Saving in New Zealand - Issues and Options

The Government has appointed an independent Savings Working Group (SWG) to provide it with advice on how New Zealand can improve its national saving. The topic of saving has been a long-standing area of interest within the Treasury. This document follows work in 2005 when we recommended the adoption of a suite of policies that took account of macroeconomic vulnerabilities and supported private saving. In 2007, the Treasury released a further report outlining its position on New Zealand saving. In providing advice to the Government, the SWG will need to grapple with some complex issues. First, it will need to decipher a clear picture of New Zealand's national saving performance. Different approaches to measuring saving tell different stories. Second, evidence about the effectiveness of possible interventions to lift saving is often ambiguous. Third, even those interventions that are effective in achieving one objective usually have downsides when measured against other objectives. Government plays a role in determining the level of saving in an economy. A significant component of national saving in any society simply reflects the direct effects of the fiscal policy of its government. At the same time, government policies affect the incentives of individuals and firms when they decide the extent to which they will save or dis-save at any particular point in time. The aim of this discussion document is to assist the SWG to start its work. Options set out in the second section identify possible courses of action, plus associated costs or benefits, to help the SWG formulate its advice to the Government. The Treasury also hopes this document facilitates public discussion, with questions included for this purpose, and encourages public submissions to the SWG in the weeks ahead. The work of the SWG will build upon the previous work of the Capital Market Development Taskforce and the Tax Working Group.