Labour’s ‘big tool’ policy turns out to be a big dog

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Aside from a half hearted attempt from the Labour Party spokesman for Fairfax, Vernon Small, and Brian Fallow who has taken time off looking around the globe for catastrophic global warming and a carbon trading system that works it’s not been a particularly welcomed policy release. The exporters love it though with a free lunch on the backs of the working poor.

We wait for the endorsement and backing of Labour from the Property Council, first of all Labour are going to drop their tax rate from 28% to 15% by introducing a CGT and now they are going to give them the gift of lower interest rates which is generally the biggest cost by taking money out of the lowest paid who will now be earning more in retirement than when they are working.

 

Labour’s proposals to allow the Reserve Bank to adjust KiwiSaver contributions rather than interest rates to control inflation could hurt savers and see debt repayment delayed until retirement, KiwiSaver experts warn.

The Labour Party this morning announce proposals to change New Zealand’s monetary policy tools by introducing a variable savings rate for KiwiSaver.

The policy would require the Reserve Bank to use changes to the rate of people’s KiwiSaver contributions rather than interest rates to control inflation while taking pressure off the over-valued kiwi dollar.

Labour would also make KiwiSaver compulsory and increase contributions from the current 6 per cent combined employee and employer contribution to 9 per cent over time.

According to sorted.org.nz ?if you earn?$600pw and you save at Labour’s compulsory rate you will enjoy a retirement income of $496pw and when added to the super payment of $366 you will be earning $262 a week more in retirement than when you were working and struggling to get ahead. ?

If the Reserve Bank decide you need to save more you will retire like a rock star having of course struggled your way through your best years.

Chris Douglas, co-head of Australasian research at Morningstar, said the policy had the potential to penalise savers.

“Obviously low interest rates are great for borrowers but it does penalise savers.”

Douglas said it would help people who wanted to borrow a lot to buy a house.

“But what happens when they reach 65? Will they just have a huge mortgage which they will have to pay off using their savings?”

Studies on Australia’s compulsory superannuation saving showed many were retiring with more debt, he said.

“Rather than using their retirement savings to pay for their retirement lifestyle it is being used to pay off debt.”

Douglas was in favour of increasing the contribution rates from 6 per cent to 9 per cent.

“I think that is great. I’m sure the industry would like that.”

But he warned it was likely to come out of future pay rises.

“It’s really the employee that’s stumping up with the full amount.”

Michael Littlewood, co-director at Auckland University’s retirement policy and research centre, said the policy was based on the underlying assumption that New Zealanders needed to be forced to save for retirement.

“The policy rests on compulsion and that is flawed – there is no evidence New Zealanders are under-saving for retirement.”

This is the essential problem of Labour’s plan…they will basically force, coerce, compel people through compulsion to save with a Kiwisaver account and then when the economy is functioning well and pay rises start coming on stream they will dictate to you that you shall not have those evil pay rises…instead they will command that it be saved in order to control the economy and because they know better than you what money should be put towards…and it isn;t your mortgage or anything else that you so desire to spend your own money on.

Once again labour are showing their Marxist roots and the preference for a command and control economy akin to Stalinist Russia or North Korea.

 

Source/ NZ Herald

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