Cullen raises idea of mandatory savings

The issue was raised in the finance minster’s scene-setting economic speech last week.

Cullen stressed the importance of savings for the economy, both for economic and social reasons, saying savings are the “spaghetti junction” which all roads lead to.

“Some commentators have floated the idea of a non-inflationary tax cut in the form of savings,” Cullen mused. "Saving is much more important than simply a way to give tax cuts without immediate demand effects.”

He went on to say savings is "another example where the government needs to get its hands a bit dirty to help the market produce the sort of outcome New Zealanders need.”

Asked what Cullen actually thinks of the idea of using tax cuts to fund savings, all his office would say is “that’s all he wants to say right now.”

The coyness appears to be aimed at seeing what sort of response there is to the idea.

It is understood that using tax cuts to fund some form of mandatory savings is one of the options being considered for the 2007 or 2008 Budgets, although there are other bids for tax concessions.

The government considered such a move as part of last year’s business tax package but there was insufficient certainty around the ongoing nature of the surpluses at that stage to commit to such a move.