By Alex Tarrant
New Zealand is a step closer to some sort of compulsory private savings scheme after Prime Minister John Key said the National-led government was considering a soft compulsion option for KiwiSaver and Leader of the Opposition Phil Goff said the Labour Party was looking at options for a more universal savings scheme.
Labour has indicated it will unveil a savings policy in the upcoming election campaign, and while National has so far stopped short of policies to push more people into KiwiSaver, Key today said officials were looking at ways to get those in the labour force not currently in KiwiSaver into the scheme.
One option for a more comprehensive savings scheme that does not require full compulsion is a 'soft compulsion' option put forward by the government-appointed Savings Working Group earlier this year, which would see people in the workforce, but not currently in KiwiSaver, automatically enrolled, although they would be given the option to opt out of the scheme.
In May while presenting the Budget, Finance Minister Bill English had said the government would look at this option, although at the time said the government "couldn’t see a good enough reason to move to compulsion [in this Budget]".
About one million people currently in the workforce are not in KiwiSaver, arising to questions of whether such a policy would therefore cost NZ$1 billion upfront, due to the government’s NZ$1,000 Kickstart scheme.
English said on Wednesday afternoon that he did not think the costs would be that much. People would still be allowed to opt out of the scheme.
“If people aren’t in Kiwisaver now, when it is a very good deal, then they might have quite good reasons for it. A big mortgage, just had another baby, one of them’s had to stop work. There’s any number of reasons, so we shouldn’t assume that the million Kiwis who aren’t in it, want to be in it," English said on Wednesday afternoon.
'In NZ's best interests'
Speaking to media at his weekly post-cabinet press conference on Monday afternoon, Key said in his view it was in New Zealand’s best interests to have the most number of people in KiwiSaver as possible.
"The government’s looking at how we could auto-enrol those people that are in the workforce but currently not in Kiwisaver. Whether it would be a good idea to make it compulsory, that was something we asked the Savings Working Group to look at, and they rejected that as an idea," Key said.
"They rejected it I think on the basis that it wouldn’t necessarily suit every person’s circumstances. Low income people might find it quite challenging to go in there, and obviously there would be an additional cost on the Crown,” he said.
The government was working on releasing a discussion document "fairly soon" which would look at how to auto-enrol people in the workforce but not currently in KiwiSaver, Key said.
Labour hints too
Labour Party leader Phil Goff earlier on Monday hinted at some sort of universal savings scheme policy that went beyond just a universally available scheme as KiwiSaver was now, but he was coy on further details.
Talking to media in Parliament this afternoon, Goff said there were a number of further options to the current KiwiSaver scheme that could be looked at, saying he would like to see a universal savings scheme in New Zealand. But there were problems to overcome first, as many people currently did not have any discretionary spending to be able to save some of their income.
Asked whether KiwiSaver meant there was already a universal scheme, Goff replied:
“It was universally available, but it wasn’t universally taken up. It was a great start, it’s 1.7 million people who are KiwiSavers.”
Asked whether therefore KiwiSaver would have to be made compulsory to make it more universal, Goff said:
“You’ve got a number of different options.”
"If we’d kept the Kirk fund back in the 1970s, we would have hundreds of billions of dollars to invest in New Zealand’s future. The difficulty we have at the moment is that there are a whole lot of New Zealanders that are struggling just to meet the day-to-day bills, that actually don’t have the ability to put money aside for savings. You’d have to overcome that problem,” Goff said.
“Ultimately I would like to see New Zealand move towards having a universal savings scheme, but there are a lot of problems to overcome before you can get to that point," he said.
Goff would not go further into any details on what Labour was perhaps considering along those lines. The party has already indicated it would release further economic policies in the run-up to the November 26 election, incorporating a focus on savings.
'Give RBNZ more tools'
Meanwhile, Goff said it worried him that the New Zealand dollar had gone through 88 US cents this morning, and was continuing to rise.
"What that does is put our export industries under real pressure, and that means a loss of jobs. We can ill-afford to lose jobs. I was talking to the timber industry the other day, and one of the CEOs said to me if we hit 90 [US cents], that could lead to the closure of just about every sawmill in New Zealand. That’s an example of how serious it is,” Goff said.
Asked whether it was perhaps time for New Zealand authorities to intervene in the currency markets in an effort to devalue the New Zealand dollar, Goff said that decision was entirely up to the Reserve Bank.
“It’s for politicians to tell them under the existing law. What we’d do is to change the law, to broaden the objectives of the Reserve Bank, and to give them legitimacy around other tools other than simply interest rates,” he said.
Asked whether Labour would consider a tax on money flows into New Zealand, Goff replied the party had not put that idea forward.
“I that’s something that other countries like Brazil and Chile are currently operating, that’s something that might be given consideration in the future, but it’s not formally part of our policy at this point,” he said.
US deal welcome news
Goff welcomed news a compromise appeared to have been reached in US between parties on the government’s debt ceiling and deficit reduction talks.
“I believe that that’s always where they were going to get to. They couldn’t afford to damage their own economy, but if they had damaged their own economy that would have had implications right across the world," he said.
"The US is a third of the global economy, and the last thing New Zealanders need is to see their interest rates going up on top of all the other pressures they have on the rising cost of living.”
(Updates with video of Finance Minister's comments on cost, video of Key, comments from Key, video, with further comments on savings, NZ$ and US deal.)