Does New Zealand have a household saving crisis?

Trinh Le

No 2007/1, NZIER Working Paper from New Zealand Institute of Economic Research

Abstract: Data from the Household Income and Outlay Accounts (HIOA) show that the ratio of household saving to disposable income has been negative since the early 1990s and has declined steeply since 2000. These data have led many people to believe that New Zealand has a household saving crisis which will result in a crisis in retirement incomes in due course. These concerns have been expressed by certain key politicians. The upshot has been the enactment of several policies, notably: • the New Zealand Superannuation Fund (2003), a scheme under which the government runs budget surpluses to invest in a fund to be able to cater for the costs of the universal pension when the population ages; • the State Sector Retirement Savings Scheme (2004), an employer subsidised saving scheme for state sector employees; and • Kiwisaver (2007), an employment related superannuation scheme in which the government provides inducements for joining, on-going subsidies for fund managers and tax breaks for participant employees and their employers. From April 2008 employers will be required to make contributions to the saving of their employees who are members. A review of the existing measures of household saving in New Zealand shows little evidence of a saving problem. Indeed, the data that the proponents of saving policies have used poorly reflect the true household saving performance. Other data sources indicate that household saving is not only positive but has also been rising considerably in recent years.

Keywords: Households; Savings; New Zealand (search for similar items in EconPapers)
JEL-codes: D14 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2007-10-01
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Citations: View citations in EconPapers (4)

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