25 Aug 2014

National takes aim at Labour economic policy

2:17 pm on 25 August 2014

The National Party has criticised Labour's policy of allowing the Reserve Bank to change the KiwiSaver rate as being ineffective and creating uncertainty.

Finance Minister Bill English.

Bill English Photo: RNZ / Diego Opatowski

If elected, Labour would allow the Reserve Bank to force people to save more in KiwiSaver as a new means of combating inflation when the economy is expanding, or reduce those contributions to boost the economy when it slows.

The party has said the proposal would reduce people's spending power but increase their savings, and would mean the Reserve Bank would not always have to raise interest rates to fight inflation, which would take pressure off the value of the dollar.

Speaking on Radio New Zealand's Nine To Noon programme, National's finance spokesperson Bill English said the policy would not make much difference to interest rates or the dollar, but it would create uncertainty.

David Parker.

David Parker. Photo: LABOUR PARTY

"There's a lot of certainty around how the interest rate mechanism works - people know what it means when interest rates go up and go down and they know who makes the decision.

"Under this other model that's very unclear."

Labour's finance spokesperson David Parker said the change together with the introduction of a capital gains tax would help keep interest rates and the dollar competitive. He told the programme a shake-up of monetary policy was overdue.

"It is abundantly clear that our currency is overvalued, we seem to have higher interest rates throughout the cycle and we need to change our monetary policies so that we don't take any eye off inflation but we say to the Reserve Bank 'look, do this in the way which best assists with achieving an external surplus."


Mr Parker said Labour's policy of pushing against speculation in the property market by means of a capital gains tax on investment properties would help boost wages.

"You've got to push towards productive investment so that we add value particularly to our exports, because if you don't earn enough for your exports to pay for your interest and your imports, then you get less wealthy as a country over time - and that's the current projections of the Government.

"So you've got to change a few things, and the most important one is actually a capital gains tax excluding the family home."

Labour also wants to increase the minimum wage from $14.25 an hour to $16.25 by 2015.

National says while other developed countries have seen wages fall in recent years, average weekly wages in New Zealand are on the rise.

Mr English said wage increases have to be driven by productivity.

"Building business confidence so that it invests the capital, that allows them to be sufficiently productive to pay higher wages to more skilled people."

Mr English said the National government has focused on making sure young New Zealanders are entering the workforce with the right skills.

Average weekly income has risen from $750 in 2008 to almost $900 in 2013 - though real wages are not growing for all.

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