Bill English made a speech today to the Wellington Chamber of Commerce that gave a taste of what to expect in the 2013 Budget that will be released in five weeks time on May 16.

Compared to the pre-2000 era, Budgets in the 21st century in New Zealand have become relatively “boring” with most budget initiatives well and truly signaled prior to budget day.

Bill English looks like continuing that trend as he stated in the speech that:

“What we are doing is well-signalled and predictable, so I don’t think you’ll see any big surprises on 16 May.”

The almost 2.1 million KiwiSavers should welcome this as previous budgets by National and Labour have seen various changes to the base KiwiSaver model that came into force in 2007.  This is consistent with the experience in Australia where successive Governments can’t help themselves in making changes to their compulsory model – most often for political rather than economic reasons.

There are already some people who have not signed up on KiwiSaver as they distrust any Government involvement in their future savings (even with the the current incentives provided).  If any further changes are made to KiwiSaver (including the taxation of KiwiSaver funds) there is a risk that some existing KiwiSavers reduce or stop their KiwiSaver contributions because of a perception that the Government is “moving the goal posts” on them. 

This would be a concern as there is real momentum in KiwiSaver, which provides a diversification of savings away from New Zealanders fixation with residential housing.  This momentum is shown by there currently being 2.1 million KiwiSaver accounts.  This compares with the Treasury forecast of 680,000 accounts by 2013/14.

Thus the Bill English speech reinforcing the importance of policy certainty suggests the welcome prospect of a “boring” speech in terms of KiwiSaver in the May 16 Budget.

Anthony Quirk

Managing Director