ANZ's savings solution
ANZ says that if there is a savings problem the only way to address the issue will be through lower income taxes, greater reliance on consumption taxes (such as gst) and further signalling the necessity for self provision.
Thursday, June 2nd 2005, 7:42AM
In a recent report the ANZ Bank paints a rather unflattering picture of New Zealand’s savings record and questions the recent budget moves.
The bank says that New Zealand’s savings performance is abysmal, but improving largely on the back of government and business saving. “But household sector dis-saving is a material drag on the savings picture.”
It is less clear that our savings performance is a problem because savings don’t necessarily help the economy in times of trouble.
For instance Asian countries are great savers but that didn’t help when the Asian economic crisis hit.
“The Asian tigers were actually squirrels – they save lots but not necessarily in the right place.”
Another observation the bank makes is that “we’ve been pathetic at both savings and investing.”
Returns to offshore holders of New Zealand assets are materially higher than the returns we generate from offshore investment.
The one positive note it expressed was that returns from New Zealand’s capital stock are picking up implying that our pool of savings are being used more efficiently than in the past.
ANZ says that the budget initiatives such as Kiwisaver and changing the tax rules around managed funds are “commendable” but unlikely to make much difference to savings rates.
“If New Zealand is serious about saving more then the key nucleus must be built around three platforms,” ANZ says.
The three platforms it names are:
- Lower income taxes
- Greater reliance on consumption taxes
- Signaling greater necessity for self-provision.
“Why save if the government is going to pick up the tab for health, education and social welfare?
"Until these three planks are put in place, anything else will be tinkering around the edges,” ANZ says.
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