Now, the government has an economic story to tell.
By reframing as a national savings issue the sterile debates about superannuation, privatisation, private foreign debt levels and the sale of farmland to foreigners, the potential is there to de-fang several political bugbears at once.
There is a compelling simplicity, too, to the idea of talking about how we save more, rather than what we spend the savings on; this being the point at which the debate so often goes off-track.
With the current national pension system off-limits for consideration by the new Savings Working Group (SWG), there’s an opening for a process that isn’t tinged with outrage and fear of a Trojan Horse attack on the elderly.
By taking the heat off the question of compulsion and allowing the SWG – surely not the best acronym in the context of this week’s alcohol reforms – to look also at the tax system, Finance Minister Bill English rightly identifies that any serious look at savings culture will also need to consider taxing culture.
The notion of taxing savings differently from labour is intriguing. Watch this space on that one, but the Australian tax review suggested certain approved savings should be taxed at a discount to income tax.
Whether a government would ever be bold enough to index tax rates on savings against inflation remains to be seen. English has put it on the table, but not with great enthusiasm.
By applying indexation only to savings, he would avoid robbing future Treasurers of their trustiest weapons of mass tax-gathering: fiscal drag. Perhaps there’s a half-way house available on that one.
Already usefully established is the rejection of capital gains and land taxes, both of which were ruled out by the Tax Working Group, whose year-long deliberations produced a benign atmosphere for a GST increase and wide public support for the personal income tax cuts that will kick in on October 1.
Granted, the SWG doesn’t have a year to create consensus. It has until December, in fact, which could be said to be a bit of a rush. Its report will be published in January, setting the political agenda for the start of election year, and condemning a lot of officials to a busy Christmas.
Nor is it all plain political sailing. If, as English hinted today, a softer tax treatment for savings were offset by axing the $1 billion in government subsidies going to KiwiSaver accounts annually, he could well have a fight on his hands with the higher income parts of middle New Zealand whom he needs to vote National.
However, the timing looks right, though, if Prime Minister John Key wants a coherent savings platform to campaign on next year, and results he could turn into initiatives for the May 2011 Budget. On top of that, much of the work has
already been done.
The enormous volume of research produced for the Capital Markets Development Taskforce would be as good a place as any for the savings group to start for recent work on New Zealand’s savings options and deficiencies.
In no time at all, the group will conclude that one of the biggest savings deficits in New Zealand is the lack of good businesses to invest in at home.
While there’s plenty of private wealth and private equity at work, the public capital markets are anemic, the dairy industry’s tied up in cooperative ownership, the banks are Australian-owned, and just about everything else of scale is owned by the government, both central and local.
The CMDT report strongly recommended partially privatised state-owned businesses, especially if the local control can be demonstrably entrenched to deal with the national economic sovereignty issues that the P word arouses.
If at least a chunk of the savings to make such investments in New Zealand businesses comes from the investment of compulsory retirement savings plans, then there may not be much public opposition to compulsion either.
Expect to hear a lot about the middle-aged cafeteria worker from Sydney who just loves her compulsory super savings.
From there, a new, more confident platform starts to emerge for New Zealanders nervous about the seemingly unstoppable “loss” of New Zealand assets to foreign owners. Instead of cringing defiance, we get organised about our money and start building ourselves back up.
That, in the end, is the only way New Zealand will maintain the degree of independence that the founders of the SaveTheFarms and other anti-foreign direct investment lobbies seek.
Petitions and protest might slow things down, but for as long as the outsiders have the money to buy what we at home can’t afford, the rot – if it’s really that – will only get worse.
The slightly cynical appeal of this platform for re-election is the way it marries both economic nationalism – a protectionist, anti-globalisation instinct – and economic rationalism, which the pursuit of coherent savings incentives would foster without closing the door to foreign capital.
It should be a platform that can be pitched simply to the right of centre in New Zealand politics, where National still seeks to be, and in campaigning, simplicity is everything.
It may not look it now and it may not come to pass, but today’s announcements create the bones of the most significant shift in economic orientation in a generation.
Here’s hoping something good comes of it.
Another working group!!! for years, its the government will look after you, now its, “you need to save more”….but for every small business out there, who relies on bank money to operate there business, its small comfort when charged high interest rates!!! which means less profit, less tax to pay. If the government in any way could get banks to loan to business’s again at reasonable rates, more taxes would flow their way. They say there is no money to lend, I would say there is plenty money to lend, but being Aussies, we are very picky and choosey who we lend to and we will charge as much as we can!!! Ok, lets flip the coin and say from today all business’s will only pay max 8% for money borrowed, well, besides immediately more profit and tax to pay, you will get more productivity and expansion. We see none of that on the moment. In Europe/Canada, interest earnt on savings is around 1% per cent. So people cannot rely on that to live on, so where do they invest there money, they have to invest in companies/business’s that will pay a dividend better than the bank. Well, I think I have created another working group discussion!!!! Banks pay less interest on deposits!