Why save? Government and Bollard want deposit rates down to next to nothing and that gives an after tax rate of 5/8ths of stuff all. Mind you we could get a better rate of return with a finance company. Are there any left standing? I cant see much incentive at all to save. Government will look after us! Cheers

Philly, I gave up on Tony Alexander a long time ago. He only rows in the BNZ boat. Guess he has to as they pay his salary. Cheers

But it's sell fulfilling right? As long as people think that borrowing and consuming leads to prosperity, it will happen.

The only spanner in the works is if (when!) we end up like the USA. Debt cannot grow faster than income forever. The US is reaping what it sowed in that respect.

"Walton looked at some solutions that may help with dealing with an aging population, such as raising the retirement age and introducing easier migration policies designed to bring in young migrants to fill the gaps left by older, retiring workers."

This doesn't make sense. If the retirement age is raised then older NZ'ers will carry on working so where are the jobs to be found for these young migrants?

Iain: You might find this article interesting.
http://www.ritholtz.com/blog/2009/07/a-dubious-foundation/

I've had a chat with Bill and John. They too think it would be a great idea to apply maximum mortgage protection limits and that 3 times the average annual income seems appropriate. That any money loaned on residential property above that max could not be secured through the courts by way of a mortgage. There would be freedon to make the loans but no security. Bill thinks it will mean an instant increase in the cost of credit on larger amounts and expects the demand to collapse. John agreed and looks forward to the end of the insane property speculative madness that is trapping Noddyland into a disfunctional economic bog of debt.

So the right plan is to be out of property other than a meat producing freehold farm and out of Kiwi$ before the truck runs over it. Looks like the big shrink has started in the state sector. Wonder who's next. Bet the splurging in the PM's dept carries on carrying on.

Key and English will do nothing to throttle the property madness because they are scared the $30ooooooooo(billion) in high risk mortgage investments will destroy the image of the banks being safe. How it is that the fools in S&P cannot see how rotten the house of credit cards has become is beyond me but then they were blind to the same sort of sickness in the USSA. And so it is that the stupid public continue to be herded like cattle into property deals that turn a fat profit for agents and brokers and chain families to banks for eternity. All this going on when we know dam well a wall of inflation will arrive. Good government? Not Bloody Likely. Who will be there to explain to the Smiths that the reason they are expected to pay $40ooo a year in interest alone on their $400ooo mortgage. And that rates are expected to climb well above 10%! Try the 18% rates that were here in the 70s. That'll be $72000 please.

It sucks Iain !

The argument that immigration can somehow mitigate the coming "˜boomer' crisis is interesting. Of course, the establishment (and the vested interests that command them) constantly insists that mass immigration "˜benefits the economy'.

Yet, if we calmly look at domiciles that have received such mass immigration since World War 2 (Britain, The United States, Western Europe, Australia, & New Zealand etc) we find a common "“ and disturbing "“ pattern:

1) Massive and ultimately unsustainable deficits on the current account.
2) Chronic government deficits with flabbergasting levels of future unfunded liabilities.
3) Large scale erosion of manufacturing bases and declines in intellectual capital.
4) High levels of structural youth unemployment and even greater under-employment.
5) Hugely damaging misallocation of resources to residential housing speculation.
6) Chronic excessive money supply growth with associated erosion of real capital.
7) A culture of litigation and entitlement.
8) The progressive erosion of historic civil liberties.
9) The vilifying of anyone who questions any aspect of immigration policy as 'fascist'.
10) The use of poorly paid migrants as a subsidized workforce for 'favoured interests'.

Moreover, is there not something offensive in reducing migrants (who are people, families etc) to mere 'units of human capital' - who are then expected to work to support both themselves and a voracious cabal of Kiwi 'boomers' whose economic illiteracy is bankrupting the nation?

You got that right Bobby, I remember that now. Hell of a lot of screaming at the time. Jeez, we have a few of the 'top' US academic economists suggesting the inflation on its way could be worse than the 70s. Imagine 22% on a $400ooo mortgage. That'll be when the crappy house of rotten cards really turns to mush and the Kiwi$ with it. Wonder if Key and English have their excuses ready. "WE did everything we could to prevent this happening" "WE can't be blamed" "Not our job to throttle a bubble"
Yesssir we sure do have us a bright and prosperous future and best of all we know dam well we will be seeing Sir Alan Bollard and Sir John Key and Sir Bill English enjoying their retirement on their state pensions.

I wonder if the people who make decisions in NZ actually read some of the ideas and problems with NZ that are discussed here, because they do make sense. The problem with raising the retirement age, is that it takes time to adjust it, because people who are due to retire soon must adjust their savings to cope with the extra few years the have to cover. As it won't be changed for another two years at least, as it isn't even on the table, it will just mean that a change in retirement age entitlement could be at least 5 years away. Australia however sets the precedent. Tying retirement age to life expectecy is a good idea, however people age at different rates. Smokes tend to be older, and die earlier, than non smokers. Polititians have a conflict of interest with property, as they are hardly going to approve a bill for property tax reform, when they all/most own properties themselves.

