Hon Dr Michael Cullen
Minister of Finance

20 September 2007
For Immediate Release Media Statement

Balance of payments reinforces need for KiwiSaver

The latest balance of payments figures reinforce the importance of KiwiSaver as a means of addressing New Zealand’s poor savings record, Finance Minister Michael Cullen said today.

The June year current account deficit fell slightly to 8.2 per cent of GDP, down from a revised figure of 8.3 per cent from the March quarter.

“While there has been a small improvement to the current account deficit, it is still unsustainably high. Our international investment position is a sobering negative eighty-nine and a half per cent of GST. Net debt levels increased to one hundred and twenty-nine billion dollars.

“This reinforces why we made saving the top priority in the Budget by enhancing the KiwiSaver scheme, rather than putting pressure on inflation and interest rates through fiscally reckless tax cuts.

“As Standard & Poor’s noted in July this year, New Zealand’s ‘strong fiscal position and conservative macroeconomic management’ are helping to offset the risks of the large current account deficit. Maintaining our prudent fiscal stance is vital, particularly given our exposure to international capital and the current financial turbulence many countries are experiencing.”

Dr Cullen anticipates record dairy prices and a slightly lower dollar will flow through to further reductions in the current account deficit, but it will remain large.

“Therefore, it is still important to improve household savings, and the enhancements to KiwiSaver will make this easier than ever.”

ENDS

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