mitts off it, NZ would now have a massive stash of money. Yes; but that money would not be additional to what we have now and what we have consumed in the meantime. A substantial proportion, if not all of it, would be instead of what we have now and what we have consumed in the meantime. The money to put into the fund would have had to come from somewhere - eg higher taxation (reduced private investment and/or consumption), higher external debt, reduced investment in infrastructure, fewer public services, reduced welfare benefits, compared to what we have actually had (and voted for).
Which do you think it should have been?
Yes you are right about those days but they were way before my time in NZ, I only heard about it.
My point is NZ could follow Australia and modified the super thru' employer cost (started with a small level and gradually increase to whatever percentage - like we have started with Kiwi savers) My super scheme in Aust doesn't cost the govt one cent, I have no choice but contribute and so is my employer. Aust isn't the only country that have such scheme, Singapore is also another one.
But then NZ could adopt the buggered it approach - if you don't look after yourself, no one will... I guess it's more like ACT approach!
Brian Gaynor has estimated that the Norman Kirk funds would now be worth in excess of $NZ 300 billion , had Muldoon not scrapped them a mere year after their introduction . But don't entirely blame the Nats , the electorate voted for the cash back .
.. beer in mind , that this was circa 1975 , fully 18 years before Paul Keating introduced compulsory super to Australians . .. NZ had a massive head start on Oz , and flagged it away .
Yes, the Government could make/could have made it compulsory to save for your own retirement. (Don't be misled by calling it "employer cost" - it's a cost to you, since that is money that could otherwise have been paid direct to you as salary.) But there are arguments against that and the Retirement Commission and the Savings Working Group both oppose it.
Those arguments being, that it's not right for everybody all the time; and that people might have other ways of preparing for their retirement (investing in a business, paying off their mortgage) which would serve them better.
"Don't be misled by calling it "employer cost" - it's a cost to you, since that is money that could otherwise have been paid direct to you as salary" I guess you could stretch this to anything. The cost of the (nice) chair that I am siiting on could be paid to me and instead I could BYO beer crate to sit on!
If governments weren't so generous with retirement pensions & with the age of eligibility , private individuals would have to smarten up , and make provision for their own future ....... and this is exactly how it should be ...
.. and some , bless them , do ... they stick the middle pinkie up to the bureaucracy , and take care of their own finances ......
But as long as governments corral workers into idiotic schemes such as Kiwisaver , or into the Aussie equivalent ..... there's no reason not to make money on it . The key is to avoid the schemes themselves ( if possible ) , because 80 % + of fund managers are bloody useless , incompetent at getting investment returns anywhere near an indexed no-load fund .
...... buy shares in the fund management firms . That's where the bonanza is . Fat fees , creaming it off the suckers .... um , sorry .. I mean off the workers' money . Plus performance bonuses , crikey Dick ....... Cullen just stampeded the citizens into the arms of modern-day highway robbers ......
Check the ASX , ... lots of fund management firms are listed .... GBH added another one to his portfolio today ......... I'm in the munny , suckers !!!!!!
Thankyou Michael Cullen : Yet again you fleeced the workers & the poor , to fatten up the rich pricks !
Indeed; many things contribute to the reward you get for doing your job, just as many things contribute to the cost to your employer of employing you.
There is perhaps a difference in the example you give, though. Your chair probably cost your employer much less than it would cost you, so it makes sense for him to buy the chair rather than give you the money and invite you to buy yourself a chair with it.
However, it costs him just the same as it would cost you to put the same amount of money into your pension savings - and it's far less likely that he is delivering as much benefit to your individual welfare, as you would if you had the money and were able to choose what to do with it.
Those are excellent points you raise there Ms de Meanour (25/8 @ 5.17) , often overlooked by those who lambast the Muldoon Govt for abolishing Roger Douglas' compulsory super scheme.
Of course the other thing many such critics are very quiet about is the 92% of New Zealand voters who voted against compulsory superannuation in 1997.
So rather than blaming politicians, and Muldoon in particular for New Zealand's lack of retirement savings, I think some need to take a good long hard look at their own malfeasance and acknowledge the extent which they themselves have contributed to the problem.
