A Budget to save NZ's credit rating
Thursday, May 19th, 2011
A Budget to save NZ's credit rating. Boosting savings better than raising taxes
Today's Budget is designed to save New Zealand's credit rating and lift our national savings rate with KiwiSaver, the Employers & Manufacturers Association says.
"If this Budget's deficit was not reduced sufficiently, New Zealand would face a credit rating downgrade resulting in a huge increase in interest rates to everybody, with borrowers the first to suffer," said Alasdair Thompson, EMA's chief executive.
"And increasing the KiwiSaver contributions from April 2013 is a much better option than raising taxes.
"Its not as if those paying more into their KiwiSaver accounts will lose anything - they're simply being asked to put more aside for later on.
"The principles behind the scheme remain intact. Keeping the $1000 start up incentive, and the tax credit albeit at the reduced level of $521 annually, means KiwiSaver remains a very attractive scheme.
"It also means the government will not have to borrow so much thereby lessening the risk of a credit rate downgrade.
"Keeping intact the principles of the scheme means the incentives to savers can be raised again in future.
"Larger employers will more likely be able to afford the extra contributions than smaller firms though the extra cost will be seen as part of the overall cost of employing people.
"The Budget could have cut deeper, but its not easy to do with the country in or near recession; making deeper cuts at this time would fly in the face of the lessons learnt from the days of the Great Depression.
"Given the experience of the PM and the Finance Minister its fairly certain the cuts will be sufficient to ward off downgrades by the credit agencies. If not this Budget will have failed in its primary purpose."