Posted by Blogger Name. Category:
Big Tool
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Compulsory savings
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David Parker
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Gareth Morgan
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Labour Party
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Susan Guthrie
There's not a lot that Gareth Morgan has said in recent months that we agree with, especially when it comes to cats. But he knows a whole lot more about economics than we do.
And Morgan and Morgan Foundation colleague Susan Guthrie have ventured an opinion on Labour's "Big Tool" monetary policy, and it isn't what David Parker will want to read. In an opinion-piece headed Nice try, but compulsory savings won't cure our ills Guthrie and Morgan opine:
It is unfortunate but true that many myths have been peddled by successive governments in relation to KiwiSaver.
The latest policy offering from the Labour Party reflects a poor understanding about the limits of KiwiSaver and related issues. This is a major flaw in the comprehensive economic policy it announced last week.
Myth one: compulsory private savings schemes solve a country's indebtedness.
Don't be so sure. Despite being hauled out whenever the issue comes up, Australia's compulsory scheme hasn't had any major impact on its national indebtedness.
It is widely understood there (but not here) that in response to compulsion people can simply alter the types of the things they save into - if a bit more compulsory savings is imposed, then they save less in other ways. The composition of private savings simply alters.
There has been one important positive effect from compulsory savings in Australia - an increase in financial literacy. That is not to be sneezed at, but supporters in New Zealand claim far more for it than educational payoffs.
The claims being made in New Zealand of the Australian example are far greater than the facts.
Myth one is but the first of five myths which Morgan and Guthrie bust in the best tradition of TV programme Mythbusters. We won't steal any more of their thunder, but simply suggest that you follow the link above and read the entire piece. It certainly casts a slightly different opinion to that of David Parker when he unveiled his "Big Tool" last week!