By the way, I voted NO to MMP, and YES to compulsory super. Unfortunately my fellow countrymen adopted a different position on those issues to me.
I don't think you can say that 1997 vote was gainst compulsory super, it was against Winston's silly version of it. (at least that's how I voted.)
Re MMP -- fortunately your fellow countrymen adoted it. Oh yes. How nice it was to finally have a vote that counted for something.
I dont anyone has though about this alternative...rather than simply raise the retirement age (something Im not against) but means test it from the age of 65 to say 75. If one earns say 1.5 times the super, not entilled to it.
This cuts back the cost and also allows those of retirement age to slow down and work part time without any great loss to income....making 'room' for those younger to be employed.
Personally I dont hardly know any person who reaches 65 and retires, they either keep on working or go part time....And those that do retire..paint the house do the gardens, get bored and die early anyway.
Those who dont, work part time, often more than that...do what retirement is all about...do those things one always wanted to do...start a new career, business, turn hobbies into income.
I know it doesn't seem to be right to pay the same NZS to high income earners and asset-rich people as poor people get. But means testing isn't an easy answer.
The problem with it is, that it penalises working and saving; and so incentivises people to do precisely what you do not want them to do - not work, not save, cheat and lie about their income and assets, and get accountants to work out clever ways of getting round the means test. This means in turn that the Government has to adopt expensive, complicated and intrusive bureaucracy to monitor what everybody has and chase them in and out of loopholes.
One advantage of NZS is that it's extremely simple, and hence cheap to administer. That's one reason why even once the demographic bulge is at its worst, it's still not going to cost as much (in terms of % of GDP) as some other OECD countries' systems are costing already.
Im no Brash fan, but even bumbling idoits are not 100% bumbling idoits and can often talk common sense .......Its not always about who 'said it' but rather 'what is said' that is important.
Now IF Brash and his party where accepted into a co olition Govern with Key....there is a bit of bargining....and it is not inconceivable retirment age or similar would not be one of the compromises in that agreement.
Lets face it, the no change retirement by Goff and Key is a political not a fiscal choice...but a coolition agreement lets them of the hook...like the smacking law with Clarke, but unlike that one this one does need some sort of addressing....along with a couple others, which this "bumbling idiot" has raised.
Ms De Menour's argument against compulsory retirement savings, "Yes; but that money would not be additional to what we have now and what we have consumed in the meantime. A substantial proportion, if not all of it, would beinstead of what we have now and what we have consumed in the meantime. The money to put into the fund would have had to come from somewhere - eg higher taxation (reduced private investment and/or consumption), higher external debt, reduced investment in infrastructure, fewer public services, reduced welfare benefits, compared to what we have actually had (and voted for)" is only partly correct and misses the most important point. Yes, to save more we have to consume less now, but we will all be better off in the long run. The problem is we have been consuming too much (too much consumption, too much debt, too many public services and welfare, etc, all the things she mentioned) for decades, and have ended up with one of the worst net foreign liability positions in the world. We need to save (and hence invest) more - that does mean consuming less but in our present position that is a plus as well. The investments don't need to be stellar, they just need to be better than the alternative which has been spending the money on Italian kitchens and holidays.
The SWG made these points pretty strongly but were ignored by the government.
As for her argument against preferential tax treatment of retirement savings, how do you explain the fact that every other OECD country (except I think one other) has adopted it? Are they all right and we are wrong? The facts seem to speak for themselves.
Don't disagree with any of your first point, just emphasising that it's too simplistic to imply that if we'd follow the Kirk plan we'd have more money in the communal piggybank than we have now. We would, but that's not the only thing that would be different - we'd have less of other things.
Note in particular that the huge bulk of our net foreign liability position is on the household side, and the Kirk fund would have done nothing whatsoever to improve household savings.
Anyway, who's to say that somebody with a lot of money in the bank but with a grotty house and who's never gone on a holiday, is better off than somebody with little by way of savings but a nice house and an enviable souvenir collection?
