Labour is waiting for Treasury's pre-election fiscal update (PREFU) before announcing its savings policy, which is widely expected to include a move toward some form of compulsory KiwiSaver.
The party's finance spokesman, David Cunliffe, said Labour would present a fully-costed manifesto in the run-up to the November 26 election, which meant it first wanted to see the underlying state of the government's finances, to be outlined in the PREFU due sometime in the second half of October.
Treasury's growth forecasts in the May 2011 Budget are expected to be revised in the PREFU to show growth in the first half of 2011 was stronger than expected, although growth two to three years out would be weaker due a deteriorating outlook for New Zealand's trading partners, Finance Minister Bill English said on September 28.
That would indicate whichever party formed a government after the election was facing a lower-than-expected revenue stream over the next term, although English was still confident the government would still be able to return its books to surplus in the 2014/15 year.
A sovereign credit rating downgrade from both Fitch and Standard & Poor's on September 30 also means spending promises would need to factor in heightened rating agency jitters about a nation's total external debt - public and private debt together.
Speaking on TVNZ's Q&A programme on Sunday, Cunliffe defended Labour's higher short-term government debt track stemming from its recently-announced tax policy. Labour would ensure net government debt hit zero by 2021, earlier than the current track, and would get the government's books to surplus the same year as National. Labour was "front-loading some investments in things like savings, like growth and jobs to ensure we meet those targets," Cunliffe said.
New Zealand's external debt comprised largely of private sector debt, which was the concern that needed to be dealt to, Cunliffe said. Labour has previously indicated it would be comfortable issuing a bit more government debt in the short-term to help pay for policies that would increase private savings and get private sector debt down over the medium to long term.
Compulsory savings?
How Labour would look to increase private savings and reduce the private sector's overseas debt has been a subject of speculation in recent months, with the party hinting at a move toward a form of compulsory KiwiSaver, whether that be hard or soft compulsion.
In January, the government-appointed Savings Working Group expressed its support for 'soft compulsion' for KiwiSaver, where everyone in the workforce not signed up to the scheme would be automatically enrolled, with the option to opt out. Prime Minister John Key last week said early estimates showed soft compulsion might cost the government about NZ$300 million upfront, which indicated expectations were for 300,000 of up to a million people in the workforce not currently enrolled would choose to stay in KiwiSaver, with the remainder opting out.
On Q&A, Cunliffe said Fitch and Standard & Poor's had pointed to long-term structural problems which needed to be fixed, with one of those being a lack of private savings. He would not be drawn on whether Labour's savings policy would include compulsion, saying Labour would wait to see the PREFU first.
"People think of compulsion as a black and white thing. And I do want to say this - it’s not quite that simple," Cunliffe said.
"You can either have a scheme where some are in and everyone can get out, or all are in and you can still get out, or hard compulsion is where all are in and no one can get out," he said.
"I think good judgment is required to see where on that continuum you get the best bang for the buck in terms of the most savings, good social equity and reasonable fiscal cost, and we’ll be announcing our decision in just a few weeks from now."
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