Gareth Vaughan takes a look at what the main political parties are offering savers ahead of the September 20 election

Gareth Vaughan takes a look at what the main political parties are offering savers ahead of the September 20 election

By Gareth Vaughan

The election campaign's in full swing and we're hearing plenty from political parties pledging to help borrowers get a foot on the property ladder.

But what about the savers? We do have them, even if they don't often get the same media attention as borrowers.

As of June New Zealanders' total household financial assets stood at $276.35 billion, $55 billion, or 25%, above total household financial liabilities of $221.32 billion which included $191.2 billion worth of housing loans.

Interest.co.nz asked nine political parties a series of questions about their policies and views on savings, and broader banking issues. We received responses from New Zealand First, National, the Greens, ACT, Labour and the Conservative Party. United Future, the Māori Party and Internet Mana haven't responded.

Here are the savings related questions and the responses we received. I've purposely largely stayed clear of KiwiSaver and superannuation policy, as this has had a good airing elsewhere. I've also included some information gleaned from what United Future, the Māori Party and Internet Mana have previously said on savings and financial matters at the foot of the story.

A lobby group recently emerged to push for changes to what it views as the overtaxing of savings. Are there any changes your party wants to see to how savings, including KiwiSaver and term deposits, are currently taxed?

ACT: At this election, we have no policy to change tax on savings. However, we are generally opposed to taxes on capital and would consider reducing or eliminating taxation on incomes from savings in the future.

Conservative: Yes we support 0% tax on interest from savings. Support the Savings Work Group report/recommendations generally.

Greens: We have no plans at present to change the existing taxes on savings until we address the inconsistent tax treatment of capital which significantly distorts investment and savings decisions across the entire economy.

To encourage greater savings, the Green Party will implement a comprehensive capital gains tax (excluding the family home) – as recommended by the OECD, the IMF, and the Government’s own Savings Working Group.

Labour: Our capital gains tax excluding the family home is the most significant levelling of the different tax treatment of different investment classes on offer at this election. It does not increase or decrease taxes on KiwiSaver, but does reduce the relative disadvantage suffered by deposits and other saving of rental housing investment. We do not propose changing the KiwiSaver tax credit, nor resident withholding tax.

National: No because the current rules are fair.

NZ First: Savers are heavily penalised. New Zealand First considers savers are poorly served by existing tax policy. We support a sensible tax policy to encourage saving.

New Zealand is the only OECD country without explicit bank deposit insurance. Would your party like to change this? Why or why not? (As of July total household deposits stood at $130.74 billion. See more on bank deposit insurance here.)

ACT: We would not change this. Deposit insurance means that depositors' face no risk from lending their money to a bank. This means that banks cannot compete by offering safer deposits. they must compete by offering higher rates of interest on deposits. To generate the income to pay these higher rates of interest, banks must take more risk in their lending and other activities. Deposit insurance thus increases the amount of risk in the banking sector.

Conservative: No policy on this but willing to consider.

Greens: The Green Party has led the debate on deposit insurance and we will continue to advocate for it to be mandatory for all retail banks. Why should small depositors lose their savings to bail out the bad decisions of the big banks?

Australia protects depositors' savings up to $250,000. Other countries have a lower threshold, typically around $100,000. We think $100,000 is a fair level of protection for New Zealand savers.

Arguments that deposit insurance won’t stop bank failure are disingenuous. Deposit insurance is specifically designed to protect small investors who don't have the ability to assess the risks their bank is taking with their savings. Smart regulation, oversight, and disclosure requirements are what helps prevent bank failure.

Labour: We do not have a final position on this, although David Parker has expressed interest in a pro rata cross guarantee from other registered banks up to a set limited amount per depositor.

National: National has no plans to change the current rules, which provide the appropriate balance between incentives on banks and protections for depositors.

NZ First: New Zealand First’s policy is to provide a government guarantee on the first $100,000 of investment in New Zealand owned banks. New Zealand First will carefully consider any other detailed proposals for extending banking deposit insurance. New Zealand First’s KiwiFund scheme would carry a government guarantee for capital invested.

Does your party have any specific views on the Reserve Bank's Open Bank Resolution Policy? If so what are they, and do you support or oppose it?  (See what the Reserve Bank's OBR is and how it might work, if implemented, here.)

ACT: We support the policy because it makes directors, senior management, shareholders and, to a lesser extent, creditors suffer losses when a bank becomes insolvent. It thereby provides these parties with an incentive to limit risk-taking. It does all this while avoiding the systemic calamity that would ensue from a large bank ceasing operations overnight.