I don't remember making an argument against preferential tax treatment of retirement savings. I made an argument against means testing, but that is quite the opposite isn't it?
But here are some more facts which speak for themselves: as a proportion of GDP, NZ's retirement system is one of the cheapest in the OECD, and delivers one of the lowest rates of old-age poverty. Even once the demographic timebomb kicks in, it will still be less costly than some OECD countries' pension systems are now. So the fact that we're doing things differently from other OECD countries doesn't necessarily mean that they are right and we are wrong. There's a lot of baby in that ther bathwater.
I tend to agree with a lot of what Brash says, on a case-by-case basis.
However, when you look at the big picture it is just that - looking after the Big Boys. He never promotes improved regulation of big businesses, shows no care for the environment, opposes CGT.
This shows he is just another puppet for the BRT. And look at the disasters that lot visited on the NZ economy when they have had the opportunity. eg:
- Promoted firesale sales of crown assets to their members in the 80s, thus losing national wealth & traumatising the NZ public regarding asset sales forever
- Successfully fought against share market regulation (eg insider trading) in the 90s, thus ensuring our business environment remains a wild west one, and opening the doors to the finance company debacles
- As individuals, lost vast quantities of shareholders' money thru arrogance & incompetence, eg Telecom.
So in terms of his overall picture, he is a total pariah for me
Cheers to all
I dont even get as far as agreeing with Brash at all.....and when you raise the other points, that just seals it.
Oh and what happened to him getting 10%? in the election? I'd expect to see a rise in the polls for ACT if its going to achive taht but its gone nowhere from what I can see...
and then of course he likes a proportioanl system that only puts ACT in Parliment and excludes a party that has 7% of the votes and 7% of the seats.....this for me is typically ammoral behavior from him.
regards
Steven: Sure, I agree
But, as an example, Brash says we need to raise the retirement age. He is the only politician saying it. And he is right, quite clearly. Practically all economists agree.
What I am saying is that his overall philosophy is anathema to me, so that particular worthwhile policy gets left behind the door
Thanks for responding
I see your point on pension but the lower earners age is not actully increasing much....
http://krugman.blogs.nytimes.com/2011/08/24/the-strange-power-of-really…
(as an example) So what happens in effect is the poor who have actually contributed potentially get no return/pension. as what it means is they work til they drop dead....So the ppl who will be claiming more pension and more healthcare are those most able to afford to save for or pay for it....and live into their 70s....
So for me a fairer way is to increase teh top rate of tax now and save it, aka Cullen fund.
regards
Much as I agree with a lot of what he says, I struggle with the inability of ACT to give some priority to envirnmental issues, including the reality of man infuenced climate change.
If they continue with this line, they will struggle with the younger voter - most of who are much better informed than their ageing parents.
Sure, & likewise getting rid of the RMA. Just like that!
So nothing to stop someone putting up a factory with a smoking chimney stack next door to your house, with effluent directed over your backyard
Nice for the rich boys, maybe, but not necessarily for the other 99%. Plus of course the irrelevant environment getting it in the neck, as you point out.
Cheers
Considering the laughable idiot of an ACT person on a Uni campus I saw recently on TV if that's the average IQ then its not just a q of being informed...its plain thick.....got to wonder how some ppl get into uni at all....oh wait they just need to be able to pay....
Apart from that I think education and in particular higher education makes you think and think logically, hence why ACT will get no where with the younger ppl (I hope).....
regards
What is ACTs position on R&D?
Deborah Hill Cone: Wanted: Help, not handouts
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10747517
"So, if it is a good policy idea for the Government to bribe companies to put their R&D here, why don't they at least do it properly? Wouldn't it be fairer to offer up-front tax breaks for R&D that every eligible company can apply for, rather than just the chosen few? I hope some bureaucrat who is not busy on sunbeds is going to make sure the recipient companies do spend their agreed portion on research, since government grants are meant to cover only 20 per cent of their R&D budget for the next three years.Maybe the people who should be caring about this stuff are like me, too busy playing Scrabble and eating cottage pie."
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