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

 


Labour to use KiwiSaver rates to drop dollar

Labour to use KiwiSaver instead of interest rates to drop dollar

By Pattrick Smellie

April 29 (BusinessDesk) – A Labour Party-led government will require the Reserve Bank of New Zealand to use changes to the rate of people’s compulsory KiwiSaver contributions rather than interest rates to control inflation while taking pressure off the over-valued kiwi dollar.

“Instead of paying more interest on your mortgage, a similar amount of extra savings would go into your KiwiSaver,” Parker told an Auckland breakfast briefing where he unveiled the “new tool” that would be added to the ways the central bank already has for inflation control.

“Overall interest rates will be lower and so will our exchange rate” through use of the Variable Savings Rate(VSR), which a policy paper published this morning says will be “investigated” and from which low income earners may be exempted.

“The policy targets agreement will request that the Reserve Bank use this once in a lifetime opportunity to attempt to get underlying (as opposed to cyclical) New Zealand interest rates back to the lower levels charged in our competitor countries,” said Parker.

“The PTA would state whether or not it was the government’s expectation that over the economic cycle the Reserve Bank variations to the KiwiSaver rate would be neutral.”

Labour would also shift the RBNZ’s inflation targeting to include achieving current account surpluses to reverse 40 years of the country living beyond its means.

“If New Zealand is to decrease its net international liabilities and do better in growing per capita incomes (particularly for low and middle deciles), greater priority will need to be given to achieving growth in its foreign exchange earnings or saving sectors.”

Parker said “nowhere currently” used a VSR system, but that moving all New Zealanders into compulsory KiwiSaver at an increased rate of contribution would reduce inflationary pressure during the transition phase anyway.

“This is the perfect time to do this,” he said.

Labour would raise the current 6 percent contribution rate to 9 percent (paid 50/50 by employee and employer) over time. The rates at which a VSR might be set are not discussed, although limits to the extent of variation in savings rates might be part of the PTA.

The RBNZ would not have the ability to deploy the VSR unilaterally. It would have to recommend its use to the government and require agreement on a case by case basis.

“Higher interest rate payments are lost to the lender, with much of it heading overseas, whereas savings would belong to the saver,” Parker said.

To reflect a new emphasis on improving the country’s external accounts, the Reserve Bank Act would be amended to “maintain stability in the general level of prices in a manner which best assists in achieving a positive external balance over the economic cycle.”

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Housing Policy: Auckland Densification As Popular As Ebola, English Says

Finance Minister Bill English said calls by the Reserve Bank Governor for more densification in Auckland’s housing were “about as popular in parts of Auckland as Ebola” would be. More>>

ALSO:

Crown Accounts: NZ Government Deficit Smaller Than Expected In First Half

The New Zealand government's operating deficit was smaller than expected in the first six months of the financial year, as the consumption and corporate tax take rose ahead of forecast in December, having lagged estimates in previous months. More>>

ALSO:

Fruit & Veg Crackdown: Auckland Fruit Fly Find Under Investigation

The Ministry for Primary Industries (MPI) is investigating a find of a single male Queensland fruit fly in a surveillance trap in the Auckland suburb of Grey Lynn... MPI has placed legal controls on the movement of fruit and some vegetables outside of a defined circular area which extends 1.5km from where the fly was trapped in Grey Lynn. More>>

ALSO:

Scoop Business: Westpac NZ Reaches $2.97M Swaps Settlement

Westpac Banking Corp’s New Zealand unit has agreed to pay $2.97 million in a settlement with the Commerce Commission over the way the bank sold interest rate swaps to farmers between 2005 and 2012. More>>

ALSO:

Going Dutch: Fonterra Kicks Off $144M Partnership With Dutch Cheese Maker

Fonterra Co-operative Group, the world’s largest dairy exporter, has commissioned a new dairy ingredients plant in Heerenveen, in the north of the Netherlands, its first wholly-owned and operated ingredients plant in Europe. More>>

ALSO:

Scoop Business: NZ Retail Sales Beat Estimates

New Zealand retail sales rose more than expected in the fourth quarter, led by vehicle-related transactions, food and beverages, adding to evidence that cheap credit and a growing jobs market are encouraging consumers to spend. More>>

ALSO:

Delivery Cuts Go Ahead: 'Government Money Grab' From NZ Post

"It's a money grab by the Government as the shareholder of New Zealand Post" says Postal Workers Union advocate Graeme Clarke about the changes announced by NZ Post. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news