Conservative: No specific views.

Greens: Open Bank Resolution is a useful tool in the Reserve Bank’s toolkit for dealing with a possible bank failure. However, without other essential tools like deposit insurance, it’s likely Open Bank Resolution will fail politically, leaving the taxpayer on the hook for paying for a major bank failure.

Banks in Australia and elsewhere in the OECD pay insurance premiums to protect their customers' savings. Why should New Zealand taxpayers cover their potential liabilities here?

Labour: Under Labour in the event of a bank failure the first $30,000 of all deposits will be protected and will not be subjected to a ‘haircut’. The cost of that guarantee must be borne by the banking system, meaning it would be a cost paid by banks that did not fail. This is the system used in Australia and it should also apply here.

Why have a different system in New Zealand than in Australia? It creates yet another reason to move to, or invest in, Australia rather than here.

The Reserve Bank’s proposed open-bank resolution means all unsecured Kiwi depositors in a failed bank will lose money, through no fault of their own. Yet under current National policy, some overseas lenders to banks have recently been protected through covered bonds, which increase the risk to ordinary depositors. That’s not a fair system.

National: National supports current Open Bank resolution arrangements.

NZ First: New Zealand First’s view is that this policy and its implications need much greater scrutiny than it has received.

Does your party have any specific views on New Zealand banks using covered bonds as a funding source? If so, do you support the use of covered bonds by New Zealand banks? Why or why not? (See more on covered bonds here.)

ACT: The more covered bonds a bank issues, the worse the position of its unsecured creditors. This will be reflected in the risk-premiums the bank must pay on its unsecured debt. In other words, banks have a price-based incentive to get the balance right. There is no need for regulatory intervention.

Conservative: No specific views.

Greens: We supported legislation to regulate covered bonds on balance, but voiced several concerns at the time. Again, the extension of covered bonds in a banking sector without deposit insurance creates inequities for small depositors. Covered bonds enable large, sophisticated investors to protect their investments by securing first preference over a failing bank's best assets. Without deposit insurance, covered bonds leave small depositors even more vulnerable to losing their savings.

Given the potential $33 billion size of the covered bond market in New Zealand, we also believe it deserves special oversight by the Reserve Bank rather than being left, under National, to the market to self-regulate.

Labour: Covered bonds create a class of deposits under which people who have the benefit of that covered bond get a preferential interest in some of the assets of the bank in the event that it goes broke. The amount that is left for people who are outside that covered bond arrangement is less. Those outside the covered bond wear a more than proportionate share of the loss in the event that there are not enough assets when the bank is wound up to cover deposits.

The problem we had in New Zealand is that this was already allowed, but was an unregulated activity. So, on balance, we in the Labour Party accepted that it was necessary to regulate covered bonds, so that there is a clear limit on the amount that can be covered, ahead of other unsecured depositors in the bank.

National: National has no plans to change the current rules around banks using covered bonds, which are a matter for individual banks.

NZ First: n/a.

United Future's savings for school kids

In terms of the parties who didn't respond to our questions, United Future gives a brief outline of its savings policy on its website.

The Peter Dunne led party says savings are an integral part of wealth and asset creation that help strengthen families in the long-term.

United Future says it would:

"Introduce compulsory KiwiSaver, which will increase the saving rate of New Zealanders, deepen the investment pool and provide financial security and certainty in retirement;"
"Seek to have a portion of KiwiSaver funds re-invested in NZ innovation and infrastructure assets;"
"Re-introduce savings schemes to children at school, in partnership with the banking industry, and promote the purpose of savings as a core feature of the ‘life skills’ curriculum."

The Māori Party, meanwhile, has a Māori Economic Development Strategy and a Māori Economic Development Action Plan. A key goal of the latter is increased financial literacy and savings. A 2012 announcement has the party working with others, including BNZ, "to share their expertise to create new plans and strategies and to complement existing work in designing Māori specific savings schemes and deliver financial education programmes to Māori."

Colin Craig's anti debt message

In his response to our questions Conservative Party leader Colin Craig noted that as a party that's less than three years old and isn't yet in Parliament, it hasn't yet formulated policy on some matters interest.co.nz asked about.

However, a search under "saving" on the Conservative Party website brings up one press release and several answers from Craig to questions put to him that shed a bit more light on his views on savings and financial matters.

