Saving New Zealand: Reducing Vulnerabilities and Barriers to Growth and Prosperity: Final Report to the Minister of Finance

The Savings Working Group presented its final report to the Minister of Finance in January 2011. The Minister of Finance authorised the final report to be released here on 1 February 2011.

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Letter from Savings Working Group# Readers' guide# Part 1# Overview# Conclusions# Recommendations# Part 2# 1 Introduction# 1.1 Objectives 1.2 The saving problem 2 New Zealand's economic situation# 2.1 The main issues 2.1.1 Poor economic performance 2.1.2 Weak productivity growth 2.1.3 Low saving relative to investment 2.1.4 Build-up of foreign debt 2.1.5 Implications of high levels of foreign debt 2.2 Understanding saving, wealth and debt 2.2.1 New Zealand’s saving rate 2.2.2 New Zealand’s wealth and assets 2.2.3 The adequacy of household wealth and assets 2.2.4 The need to entrench higher household saving 3 Implications of New Zealand's national saving position# 3.1 Vulnerability 3.1.1 Macroeconomic vulnerabilities are of concern in New Zealand 3.2 Growth and efficiency 3.2.1 Issue 3.2.2 Features of poor growth and links to saving 4 Factors contributing to New Zealand's national saving performance# 4.1 Introduction 4.2 Households 4.2.1 Incentives and disincentives for household saving and building wealth 4.2.2 Private-sector debt and factors affecting it 4.3 Fiscal situation 4.3.1 Issue – the move to structural deficit 4.3.2 The move to structural deficit 4.3.3 Pressures on government saving position projected to grow 5 Future scenarios# 5.1 Future prospects under business-as-usual 5.1.1 The income burden of external debt 5.1.2 Implications of no policy change 5.1.3 Comparison with other countries 5.1.4 Reducing New Zealand’s vulnerability 5.2 Modelling national saving scenarios 5.2.1 Results of an increase in national saving 5.2.2 Results of increased national saving plus a lower cost of capital 6 Government saving# 6.1 Fiscal policy 6.2 A high-performing public sector 6.1.1 Government savings and productivity 6.1.2 Public sector performance 6.1.3 The Crown’s balance sheet 7 Household and business saving# 7.1 Introduction 7.2 Tax policy 7.2.1 Taxes and saving: a brief overview 7.2.2 Current structure of the New Zealand tax system 7.2.3 Income tax incentives – can they increase national saving? 7.2.4 Increasing the level of national saving by changing the structure of the tax system 7.2.5 Thin capitalisation rules 7.2.6 Reducing the inherent over-taxation of savings in income tax 7.2.7 Indexation 7.2.8 Company tax rate 7.2.9 Other 7.3 Long-term saving 7.3.1 PAYGO versus SAYGO 7.3.2 NZ Superannuation Fund 7.3.3 Compulsion 7.3.4 KiwiSaver design 7.3.5 Annuities 7.3.6 Other long-term saving 7.3.7 Declining home ownership 7.4 The role of business in the national saving debate 7.5 Financial education 8 Measurement issues# Part 3: Additional reference material# 9 Additional analysis# 9.1 Understanding saving, wealth and debt (2.2) 9.2 The probability of a sudden stop (3.1) 9.3 How financial and economic crises came out of the blue: three examples (3.1) 9.4 Household saving - what are the government's objectives and how can it best achieve them? (4.1) 9.5 The impacts of KiwiSaver on saving (7.3) 9.6 Other approaches to partially prefunding the NZ Superannuation Fund (7.3) 10 Terms of Reference for the Savings Working Group# 11 List of submissions# 12 References#	Saving New Zealand: Reducing Vulnerabilities and Barriers to Growth and Prosperity: Final Report to the Minister of Finance - January 2011 - Savings Working Group PDF 1.16 MB

Browse section/chapter

Download/Page range

Letter from Savings Working Group#

Readers' guide#

Part 1#

Overview#
Conclusions#
Recommendations#

Part 2#

1 Introduction#
- 1.1 Objectives
- 1.2 The saving problem
2 New Zealand's economic situation#
- 2.1 The main issues
- 2.2 Understanding saving, wealth and debt
3 Implications of New Zealand's national saving position#
- 3.1 Vulnerability
  - 3.1.1 Macroeconomic vulnerabilities are of concern in New Zealand
- 3.2 Growth and efficiency
  - 3.2.1 Issue
  - 3.2.2 Features of poor growth and links to saving
4 Factors contributing to New Zealand's national saving performance#

Part 3: Additional reference material#

9 Additional analysis#
10 Terms of Reference for the Savings Working Group#
11 List of submissions#
12 References#

Saving New Zealand: Reducing Vulnerabilities and Barriers to Growth and Prosperity: Final Report to the Minister of Finance - January 2011 - Savings Working Group

PDF

1.16 MB

Dear Minister

We are delighted to complete this Report for you.

In the time available it required an intense effort and I thank everyone who contributed to it, in particular, the members of this Group and its secretariat.

The Report presents well-considered, robust and, where necessary, pragmatic views on economic policy and saving issues which we consider merit serious consideration, especially in the current economic and financial market context. However, some of our recommendations do require further detailed fiscal analysis, which we did not have time to complete.

While our Terms of Reference excluded some issues this was not a significant constraint as our views on them are implicit in our higher-level analysis.

Our views will challenge some strongly held and entrenched attitudes, and differ in some areas from genuinely held perspectives where the position is not helped by data difficulties. However, we are confident in the merits of the views in our Report, as a sound and realistic basis for policy.

Best wishes

Kerry McDonald
Chairman
Savings Working Group

Members of the Savings Working Group

Kerry McDonald MCom(Hons) DCom(hc) FAICD AFIOD – Chairman
Company Director

Dr Craig Ansley PhD FIA
Visiting Professor, Macquarie University

Dr Andrew Coleman PhD
Senior Fellow, Motu Economic and Public Policy Research
Senior Lecturer, Department of Economics, University of Otago

Mary Holm MBA
Financial Columnist and Author

Dr John McDermott PhD
Assistant Governor, Reserve Bank of New Zealand

Paul Mersi BCA
Financial Services Consultant

Stephen Toplis MSocSci
Head of Research, Bank of New Zealand

Secretariat: Treasury (Brian McCulloch, Geoff Lewis, Paul Rodway, Lisa Meehan, Jaime Alaimoana), Inland Revenue Department (Matt Benge, David Carrigan), Reserve Bank of New Zealand (Phil Briggs, Daan Steenkamp), Statistics New Zealand (Jeff Cope).

Readers' guide#

Part 1 – concise, higher level overview – not technical, an easy read.

Part 2 – the full story, more detail, technical in parts.

Part 3 – more detailed and technical supporting information for Part 2.

The presentation is designed to meet the needs of a variety of readers and this results in some repetition of important points.

Saving New Zealand: Reducing Vulnerabilities and Barriers to Growth and Prosperity: Final Report to the Minister of Finance

Letter from Savings Working Group#

Readers' guide#

Part 1#

Overview#

Conclusions#

Recommendations#

Part 2#

1 Introduction#

2 New Zealand's economic situation#

3 Implications of New Zealand's national saving position#

4 Factors contributing to New Zealand's national saving performance#

5 Future scenarios#

6 Government saving#

7 Household and business saving#

8 Measurement issues#

Part 3: Additional reference material#

9 Additional analysis#

10 Terms of Reference for the Savings Working Group#

11 List of submissions#

12 References#

Readers' guide#