Labour's policies would encourage borrowing

The party’s finance spokesman, David Parker, revealed this morning that it would broaden the Reserve Bank’s objective to include helping to achieve a positive national external balance, encourage it to use its tools to help exporters and homeowners and introduce a variable savings rate, to allow the Reserve Bank to alter KiwiSaver savings rates as an alternative to increasing the official cash rate.

KiwiSaver would be compulsory and the Reserve Bank would be encouraged to increase compulsory contribution rates during periods when heat needed to be taken out of the economy, and decrease them during downtimes.

BNZ chief economist Tony Alexander said it would probably only have a limited impact on interest rates because the bank had no information about how people would respond.

He said rising interest rates took money out of people’s pockets that would never be returned. But if it was their savings rate that was rising, they might not feel the same need to cut back on spending, knowing they'd get the money back eventually.