In the press release, from May this year, Craig criticises Labour's proposal to make KiwiSaver compulsory. Here are some of the points he makes in the release:

"The problem here is that Labour has missed the obvious, the best form of saving that any individual can make on average is to reduce their borrowing, and in most cases this means paying off credit cards, and then their mortgage as soon as possible."

"By legislating for the compulsory use of KiwiSaver, Labour would be forcing many New Zealanders to make a less than optimal financial choice. Government should not dictate the types of investment New Zealanders hold, particularly when they dictate a sub optimal choice."

"Current KiwiSaver options are not guaranteed and therefore Labour's proposal will be forcing a financial risk on New Zealanders; a risk that they may not wish to take," he says.

"New Zealanders voted overwhelmingly (92%) in a 1997 referendum against a compulsory savings scheme. It is our view that New Zealanders have already spoken on this issue, with good reason, and the government should not override the wishes of the people."

Plans for KiwiSaver investment in govt guaranteed bonds

The press release goes on to float the idea of KiwiSaver investment in government guaranteed bonds.

"The Conservative Party has a policy to introduce a new KiwiSaver option whereby New Zealanders can save by investing in government guaranteed bonds. These bonds will be used by the government to build infrastructure, and reduce dependence on overseas borrowing. This is a retirement savings option that makes sense. It is voluntary, with a sensible rate of return, and a government guarantee."

Meanwhile, in a published answer to questions about the monetary system, fractional reserve banking and house prices Craig, whose party is polling close to the 5% threshold required to get into Parliament says;

"There are a raft of challenges with the way the world economy currently works. In respect of money I hold a purist view. I believe currency should only be a means of exchange, not a tool to manipulate an economy, and not subject to any fractional process to multiply it which of course results in inflation. Fractionalising money is really the same as printing more of it (or adding zeros to a computer screen nowadays)," says Craig.

"The much harder question is what to do about it. We are part of a globally integrated economy, and as a borrower, subject to certain provisions imposed by lenders."

"Let me suggest two practical steps that we can take to improve the situation; Firstly we should be debt free. We are a small country with enormous untapped wealth, debt free is achievable. Secondly we should hold wealth in real assets. Consider for a moment the vulnerability of the superannuation savings and the government super fund which are invested in offshore stock markets. This could instead be invested in key infrastructure in New Zealand," Craig says.

"Infrastructure is real bricks and mortar, serving a necessary and permanent function. So a market crashes - not fun for anyone - but at least we would still have a functioning asset."

Internet Mana's new wealth taxes

According to the party's website, Internet Mana believes the tax burden has shifted too heavily onto low and middle income families, something it wants to change.

"Internet Mana would redress the balance with new taxes on those with high incomes and high net wealth which is currently untaxed."

The party also proposes a "wealth tax" on unspecified luxury items over and above current GST. It says details of this will be worked out when full financial information is available. Internet Mana also wants to introduce a Capital Gains Tax, which would apply to unearned income from the increase in value of property, shares, bonds and precious metals.

"It would be paid by an individual or company at the same rate as the appropriate personal/company tax rate. It would not apply to the family home," the party says.

Internet Mana also wants to introduce a Financial Transactions Tax. It argues this would tax currency speculation that's helping keep the value of the New Zealand dollar artificially high.

"As well as gaining revenue this tax would help reduce our dollar’s value thereby increasing income from exports. A Financial Transactions Tax would also apply to share transactions, for example as now applies in several European countries."

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30 Comments

My goodness is Colin Craig finally talking common sense.  Who would have thought it was possible?
0% tax on Saving, Investment in Infrastructure.

but what is "saving"? is that deposits only? yet deposits are not really great things to put money into in terms of growing an economy.  Is it invetsing in a business directly? in which case that is in effect no tax on earnings on everything.
Do we need more infrastructure? just how pays the bills?
"common sense" fraid not IMHO, such a statement frequently isnt, its just used as a hide behind as there is no real justification.
regards
 
 

the question refers to deposits and term deposits and kiwisaver. And I thought you didn't believe in growing an economy steven? peak things and exponential problems is what i've learned from you ;)

Besides that (and we will need investment to move to a different economy) 
a) there is a big difference between the saved and the saver.  The saved lives off their savings, they will not be re-investing the interest by and large but spending it.  The savers on the other hand are trying to collect capital, big difference. 
b) Deposits are not really terribly productive sources of interest, and even I suspect economic growth. They are low risk and "safe" hence really if we want ppl to grow an economy we want that tax free status on risky endevours and undertakings to encourage them to take place. This actually does the opposite, in effect a risk free rate of return has a tax advantage over making a good, that is plain retarded IMHO.
In terms of "peak things" yes this is true, but giving tax free status to deposits makes no sense in either environment/future, unless as pork barrel politics.
regards

Is that "savings" just loans made to banks?

