Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Institute Proposes Bold Action

The New Zealand Institute Proposes Bold Action To Help Many More New Zealanders Get Ahead

A report released today proposes bold and creative policy solutions to help many more New Zealanders get ahead financially, and to lift New Zealand’s savings and ownership outcomes in a material way.

The report, called “Opportunity for a Lifetime: Creating an ownership society in New Zealand”, is the fourth and final report to be released by the New Zealand Institute around the theme of ‘Creating an Ownership Society’ in New Zealand.

The New Zealand Institute’s previous three reports, released since July 2004, described the lack of assets held by many New Zealanders, the difficulties that many New Zealanders face in building wealth over their lifetimes, and the social and economic benefits that are generated by asset ownership and savings.

New Zealand Institute chief executive Dr David Skilling notes that “together, these social and economic benefits create a compelling case for action to raise the level and broaden the distribution of asset ownership by New Zealanders”.

The report released today is focused on solutions that will help many more New Zealanders to get ahead financially and also lift the national level of savings.

The report argues that deliberate policy to promote savings and asset ownership is required. The international evidence is clear that these policies work, and the absence of such policies in New Zealand over the past decade or so is a key reason that savings and asset ownership outcomes have declined in New Zealand despite a supportive economic environment.

Dr Skilling notes that “it is very unlikely to be a coincidence that New Zealand has the most hands-off approach to asset accumulation in the Anglo world and also amongst the worst outcomes in terms of savings and household wealth”.

A significant, sustained policy commitment is required to promote asset ownership – the size of the solution needs to be aligned to the scale of the ownership challenge. Small-scale initiatives are unlikely to be adequate.

Rather, Dr Skilling argues “the policy solution needs to help many people get ahead, not just a few, to be flexible, addressing challenges from low savings, to student loan debt and declining home ownership, and also to promote a savings culture in New Zealand”.

The major recommendation in the report is the establishment of individual savings accounts for all New Zealanders, called Kiwi Savings Accounts.

These accounts will be created automatically at birth, with a series of government endowments and a system of matched savings. Under conservative assumptions, these accounts could have balances of over $14,000 by the time of the child’s 18th birthday. This will eliminate the need for a student loan for many, and it will ensure that everyone starts adult life with a firm financial base.

A two percentage point across the board reduction in the personal tax rate is also proposed, which will be diverted into the individual’s savings account. And for voluntary contributions into this account of up to $1000 p.a. the government will provide a matching contribution. Employers and others, such as family members, will also be encouraged to make contributions to the accounts.

Funds can be withdrawn from the account to finance education and the repayment of student loan debt; to finance the deposit on a first home; to finance retirement; and for transfers to the accounts of children.

This will require a major fiscal commitment to promoting asset ownership, and the report proposes that the government commit $4 billion p.a. This is sufficient to achieve a material improvement in outcomes, benchmarks well against other spending priorities, and is consistent with the government’s fiscal projections.

The report also recommends that substantial financial education initiatives be established in conjunction with these individual accounts, and that policies in a range of areas – from housing, to student loans, to welfare – be changed so as to have a greater focus on promoting asset ownership.

Dr Skilling notes that “these policies will have a substantial effect on broadening the distribution of asset ownership, with many more New Zealanders able to get ahead financially. The proposed policies will also lead to a material improvement in national savings, perhaps up to 4% of GDP, which will have a significant impact on New Zealand’s external balance”.

New Zealand has a window of opportunity to make a significant investment in its future through the proposed policies, as a result of recent strong economic growth and a healthy fiscal position – and we ought to make full use of this opportunity. The report argues that we need to act now.

The New Zealand Institute now looks forward to participating in a constructive debate around these issues, with a view to achieving policy change that leads to a material improvement in ownership outcomes.



Kiwi Savings Accounts are individual accounts that, over time, will be held by all New Zealanders and will provide a vehicle for saving for a range of purposes over a lifetime. On establishment of the scheme, Kiwi Savings Accounts will be created automatically at birth and for all who are earning taxable income.

Kid’s savings Individual accounts will be established automatically at birth, with a $500 endowment by the government. Repeat endowments of $500 will be made at age 5 and again at age 10. For voluntary contributions into the account of up to $200 p.a. – just under $4 a week – the government will provide a matching 1:1 contribution into the account, until age 18. Additional contributions can also be made. This money – except for the additional contributions – will accumulate tax free until age 18. After that, returns will be taxed in the standard way.

Tax cuts A two percentage point across the board reduction in the personal tax rate will be diverted into the individual’s savings account in the form of an annual lump sum contribution – this will reduce the 33c tax rate to 31c, for example, and the 39c tax rate to 37c. 2% of everyone’s taxable income will be saved in this way, including those who are receiving welfare benefits.

Matched savings For voluntary contributions into this account of up to $1000 p.a. – just under $20 a week – the government will provide a 0.5:1 matching contribution. There will be a supplemental match of 0.5:1 for those in the lowest tax bracket (earning below $38,000), to bring the match rate to 1:1. Other parties, such as employers, can also make direct and matching contributions to the account.

Withdrawals Funds can be withdrawn from this account to finance the costs of education and the repayment of student loan debt (the portion that relates to tuition costs); to finance the deposit on a first home; to finance retirement; and for transfers to the accounts of children.

Note to Editors: Worked examples are available upon request. Please contact Karine Fox.

© Scoop Media

Business Headlines | Sci-Tech Headlines


Banks: Westpac Keeps Core Government Transactions Contract

The local arm of Westpac Banking Corp has kept its contract with the New Zealand government to provide core transactions, but will have to share peripheral services with its rivals. More>>


Science Investment Plan: Universities Welcome Statement

Universities New Zealand has welcomed the National Statement of Science Investment released by the Government today... this is a critical document as it sets out the Government’s ten-year strategic direction that will guide future investment in New Zealand’s science system. More>>


Scouring: Cavalier Merger Would Extract 'Monopoly Rents' - Godfrey Hirst

A merger of Cavalier Wool Holdings and New Zealand Wool Services International's two wool scouring operations would create a monopoly, says carpet maker Godfrey Hirst. The Commerce Commission on Friday released its second draft determination on the merger, maintaining its view that the public benefits would outweigh the loss of competition. More>>


Scoop Review Of Books: She Means Business

As Foreman says in her conclusion, this is a business book. It opens with a brief biographical section followed by a collection of interesting tips for entrepreneurs... More>>


Hourly Wage Gap Grows: Gender Pay Gap Still Fixed At Fourteen Percent

“The totally unchanged pay gap is a slap in the face for women, families and the economy,” says Coalition spokesperson, Angela McLeod. Even worse, Māori and Pacific women face an outrageous pay gap of 28% and 33% when compared with the pay packets of Pākehā men. More>>


Housing: English On Housing Affordability And The Economy

"Long lead times in the planning process tend to drive prices higher in the upswing of the housing cycle. And those lead times increase the risk that eight years later, when additional supply arrives, the demand shock that spurred the additional supply has reversed. The resulting excess supply could produce a price crash..." More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news