Budget 2011 – Key makes KiwiSaver changes an election issue

Budget 2011 – Key makes KiwiSaver changes an election issue

By Pattrick Smellie

May 11 (BusinessDesk) – Next week’s Budget will lay out a path to reduced government subsidy for the KiwiSaver scheme, made up by greater savings by businesses and their employees, Prime Minister John Key, has told a Business New Zealand lunch in Wellington.

“None of the changes we will be making will affect people before the election so New Zealanders will be voting with all the information they need and can make their own choices,” said Key, who affirmed that the $1000 government-funded “kick-start” would stay in place.

KiwiSaver, the Working for Families programme, and the student loan scheme are all in for a trimming in the May 19 Budget. Key said the Budget would contain “significant savings, but will by no means be a slash and burn Budget.”

It would be “responsible” Budget, would “protect the most vulnerable New Zealanders, boost frontline health and education services, and help to pay for rebuilding Christchurch”, as well as showing a “credible path back to surplus.”

The government is targeting a return to surplus in 2014/15, a year earlier than initially indicated, with New Zealand’s record Budget deficit in the current year being compared by global investors with yesterday’s Australian Budget, which sees the Lucky Country back in surplus by 2012.

The three targeted programmes had a collective cost of $5 billion a year, and had been created “during a debt and consumption-driven economic bubble, and it is clear that they are unaffordable,” said Key.

The KiwiSaver changes would also mean the country was truly saving rather than having the government borrow internationally to contribute to a domestic savings scheme.

There would be time for people and businesses to adjust to a less generous government top-up, and should be timed to coincide with economic recovery, Key said.

“Increased contributions … will happen at a time when the economy will have well and truly recovered, and both wages and employment will be increasing.”

The student loan scheme would be “adjusted” but remain interest-free, while Working for Families benefits would be skewed to lower income families, with less generous entitlements for families in the upper band of the scheme, where a cluster of taxpayers has emerged along with a drop in high income earners.

(BusinessDesk)12:20:33

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