Press release: “We should brace ourselves for a game of KiwiSaver political hot potato, says Ernst & Young.
National has refused to let taxpayers know whether they support the new turbocharged version of KiwiSaver – employer contributions – and it will seek to embarrass the Government in any way possible,” says Jo Doolan, Tax Director at Ernst & Young.
Employers and employees alike will hardly be filled with confidence as the introduction date nears, she says.
Last week, in a barrage in the House, National’s deputy leader Bill English alleged that the fiscal cost to the Government of the tax incentives will be more than the incremental household savings to come from KiwiSaver, citing Treasury forecasts in support. The forecasts were rejected by Hon Dr Michael Cullen.
“Dr Cullen should be congratulated on the ingenuity of his turbo-charged KiwiSaver and the fact this is being phased in to allow employers to deal with the financial cost. But shouldn’t employer contributions – such a fundamental change to KiwiSaver – be agreed to by both the major parties? If they can work together on anti-smacking issues then surely setting a framework for savings is also important enough to warrant such an agreement?
Wage negotiations – will we see ‘KiwiSaver discrimination’?
“We really do not know how compulsory employer contributions to KiwiSaver will impact on wage negotiations,” says Doolan.
At a recent Ernst & Young client seminar Cullen reminded attendees of just how little influence the Government really has over wage negotiations given the low percentage of private sector employees who are actually part of collective bargaining agreements.
“Take for example, two employees who perform the same and have the same experience. One elects to go into KiwiSaver the other does not. Can the employer offer more pay to the one who does not opt to go into KiwiSaver to compensate them for the fact the employer does not have to fund their compulsory KiwiSaver contributions?
“I wonder whether we could see the advent of a new type of claim, for ‘KiwiSaver discrimination’?
Australia – trillions of dollars in the lead
“It’s clear that Kiwisaver is designed as a rather large shove from behind to ensure we are very focussed on achieving the Governments agenda of greater productivity,” says Doolan.
“At the Ernst & Young seminar, Cullen also reminded the audience of the advantages Australian companies have from the trillion dollar-deep pool of savings generated by Australia’s compulsory scheme. And that every time an Australian private equity firm crosses the Tasman and invests here, they are doing so with money saved by Australians who have been encouraged to save through active government policies for nearly twenty years.
“If the funds invested from KiwiSaver provide a capital base that ultimately helps control our extortionate interest and exchange rates, any negativeness about compulsory contributions to KiwiSaver will be overcome.”
Questions And Answers – Thursday, 14 June 2007
Press Release: Office of the Clerk
Hon Bill English: Has the Minister seen the estimates by his own department, Treasury, that show that the increment to household savings arising from KiwiSaver will be less than the fiscal cost to the Government of the incentives it will apply to KiwiSaver, and can he explain why the taxpayer would be spending more on incentives than the country gets in savings?
Hon Dr Michael Cullen: Treasury provided a variety of estimates over a period of time. I think that the reaction to KiwiSaver once the announcements were actually made indicates we will see a significant rate of take-up and far less of the behaviour that Treasury was forecasting.
Hon Dr Nick Smith: So Treasury got it wrong.
Hon Dr Michael Cullen: Yes.