Parker needs to front up on KiwiSaver jack up planFinance
Labour's David Parker needs to front up on how much he would squeeze wage and salary earners with his KiwiSaver jack up plan, Associate Finance Minister Steven Joyce says.
Mr Parker couldn't answer a simple question today on how much KiwiSaver contributions would have to go up for wage and salary earners in order to stop a 1% rise in interest rates.
"Surely you must be able to answer that question. If you can't, it's not a policy, it's not even an idea, it's just a David Parker thought bubble.
"It's simply not thought through," Mr Joyce says.
Mr Joyce says a 1 per cent increase in KiwiSaver contributions is only likely to generate about $400 million of net new savings.
“My estimate is it would take roughly $2.5 billion in extra savings to keep the OCR 1 per cent lower. Labour would need to take another 6 per cent of people's pay packets off them and put it into KiwiSaver to avoid a 1 per cent increase in interest rates. Given they already want people to save 9 per cent, that would whack it through to 15 per cent,” Mr Joyce says.
"But it's not my estimate that's important on this one, it's David Parker's. Where are his numbers? What are his calculations? All he's done so far is mumble about how complicated it is.
Mr Joyce says Parker’s KiwiSaver interest rate jack-up idea would simply force all KiwiSavers to spend a lot less of their own money just to avoid putting up interest rates for other borrowers.
“Housing is less than half of New Zealanders' debt. The rest is companies, credit card holders, farmers, councils, government agencies and so on. Effectively he'd be telling businesses and councils to carry on borrowing and spending regardless because wage and salary earners will do all the belt-tightening for them,” Mr Joyce says.
“The strength of using interest rates to control inflation is that it affects all borrowers equally and encourages all savers equally. Under the Parker Plan, wage and salary earners would be completely squeezed and everyone else would continue on regardless. The Reserve Bank Governor would end up putting interest rates up anyway.
"And that's not all. Respected economists have this week said that if this idea does anything it would increase bank profits, increase house prices faster, and force people to buy overpriced shares with their savings.
“New Zealanders know the New Zealand economy is currently one of the best performing in the western world. And it’s National’s consistent and sensible economic policies that are helping achieve that.”