Hon Bill English
Minister of Finance

1 February 2011
Media Statement

Government to carefully consider savings report

The Government will carefully consider the Savings Working Group’s final report issued today and any immediate policy decisions are likely to be included in the Budget later this year, Finance Minister Bill English says.

“This report will not only assist ministers in considering the Government’s next steps in building a stronger economy, it will also help an informed and open public debate on the national savings challenge facing New Zealand.

“The Working Group points out that New Zealand’s national savings problem has developed over a long period and it is unreasonable to expect it to be solved overnight. But it is a serious problem, requiring urgent attention.

"As a country, our reliance on foreign borrowing leaves us vulnerable to external shocks and means New Zealanders face higher interest rates – holding back our economy.

"Improving national savings is central to the Government's economic programme, which is designed to tilt the economy towards savings, exports and investment and away from excessive borrowing and government spending.

“As we said when the Working Group was set up last year, the Government has an open mind about what might be required to improve New Zealand’s level of national savings.

“Ministers will carefully look at the Working Group’s report over coming weeks with a view to picking up practical ideas that can feed into the Government’s economic programme and Budget 2011.”

Mr English thanked Working Group chairman Kerry McDonald and group members for their excellent work in providing a comprehensive report within a tight deadline.

The Government had deliberately set wide terms of reference for the Working Group. The only exclusions were New Zealand Superannuation, which the Government will not change, and broad taxation of capital gains or a land tax, which it has previously said it will not introduce.

“We are also not interested in considering another increase in GST, which the Working Group has suggested,” Mr English says. “Otherwise, we are not ruling anything in or out at this stage.

"The Prime Minister signalled last week that the Government is prepared to lift its own savings by taking decisions that reduce borrowing and get us back to meaningful surplus by 2014/15 – a year earlier than forecast.

“We are also considering options – such as the viability of the mixed-ownership model for four energy SOEs – that would reduce the amount we would need to borrow to pay for substantial increases in Government assets like schools, faster broadband and better transport infrastructure.

“They are just some of the steps the Government is considering to boost New Zealand’s national savings performance. The Working Group has provided a wide range of other practical options worth considering.

“By playing its part in lifting national savings, this Government will help to keep interest rates low and build faster, ongoing economic growth.

The Savings Working Group’s final report is available at:
www.treasury.govt.nz/publications/reviews-consultation/savingsworkinggroup

ENDS

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