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

 

Must Sell 20 Petrol Stations: Z Cleared To Buy Caltex Assets

Z Energy is allowed to buy the Caltex and Challenge! petrol station chains but must sell 19 of its retail sites and one truck-stop, the Commerce Commission has ruled in a split decision that acknowledges possible retail price coordination between fuel retailers occurs in some regions. More>>

ALSO:

Huntly: Genesis Extends Life Of Coal-Fuelled Power Station To 2022

Genesis Energy will keep its two coal and gas-fired units at Huntly Power Station operating until 2022, having previously said they'd be closed by 2018, after wringing a high price from other electricity generators who wanted to keep them as back-up. More>>

ALSO:

Dammed If You Do: Ruataniwha Irrigation Scheme Hits Farmer Uptake Targets

Enough Hawke's Bay farmers have signed up for water from the proposed Ruataniwha Water Storage Scheme for it to go ahead as long as a cornerstone institutional capital investor can be found to back it, its regional council promoter announced. More>>

ALSO:

Reserve Bank: OCR Stays At 2.25%

Reserve Bank governor Graeme Wheeler kept the official cash rate at 2.25 percent, in a decision traders had said could go either way, while predicting inflation will pick up as the slump in oil prices washes out of the data and capacity pressures start to build in the economy. More>>

ALSO:

Export Values Down: NZ Posts Biggest Annual Trade Deficit In 7 Years

New Zealand has recorded its biggest annual trade deficit since April 2009, reflecting weaker prices of agricultural commodities such as dairy products, beef and lamb, and increased imports of vehicles and machinery. More>>

ALSO:

Currency Events: NZ's New $5 Note Wins International Banknote Award

New Zealand’s new Brighter Money $5 note has been named Banknote of the Year in a prestigious international competition. The $5 note was awarded the IBNS Banknote of the Year title at the International Bank Note Society’s annual meeting. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news