Budget: save if you can afford to - if you can't, tough
As expected, Kiwi Saver is the big budget thing. It works like this. If you are not unemployed, a home maker, a student, prisoner( Ie: you have a job), you can save 4 per cent of your salary and get $20 per week tax credit - and you employer can contribute 25 percent of what you contribute in the first year, increasing in later years. Even the Government will contribute You can't take these contributions out until you retire.
Good way to take demand out of the economy, huh? Even better way to get a tax cut - just get your employer to pay for it. After all, that`ll teach him for giving you a crap salary, won't it. Now, you`ll NEVER get a pay rise.
Yet, in order to save, you need to have income that will allow you to save and most on the average wage or lower just don't. So it is in employers best interests NOT to give you a pay rise so you can't afford to pay into Kiwi Saver.
But some of your workmates can- and are getting their Kiwi Saver topped up by your boss. Consequently you wont get a pay increase because the topup for your fellow workers is costing your employer up to twice as much as the savings on their reduced tax rate in the long run.
This means that higher salaried staff will be more appealing to get rid off when redundancy happens, and the rest of the higher paid staff will be re-hired as self employed contractors - and if you are one of them, BANG!, you're stuffed. Your employer contributions stop and you can't take any money out. Furthermore, GDP will be affected, companies will not be able to increase wages or grow their businesses. Good for inflation - but bad for growth.
This budget is about encouraging people to save.Ummn.. no its not, it's about taking consumer demand out of the economy so the Government can spend and tax more without affecting inflation.To save, people must do one of two things: spend less or earn more. If you can't do either, it's a bit like asking someone to flush the toilet after using a long drop.
If wages are stagnant, this budget encourages people to save more on less income, and if you buy your petrol in Auckland and Wellington they`ll slap 10c a litre on the price to assist.Just to remind you that most of your money paid for your petrol is actually TAX. As in, "would you like petrol with that tax?"
What the Government should have done to encourage people to spend less was to withhold $30.00 a week of Family Support money, put that in the Kiwi Saver and make a $30.00 contribution on top of that****, allowing them to opt out of they want to take part in the workplace Kiwi Saver scheme. That is successful forced saving, includes all taxpayers,some beneficiaries and students, and provides more leverage for employers to grow their businesses, contributing to economic growth. If course if you work for a Govt department, the taxpayer will be paying your employer contribution anyway.
What to do? Don't work too hard - you can't get a pay increase but at least your Working for Families marginal tax rate won't be affected. If you want to get wealthy, leave New Zealand or have some kids.
What I can't understand is why Government thinks the extra spending will not be inflationary but tax cuts will be.
Also, I note that less than 24 hours after Gordon Copeland left United Future, the party`s web site was updated removing mention of Copeland as an MP. The Google cache shows that Larry Baldock, Anthony Walton and Bernie Ogilvy were board members. They are not now.
*** This is instead of the Government contribution as part of Kiwi Saver. Non- workers can open up their own account, they don't get the employer contribution, thats all.