Or is that the "savings" I make by paying my mortgage off faster?

Of is it "savings" made into KS or other annuity funds? (that would be nice, especially if the drop the tax on the employers contribution which is unnecessary grab - after all that interest builds our retirement fund and collective pension wealth, so isn't a threat of any kind to inflation!!)

savings made by paying off a mortgage faster aren't taxed anyway are they? So i guess its giving the same benefit to people with debt as to people in the black. Possibly I'm wrong, but isn't there someone in government or RBNZ who constantly bemoans our low savings rate? maybe this would help

those savings isn't taxed, and it's a lot more benefical to people with debt than loaning money to a bank - so if someone is promising tax-free on savings...it already is...  so is that their game ? Promise stuff that is alreqady done.   The first so many dollars recived in interest are also tax free, until threshold of reporting is crossed.  So its really just tax cuts for a few rich people, who put their money in poor return places.

Lots of OAPs have money on deposit, hence this is promising them a 25% pay rise.
regards

Low savings rate is less of an issue compared with the bad borrowing rate, ie too many ppl are gambling in houses and not business undertakings.
and no I dont think this will help the low savings rate.  What it is is pork barrel politics for the OAP vote.
regards
 

very good point.
regards

0 % tax on savings - good thing.  Why not tax interest paid.
That's a direct reversal of the current situation.  Collection mechanisms and rules are all there.  Just flip them.
It's quite a 'wow' signal and shows that what we need are savers, not borrowers.

huh? we only pay tax on interest earned and not on the capital.
Actually we need good borrowers ie business ppl who borrow to undertake an opportunity to make a good, we desperately need them IMHO.
It is a balancing act, we dont need savers if no one borrows.
regards

are you saying interest paid to banks and lenders?  It's already done, it's called Income tax (where it is listed as the lenders profits - no point taxing them on costs portion, what would they pay it with?).

Call it luxury tax, not wealth tax.

luxuries for for those who like them and prepared to pay more for non-necessities...

...wealth is a bunch of friends who show up and help you move, a solid roof over your head, good health and an education that works.

tax luxuries...not wealth...
wealth is to be encouraged.

Agree

WOW, Colin Craig scratches his head if you mention OBR, covered bonds, or monetary policy.  Do we really want to give this guy to influence government?  Speaking of fiat money and what its good for here's a related calculation, the median price of houses in Albany and Taruanga priced in gold, with ROI's in gold.  Lastly the value of gold denominated in NZD over the same time period with ROI in NZD.  I guess the last ROI represents true inflation.  Data sources here here and here.
Albany 1994 ($280,000 = 13.4 kg) -> Albany 2014 ($800,000 = 16.4 kg) ; ROI(Au) = 22%
Tauranga 1994 ($120,000 = 5.7 kg) -> Tauranga 2014 ($375,000 = 7.7 kg); ROI(Au) = 35%
gold(1 Kg) 1994 ($20,881) -> gold(1 Kg) 2014 ($48,671); ROI(NZD) = 133%

So what that means is that if we had a true gold backed currency, house price inflation would have averaged 1 - 1.5% per year over the last 20 years.  BUT, because we have government money fiat currency house price inflation is much higher.  Parasitic central banks are stealing the wealth of savers and eroding capitalism.  Now they have the audacity to propose OBR bail ins, and covered bonds so that they can steal even more wealth from savers.  grrr!

You cannot gold back a currency in todays modern economy. 
Its not the central banks fault we are in such a mess but that the 'free market" has in effect been allowed to run riot.  The central banks are now trying to stay the Second Great Depression, and that will wipe out capital and savers en-mass.
OBR means tax payers are not liable for others financial illiteracy and risk taking, its known as avoiding moral hazard. The good thing is the OBR makes its crystal clear that a depositor's money is at risk and not letting them sit in the illusion of safety, so when events unfold those despoitors can move their money fast, faster than the ocvered bond holders, that leaves the shareholders and bank owners in the deep end, where they should be.
regards
 

I absolutely agree.  OBR and CB dramatically increase the risk of a bank run.  However, I'm sure vested interests would ensure that capital controls are implemented well ahead of time so that even the most trigger happy pessimist wouldn't be able to bail out.

