1 Introduction
There have been repeated calls for increasing the level of saving in New Zealand. In his budget speech in 1959, the Hon. A. Nordmeyer, Minister of Finance stated: “To maintain and increase our growth it is important that savings continue at a high level. It is the strong desire of the government to provide further incentives for saving”. In a 1984 address to the Economic Summit Conference, Sir Frank Holmes noted: “We have been relying too heavily on overseas sources to supplement our savings in financing our investment. The more we can increase savings, the less we shall need to cut back that investment”.
The sense of disquiet over the rate of saving has a number of origins. First, as reflected in the statement by Sir Frank Holmes, is the concern that an inadequate level of domestic saving will constrain investment, and by implication reduce capital accumulation and the subsequent growth of income. Second, low levels of domestic saving may lead to increased use of foreign saving, and, at some point, the concomitant cumulative increase in the current account deficit may be a cause for concern. Third, if households fail to save adequately, they will be less able to meet the costs of health, education and above all retirement, without greater reliance on the state.
In general, domestic saving has not been sufficient to meet the total demand for investment in New Zealand. Despite an increase in public saving, national saving in total has still fallen short, requiring an increased reliance on foreign saving. This has its expression in the size of the deficit on the current account of the balance of payments. Naturally the outstanding stock of external liabilities rises as the counterpart to these annual deficits.
There are several sources of information about saving in New Zealand. The purpose of this paper is (i) to document and compare the various measures of saving and (ii) to draw attention to some of the measurement issues regarding saving. The paper does not attempt to assess the adequacy of saving in New Zealand, but rather highlights the difficulties of drawing clear implications for policy on the basis of our existing knowledge of saving. It is part of a series of Treasury papers on saving. Other papers that try to assess saving in New Zealand include: an empirical analysis of individual household saving behaviour (Gibson and Scobie, 2001), a discussion of saving and growth in an open economy (Claus, Haugh, Scobie and Törnquist, 2001), an international comparison of household net wealth (Claus and Scobie, 2001), an analysis of foreign investment (Haugh, 2001) and the current account (Kim, Hall and Buckle, 2001), a discussion of superannuation (McCulloch and Frances, 2001) and an evaluation of saving incentive options (The Treasury, 2001).
The remainder of this paper proceeds as follows. The next two sections discuss how saving is measured (section 2) and available measures of saving in New Zealand (section 3). Section 4 examines the New Zealand data, while section 5 compares key saving (related) variables across selected OECD countries. Section 6 discusses measurement issues surrounding measures of saving from the national accounts. Section 7 constructs and reports some adjusted measures of saving for New Zealand and other OECD countries, while section 8 summarises and concludes.
