Don't look to the Budget for savings incentives

Cullen told a pre-Budget Wellington Regional Chamber of Commerce briefing in Wellington that the government's main work to encourage savings is in the workplace superannuation area, along with moves to sort out the taxation of investment flows.

While Cullen has always been dubious about incentives for savings he has usually left the door slightly ajar.

Asked from the floor whether he would consider incentives for savings, Cullen indicated not.

“I doubt very much that we would because the arguments for incentives...are as weak as they are for incentives in any other other area of activity. People just move their savings around.”

He also stressed the equity issues raised by tax incentives: the better-off get most of the money, he told the meeting.

New Zealand is a good model for what works and what does not in superannuation policy, he says, because over the past 30 years most of the options have been tried.

“We cut benefits and it did not encourage people to save: we tried to frighten people by running advertising campaigns saying we won’t pay for your retirement and the savings rate continued to fall.”

The group of savings which has collapsed the most though is workplace-based superannuation, Cullen says. That is where the government is putting its effort through the working group set up earlier this month.