[ad_1]
analysis: Rep. Trevor Mallard’s resignation proposed to give Reserve Bank’s Te Putea Matua the power to use the Kiwi Saver as a monetary policy tool to combat inflation.
His “leftist” idea was that the Reserve Bank could increase the percentage of workers’ salaries going into KiwiSaver, say from 2% to 4%, if they wanted to slow the economy.
Conversely, if you want people to spend more to boost the economy, you can contribute less.
This proposal has caused laughter among KiwiSaver watchers. Some people are nervous. some disbelief.
read more:
* Here’s how banks set mortgage rates
* The reason why loan interest rates do not fall
* Banks are ready to expect sub-zero interest loans from the Reserve Bank with few conditions
Katrina Shanks, a former member of parliament and now Chief Executive Officer of Finance Advice New Zealand, said Mallard’s ideas needed to be studied and consulted before being put into practice, so they would have public support. I don’t think
Mallard put forward his idea instead of the Reserve Bank raising or lowering the Official Cash Rate (OCR) to cool or stimulate the economy.
He said the results of OCR increases or decreases are slow and unpredictable. The main reason was that most mortgages had fixed interest rates that didn’t change until the end of the term.
Robert Kitchen/Staff
Trevor Mallard gives his farewell speech in the House of Commons and drops a farewell Kiwi Saber bomb.
Allowing KiwiSaver to change its contribution rate would be a quicker solution, he said.
“They can increase or decrease net wages almost instantly, and in doing so they can boost or tighten the economy,” he said in his farewell speech.
let go of people’s savings
“It’s a very unique perspective on people’s wealth growth,” says Shanks.
KiwiSaver is designed to help people manage their retirement savings decisions, she says.
“It’s a very dangerous area if the government is allowed to control it more.”
She worries that confidence in KiwiSaver will be undermined if it becomes a monetary policy tool.
Mallard’s left field proposal is actually a dusting of previous Labor policy.
Reserve Bank watcher Michael Reddell called the idea “ridiculous.”
It undermines retirement savings and is unlikely to work, he says. It has the effect of shuffling their money from one place to another.
But Reddell says the policy was one of the Labor Party’s adoption in the 2014 election, which won just 25% of the party’s vote.
Chris Skelton/Fairfax NZ
This is how Labor won the 2014 election.
At the time, it proposed making KiwiSaver mandatory and asking the Reserve Bank and the Treasury Department to develop a “variable contribution rate” proposal as a tool for monetary policy.
Susan St. John, Michael Littlewood and Claire Dale of the Center for Retirement Policy Research at the University of Auckland were critical of the idea.
The government had no control over the “countervailing” act, they said.
These were people who supplemented in other areas of their money lives, such as saving less in retirement plans and bank accounts outside of KiwiSaver, or extending their borrowings.
They warned that the policy would also be unfair to the poor.
“The burden of this policy will fall on those who cannot offset their increased contributions by saving less elsewhere,” they said.
Cameron Burnell
Trevor Mallard and Chris Hipkins on Election Night 2014.
“Suppressing demand by depriving the low-wage population of purchasing power and leaving those with income from capital unaffected will adversely affect the most disadvantaged,” they said.
Unfair to savers?
According to KiwiSaver expert David Boyle of Mint Asset Management, more than 3 million people have KiwiSaver accounts, but only 1.2 million regularly save.
That would limit the influence of manipulating the kiwi saver contribution as a monetary policy tool.
Not only was KiwiSaver not mandatory, but many people were employed as “contractors.”
“Some employers are not acting in the spirit of the KiwiSaver Act,” he said.
Barry Coates, a former Green Party MP and founder of the ethical investment charity Mindful Money, said there were clear fairness issues with the plan.
Wealthier, higher-paid people regularly force large amounts of dollars into savings or leave in their pay sack as a result of such policies.
But poorer households, including many renters who have just refinanced their finances, will struggle to cope with the surge in forced savings, he says.
As a result, you may need to stop saving on KiwiSaver and build long-term wealth.
The “volatility” problem
KiwiSaver watchers also point out that the KiwiSaver fund invests in volatile assets such as company stocks and assets that may perform poorly when interest rates are rising, such as interest-bearing bonds. increase.
The Reserve Bank is battling inflation and people’s KiwiSaver accounts are declining in value.
Since this is a long-term savings scheme, periods of market decline are tolerable for most savers.
But it was unclear whether the public would accept the need to increase savings on assets that were losing value.
[ad_2]
Source link