Um, not really.  There will be a bank run, indeed Dr Bollard commented that a lot of $100 bills were drawn out in 2008 and the serial numbers have not been seen since, so I simply dont think they will be quick enough.
Forget vested interests, (and that is opinion anyway) they like the RB and Pollies can only see some weeks ahead.  They will all be busy talking us into its all OK some months out while I for one bail.  When it does finally happen I think we'll see automatic trading happen so fast the market will hit zero before the RB etc can blink, given history I think you only have to be 2 weeks maybe 2 months or so ahead.
regards
 
 

You miss the 33% loss if you had bought a few years ago and held gold today..
its known as cherry picking.
regards

Yes agreed.  I'm not suggesting we have a gold backed currency, I'm merely pointing out the shocking destruction of wealth that happens when you hold onto cash.   If someone was thinking of saving cash to buy a house in say10 years time its surely worth considering isn't it? especially given the current climate.
 
Regarding the pull back of gold.   It seems like after Leman Brothers, everyone rushed to gold and US treasuries as safe havens.  It seems the overshoot has been slow to pull back.  Perhaps that's just the dynamics of the gold market, quick buy slow sell?   The big question is what happens during the next phase of the financial crisis?  Will money disappear from NZ like it did last time.  Will people really flock to US treasuries like they did last time.. really..? I'm not sure I believe that.  The US has 17 T of debt with 70 something trillion of unfunded liabilities.  They're on the verge of losing their global reserve currency status and their economy is in tatters.  
 
So in that context maybe during the next financial crisis people will go to gold instead.  So maybe holding a couple of kilos of gold in New Zealand isn't such a bad thing.    Maybe at some point in the future the price of NZ houses denominated in gold will be much less than it is now. 
Just thinking out loud..  
 
    

Bit of a stretch to say the US is "on the verge of losing global reserve currency status" Pat.
The attempts to get oil traded in other than USD have been a damp sqib so far and in the future will continue to generate a lot of smoke but little heat.
Gold bugs will be licking their wounds for a couple of decades yet, just like the last gold mania in the 1970's.

Quite a few authors would disagree with you.  In saying that, I personally read a lot of negative stuff from zerohedge, Jim Rickards and the like.  Being of a melancholic temperament, I gravitate towards that kind of thing.  I suppose a pessimist is never disappointed.
 
Regarding the gold, Unless we enter a severe deflationary phase (ie. gold @ 900USD) I dont see gold going down much more.  It seems to have equilibrated with other asset classes.   Besides if we do see severe deflation in New Zealand the OBR will probably be required, and gold might sitll win out over bank deposits which suffer a "hair cut".

Well the US bombed the crap out of the last country to serious push for EUR backed oil trade (Iraq)

Well the US bombed the crap out of the last country to serious push for EUR backed oil trade (Iraq)

Good luck bombing China, Russia and the rest of the BRICS.

That's why bullies pick on peoples' weaker friends and also try to undermine their friends.  Playground politics at it's finest.

Oh - also didn't find the earlier comments about taxation - 
No only do I pay a 70+ rate to your 30%,

I worked average 10+ hours a day, 7 days.

so happy salaryman pays the government 40 (37.5) hours at 30% = 12hrs a week service to their government masters

I have to pay 70+ at 70% = 49 hrs a week - more than most people work all week.   Whats left over of my very tiring life, is what I get to live on/improve myself or my business.

So I get less in the hand, and do 35 hrs more labour for government , this is called "fair"

So you understand why I have issues about taxes?

