It’s official: Key reveals “inertia” strategy

Written By: - Date published: 4:37 pm, May 18th, 2011 - 19 comments
Categories: brand key, Economy - Tags:

Speaking to Audrey Young in today’s Herald, Prime Minister John Key stated “the one thing I’ve come to learn is that the single biggest driving factor in Kiwisaver is inertia”. This confirms what many in the community have been thinking, and a few in the business world have been saying, that inertia is also the single biggest driving factor in the National/ACT/Maori Party government’s economic policy.

Not that Key’s government have been altogether idle. They have been borrowing furiously in a world awash with cash looking for a return. In contrast to the last several years where households over-borrowed from banks loaded with cheap overseas loans, now that households are pulling back the government is taking up the slack and borrowing extensively.

The borrowing is necessary to pay for liberal tax cuts, weighted heavily to the top 1% of income earners. Now that households are cutting back on their spending, the government intends to help them to cut back even further by removing benefits and the incentives for saving through Kiwisaver as part of its inertia policy. Government workers will also be asked to contribute to ensuring the government’s books don’t suffer as households did by giving up their jobs.

There’s a lot to be said for doing nothing.

19 comments on “It’s official: Key reveals “inertia” strategy”

  1. William Joyce 1

    New election poster for National’s economic policy

  2. Can I go out on a limb and say that National is looking really rattled.  Its MPs have spent all day saying that Labour wants to tax turnover and not profits (as if).
    They are also saying that the tax/GST switch was fiscally neutral.
    The louder they keep shouting these things out the more removed from reality they are showing themselves to be.
    And this is at a time where they should be building up the budget.
    Methinks that they are in trouble and their lack of a coherent economic strategy is starting to show.
    And their beligerent insistence that people are better off is showing to ordinary people that they are totally out of touch.

    • Lanthanide 2.1

      “Its MPs have spent all day saying that Labour wants to tax turnover and not profits (as if).”
      This is in response to Labour highlighting the tax paid by farmers as being “too low” in a year that had high turnover but very low profit. It’s a clear whistle to their base – farmers and businessman – that Labour don’t know what they’re talking about.

      • ron 2.1.1

        Actually, Lanthanide the Labour pollies commenting in this had some very succinct and pertinent things to say. Among them was the concern that our “dairy boom” is as based on b”borrow and hope” as much as this incompetent Govt.’s fiscalm policy is.

      • kriswgtn 2.1.2

        Is that right?
        Obviously Blinglish knows this tax avoidance by farmers and has set his net to catch them
        I feel there be backlash on this so IT isnt just Labour stirring things up- (and National will be pay for daring to do so)

        I think its great>

        whose next??

        Family trusts?

      • felix 2.1.3

        Bollocks Lanth, it was in response to Labour daring to discuss the massive tax rort perpetrated by National’s voting base.

        And hearing every Nat mp shouting it over and over yesterday just exposed the shallowness of their own belief in their ability to present a viable budget.

        If they had any faith they would’ve been singing their own praises all day but it spoke volumes that all they had left was a ridiculous man of straw thrown up by Key at the last moment.

        And their desperation was writ large by their excitement at having something – anything, no matter how facile – to shout about.

        Desperate. Panicked. Deeply afraid.

        • Lanthanide

          Um, I don’t see how what I said is any different to what you said, except I said businessmen and farmers and you said “National’s voting base”.

    • Peter 2.2

      Agreed, it’s difficult to respect these people. No one claimed that they should be paying tax on turnover/sales. Nash is simply pointing out that the backbone of the economy are actually not very profitable and under existing tax laws pay a pathetic amount of tax compared to others. They could at least acknowledge the contribution of others and consider improving their contribution given their asset base.

  3. Maui 3

    Inertia ?

    A swan may look graceful on the surface, but under water there is a lot of paddling going on.

  4. Matthew Hooton 4

    Key is not saying anything here different from what Michael Cullen’s personal economist (and former CTU economist) Peter Harris said when KiwiSaver was set up – that it uses inertia to get people to sign up to it, and stay in it. Try again.

  5. Afewknowthetruth 5

    Since we live in a scientifically illiterate society, we should not be surprised that our so-called leader doesn’t know the difference between force, work, energy, inertia and momentum.

    As for actually doing any work, why would he bother when he can collect a huge salary for tripping round the world smiling and shaking hands?

  6. ianmac 6

    If you have to explain, either you are hurting or you are feeling guilty. Hope Key is forced to justify/explain a lot more.

  7. Mike Smith 7


    I’ll check with Peter Harris what he said. However the scheme as Michael Cullen set it up didn’t rely on inertia but incentives which is why commentators such as Mary Holm have promoted it so much. It is those incentives which have made it successful and which Key and English are now about to reduce.

    • PeteG 7.1

      Far more successful (and costly) than anticipated, that suggests the incentives were overly generous. That’s why Mary Holm promoted it, it wasn’t just an attractive investment proposition, it was too generous to ignore.

      • Colonial Viper 7.1.1

        PeteG saying that savings are too costly to afford!

        Smart man!

        Another reason to move to Australia, where their savings scheme is already more than twice as generous to NZ’s pathetic efforts.

    • Matthew Hooton 7.2

      The “incentives” as you call them have certainly made a difference. You’d either be very very poor or very very stupid not to sign up to KiwiSaver given how extreme those incentives are – 100% guaranted for someone on $56,000. But inertia was also a deliberate factor – you are autmoatically signed up when you get a new job and have to take bureaucratic steps to opt out. Also, once you’re in you can’t get out (and the money just leaves your pay packet without you knowing it). Where the exact balance lies between incentives and inertia but Peter Harris and John Key are both right that the scheme harnesses the power or inertia to be successful. I doubt the changes, whatever they are, will make any difference to uptake and participation because the $1000 sign up “bonus” is apparently going to stay and, for those who are in, they can’t get out.

      • PeteG 7.2.1

        I doubt the changes, whatever they are, will make any difference to uptake and participation

        It could make a difference to active participation and the number of people electing to go on contribution holidays, although I think the expected 50% guranteed still makes it a good investment proposition – if that is the level of change and the compulsory minimum employee contribution doesn’t go up too much I’ll keep contributing.

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