John Key has announced National’s third reform of Kiwisaver in 3 years, saying the government’s contribution will be cut and made up with higher minimum contributions from members and their employers. It’s an embarrassing flip-flop from the government that cut default contribution rates and shows no plan for the future.
As Phil Goff pointed out yesterday, National is keen to cut government spending out of a fair savings proramme like Kiwisaver but won’t even think of reversing its tax cuts for the rich.
Hon Phil Goff: If he wants to reduce the deficit, why is he cutting tax credits to low and middle
income earners in KiwiSaver but not cutting back any of the windfall tax gains he gave to the
highest income earners at a cost of $2.5 billion each year?
They plan to make up the lost government contributions by making our contributions higher, reversing their own decision to cut those contribution rates, as David Cunliffe pointed out.
Hon David Cunliffe: Why did his Government cut the KiwiSaver default contribution rate for members and employers in 2008, given that the Prime Minister’s big announcement today is that he will seek to reverse his own change?
Hon BILL ENGLISH: The member may recall that KiwiSaver was at the time costing the Government somewhere around $1.5 billion. We made a number of changes to it that made it affordable, particularly in the light of the significant global recession affecting New Zealand, and as part of the tax package we brought in in December 2008.
Hon David Cunliffe: If KiwiSaver needs to be durable and sustainable, as he used to say, how is his Government promoting that durability by flip-flopping on member and employer contributions and breaking his party’s promise not to cut member tax credits, when the average Kiwi now thinks they cannot rely on this scheme under this Government?
Hon BILL ENGLISH: The Government is committed to the durability and affordability of KiwiSaver and we have managed to maintain the scheme through the most difficult economic times the country has had in a long time. We are simply not willing to keep borrowing to put money into people’s savings accounts and calling it savings.
Uh huh. Of course, by cutting the default member and employer contribution rates when he did, English made Kiwisavers miss out on a once-in-a-generation rally in asset prices, following their plunge in 2008/09.
It always stuns me that English seemed to genuinely think that the recession was a reason to stop investing in our future. Doesn’t he realise that, when you’re buying now to sell decades in the future, the best time to be buying is during a recession when asset prices are depressed? If he thought asset prices would never he recover he must have thought the entire economic system was going to collapse – I would have liked to hear him say that. Instead, he cut Kiwisaver and the Cullen Fund, costing us a fortune:
Hon David Cunliffe: Can the Minister confirm that the New Zealand Superannuation Fund has made a return of 32 percent since he cancelled the Government’s contribution to it, and that if those contributions had continued, based on that rate of return, Crown debt would have been reduced by approximately $375 million compared with what it is today?
Hon BILL ENGLISH: The member needs to remember the context here. The New Zealand Superannuation Fund lost billions of dollars because of the change in global markets. It has clawed back a fair bit of that, and one would expect that a fund of this size would over time return to its normal return. In the end, the Government took the view that borrowing is not saving.
I’m guessing English would never take a mortgage to buy a house at the bottom of the housing cycle, then.
Actually, of course he wouldn’t. He just gets the taxpayer to pay. The guy’s been on the public teat for so long he doesn’t have a clue about making investment choices.
– Bright Red