Kin: very, add in after a decade, actually 18 years Japan is still in the same position....it never really recovered...

BB's switching to saving not only takes away consumer spending but also the multiple tax cuts the Govn gets, there is less repeated churn so less repeat GST and PAYE, downgradign to smaller cars, less petrol tax...etc etc.....

There is NO point in saving. I have been a saver for decades but relatively become poorer when compared to my friends who are earning little over half of my income. They took huge mortgage and built a big house and much wealthier than me now.

The interest received after 39% tax has always been below the rate of inflation. The house price afflation was much higher than the general inflation. The home-owners do not pay any tax on the capital gains after all. When I retire in 10 years time, I will not be as wealthier as my friends. House prices will not fall as much in the next 10 years because the whole economy has been tied to house/farm securities for lending.

BNZ economist should advice his own peers on banks' past ways of lending too much without equity, even to those on DPB or 16 year olds. The banks are doing lip service to savers and I simple do not trust them. Their interest is just short-term profits and not the welfare of the local savers. They make more profit creating debt with offshore borrowing, and not by the way banks traditionally used to function.

sam.p:

Invest in yourself. Start a small business, manage it prudently, and when it begins to grow, hire good people to help you.

Sure hope if John Banks and his entrepreneurial mates get hold of Auckland Super City they dont go putting Aucklands "Capital Value" up as colateral for the no doubt increased local govt bond issues as Dunedin did, explained below -

Reserve Bank funding the only sustainable option
"Reserve Bank grants, interest-free loans and low interest loans should be available to local bodies to fund infrastructure projects" said Democrats for Social Credit Leader Stephnie de Ruyter, responding to information published in the Otago Daily Times about DunedinCity Council borrowing levels.

Yesterday's edition of Otago Daily Times (4.11.08) reports that "˜Interest on the $92.8 million the Dunedin City Council plans to borrow this year is set to cost the city $9.5 million a year for the next 20 years (totalling $190 million). More is expected to be borrowed next year. The capital value of Dunedin city will be used as security for the loans, effectively meaning banks could place a claim on rates income if the city was unable to meet its repayments. The council will borrow $45.8 million to be repaid over 20 years at 7.5%, and $46.9 million at 9% on an interest-only basis. The gross interest expense will represent 14.4% of total rates revenues.'

"This indicates that funding issues are driving high percentage rates increases, causing hardship to many ratepayers and stalling necessary infrastructure upgrades. It reflects the folly of the present narrow funding mechanisms" Ms de Ruyter stated.

"By utilising our publicly-owned Reserve Bank of New Zealand, instead of borrowing from commercial trading banks, our country's infrastructure and community project needs could be met without the burden of interest-bearing debt. We would then pay for these projects once, not two or three times over. And tomorrow's ratepayers would no longer be encumbered with servicing yesterday's debts" she said.

Ms de Ruyter noted that this was an example of applied social credit.

"The current practice of gathering local body funding through rates, taxes, fees, fines, government subsidies and top-ups is clearly unsustainable and unaffordable: the burden on ratepayers, residents and taxpayers is too great.

"The government must look to the publicly-owned Reserve Bank to fund essential infrastructure development. It is the only sustainable, ethical funding option suitable for this purpose" Ms de Ruyter concluded.
http://www.democrats.org.nz/OurNews/MediaReleases/tabid/111/selectedmodu...

Yeh I did Matt, expanded on it here -
http://www.interest.co.nz/ratesblog/index.php/2009/07/10/top-10-at-10-mo...

I add further to above this from the US Federal Reserve -
Book Entry Procedure
A book-entry program has largely replaced paper U.S. Government and agency securities with computer entries at Reserve Banks.
Book entry offers both security and efficiency advantages over paper certificates.
The Treasury offers new bills, notes and bonds only in book-entry form.
The book-entry program of the Federal Reserve, United States Treasury and several federal and international agencies has succeeded in largely replacing paper U.S. Government and agency securities with computer entries at Reserve Banks. By eliminating certificates, government and agency securities are better safeguarded and more rapidly transferred by the nation's depository institutions.
Securities in book-entry form are less vulnerable to theft and loss, can't be counterfeited and don't require counting or recording by certificate number. In addition, owners do not submit coupons to obtain interest payments or present certificates to redeem securities.

As of year end 1988, about $1.8 trillion, or 98.7 percent of the outstanding marketable Treasury debt, was in book-entry form. All Treasury securities held in physical form by depository institutions"”whether owned by them or held on behalf of others"”are eligible for conversion to book entry and for transfer by wire.
http://www.newyorkfed.org/aboutthefed/fedpoint/fed05.html