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Reserve Bank submission to Savings Working Group

( The Reserve Bank has today released its submission to the Government-established Savings Working Group.

Commenting on the release, Governor Alan Bollard said an increase in New Zealand’s national savings would improve the country’s medium-term growth performance, as well as reducing our vulnerability to global financial shocks arising from our high level of foreign debt.

“The recent decision by Standard and Poor’s to put New Zealand sovereign debt on negative outlook reinforces this,” he said.

“Most importantly, an improved savings level would reduce interest rates relative to foreign rates, thereby taking pressure off the exchange rate and promoting a more balanced growth mix across the export and domestic sectors.”

Dr Bollard said that while there are no obvious failings in current policy which constrain national savings, there are a number of measures that, working together, would be expected to deliver an improvement in national savings over the medium term.

“Foremost could be a faster return to government operating surpluses than currently planned. The Government might also give consideration to moving towards a Nordic-type tax system where income on capital is taxed at a lower rate than labour income. Savings would also be enhanced by inflation-indexing the tax treatment of interest.”

Dr Bollard said the introduction of KiwiSaver has already done much to promote retirement savings.

“We believe more can be done through this channel, both to promote a savings culture amongst New Zealanders and to reduce the fiscal cost of KiwiSaver, thus improving its contribution to national savings,” he said.

The submission document can be downloaded from the Reserve Bank’s website (

Media Release on 24 November 2010 from Reserve Bank of New Zealand (RBNZ)



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