I dont agree with you on cash. If you had bought gold  8 years ago instead of holding onto cash you would have taken a 30% loss.  So saving say a 50k deposit would see you knocked back to 35k.  Dont know about you but that is 2 years hard saving for me, probably more like 3.
If I had had cash over the last 8 years with 2% inflation or in a bank I'd be evens more or less.  That is no great destruction of cash.
As well as that if we get deflation cash is king and assets collapse in value.   Or housing, If you had bought 20 years ago for say $150k and now its worth $450k but we see a 50% loss as the bubble pops  you are breaking even more or less. If you bought in say $207K and have a 90% mortgage and we see a 50% loss you are seriously out of pocket.
Now if we look at the madness of the property bubble it seems to be limited to some areas of NZ and the reasons for this are far from clear.
"everyone" didnt rush into gold. Lots of Austrians and those of Republican leanings sure did and look at the result, some severe lost shirts.   Glenn beck probably made a lot of $s selling on behalf of etc...
The next phase of this crisis is an interesting Q. 
IMHO, thinking out load.
Will money disappear out of NZ? yes, its borrowed cheap from the Fed to specualte on the carry trade and hence it will run back there. I see no reason for this to change.
US treasuries, well many have never got out since 2008 you need to ask why.  The US is seen as a safe heaven that may not be logical but thats the human aspect in this for you.  Where else does the money go?  NZ is all about a housing bubble, when that pops we'll be in deep doo doo, so having money here isnt looking too hot a bet.
US debt etc, yes but in effect there is no other game in town. It is like playing musical chairs, everrtyone is making money while the music plays and everyone will try and sit on the US chair when the music stops.   And yes even that chair may not be there, personally I  agree with you, it is not. US a basket case, yes, I wouldnt put my money near the place, but that is me view (I have penions stuck the the US markets there un-fortunately)
"Gold instead" isnt a sure bet while we have deflation, conventionally cash is. Every day that cash buys more things and those gains are un-taxed.  After that deflationary phase phase and we are looking at inflation (maybe) then gold is by far the best place to be I would guess.  This is certianly what I would do if I was not in debt ie I have a mortgage, I'd buy gold or maybe assets.
Someone said that you dont make money in a class of investment ie holding on to it , you make the money by moving at the right time before the class you are in tops and tanks and into one taking off.  
Also the conventional wisdom is you move into gold to see you through an event. It can protect your wealth very well, afterwards you get out of it.  Speculating in it using a faulty economics model you just know is right (Austrian) but isnt will see you get burned, as we have seen makes for huge losses. As Paul Krugman has said if you listened to the WSJ and not him during the GFC you would have lost a packet, Im sure many did.
regards
 
 
 
 
 
 
 
 
 
 
 

Thanks Steven.  Yes you’re right gold didn’t suddenly jump after Lehman Brothers, but what’s interesting is the close correlation between the gold price and the total value of New Zealand housing stock from the RBNZ website, very close correlation of explosive growth from 2002 onwards.  Interestingly 2002 is when Alan Greenspan lowered interest rates to historical lows.   
 
I’ve just tried to put some numbers to what you’ve said above.  Lets say the price of gold in 2006 was $30,000NZD  and the 2014 price is say $48,671.  Bit hard to eyeball the numbers from landlords.co.nz but this is pretty close.
 

Albany 2004 ($450,000) -> Albany 2014 ($800,000 ) ; ROI(NZD) = 78%
Tauranga 2004 ($278,000 ) -> Tauranga 2014 ($375,000 ); ROI(NZD) = 35%
gold(1 Kg) 2004 ($30,000) -> gold(1 Kg) 2014 ($48,671); ROI(NZD) = 62%

So imagine you had a 100K deposit in 2004 and used it to buy gold (@ spot +3%) which gives you 3.24 kg.  Then you sell in 2014 (at spot -3%) which gives you $152,963.  That’s a 53% ROI and still a healthy deposit for a house, but yes you’re right you lose out.  Of course with the benefit of hindsight you’d be way better off buying the house with leverage rather than mucking around with gold.

Let me try to articulate the problem as I see it for gen X and Y Aucklanders today.  In 2004 the short term risk of catastrophic failure of the economy and OBR “hair cuts” was practically zero.  Moreover, the house price to income ratios were such that most professionals could easily afford to finance that house in Albany.  Today the risks are palpable,  All the reserve bank balance sheets are overloaded with debt.  That $800,000 house in Albany now requires a 400K deposit (for me anyway) and that will take my girlfriend and I about 7 years to save.  The risks are twofold, if deflation occurs then a highly leveraged investment which goes pair shaped is a financial disaster.  Secondly given the likelihood of GFC round 2 which will surely happen in the next 7 years, is it seems dangerous to save large quantities of New Zealand dollars in the bank.  You say buy gold after the deflation phase, but deflation will trigger mortgage defaults and OBR bail ins.  Capital will evaporate.    Oh well not a problem for me as my partner and I are now looking to move and buy in Germany.    

Regarding the New Zealand housing bubble, is it really a bubble?  As I see it NZ houses are an international investment commodity, and denominated in gold they seem reasonably priced.  However, if the Labour party wins (and I hope they do), and they manage to block foreign investors from buying houses then everything will change.  Auckland houses will no longer be an international investment commodity.  House valuation will suddenly become dependent on rental yields and income multipliers.  A large swathe of Auckland houses will suddenly find themselves to be in a McMassive bubble.  I doubt that will happen as too many politicians own rental portfolios, but its another thing to consider I guess.