With many commentators currently putting forward their opinion on the recent Budget announced by Prime Minister, I thought I would join the choir and put forward a few thoughts of my own. The main talking points of the Budget to date have been around the changes to KiwiSaver, Working for Families, Student Loans, and the possible mixed ownership model (or privatisation) of state owned assets.
As far as KiwiSaver goes, I can appreciate that the $1042.86 sweetener was costing the Government a lot of money, and therefore some changes were inevitable to make the scheme sustainable. To compensate for this reduction in Government contribution, the minimum employee and employer contributions have both been raised to 3%. However, with the employer contribution now being taxed (which the 2% employer contribution hasn’t been to date), the overall effect to our KiwiSaver accounts won’t be as significant as you might think. Overall these changes should be good for the economy long-term; it will ease the fiscal pressure on the Government by allowing them to reduce their contribution to the scheme, while at the same time it should enable New Zealand’s household savings to grow as there are still good incentives for Kiwi’s to be part of the scheme.
Working for Families
In terms of Working for Families, with the current high cost of filling the car, putting food on the table, and paying the household bills, this squeeze may unfortunately result in a reduction in household savings (if there was some money being put away for these purposes). And with minimum KiwiSaver contributions rising to 3%, this may unfortunately result in some sacrifices having to be made here if finances do get tight.
I have been lucky enough to be a benefactor of the Governments interest free student loan policy, and am extremely grateful for this after leaving university with what seemed like an insurmountable student loan. With some light starting to emerge at the end of my student loan tunnel I can only imagine how difficult things would have been with the interest burden also. With so much publicity about how New Zealand’s best and brightest graduates are heading off overseas, this interest free scheme remains a good incentive for those graduates to stay here in New Zealand. It does sound as though the Government is going to start getting tough on those borrowers who are overseas and making no repayments, and with a shortening of the interest free grace period while borrowers are overseas, it will be interesting to see if this encourages Kiwi student loan borrowers living offshore to think more seriously about coming home to work. As we have heard from a number of commentators, having our best graduates staying on our shores (or returning after a stint overseas) will assist our economy to grow and be competitive, and can only be positive for the country.
Finally, there has been talk of implementing a mixed ownership model for some of New Zealand’s state owned power companies, and it is fair to say that this is a hotly contested debate. While some commentators are calling this a short-sighted view by the Government to reducing our debt problem, and citing much bigger longer-term economic gains by retaining Government ownership of these assets, the Government is assuring everyday New Zealanders that they will be given every opportunity to own shares in these companies which will continue to benefit our economy. I’m sure this will be a topic that gets a lot of mileage over the coming months, and it will be interesting to see how much of a factor it becomes in the lead up to the election.
So those are my takes on a few of the points to come out of the recent Budget, but I would be interested to hear your thoughts. How do these Budget announcements affect any saving or investment plans you may have had on the go, or in the pipe lines, or how do they affect your general day to day household living?