Saturday, May 19, 2007

Kiwi Budget Promote Savings, But..

Opens the Gap Wider between the Rich and the Poor.

On the plus side;
Interest rate will be lower in the long term, increase savings rate would supply funds to the financial market, hence in the long term, reducing the need to borrow fund from offshore.
Reduce inflationary expectation in the short term, when people are saving a fraction of their incomes, the money that they are not spending now.
Regional tax to fund public transport, now that is a novel idea. True, why should Southlanders chip in money to fix Auckland's transport woes, but will this be a catalyst in commuting behavior? The success remain to be seen, we might still see clogged roads and empty buses.
Lower business tax rate, now that is good for business.

On the negative side;
See the budget effectively help working people to save and get ahead. Govt will add money to your Kiwisaver account after a given time.
But there are huge number of people who are still on the benefit, DPB and low income pension. These people will be left behind in the prosperity ladder.
So does small business owners and self employed.

Govt banks on KiwiSaver to turn fortunes around
Fri, 18 May 2007 05:48a.m.
Michael Cullen was all smiles when he entered the debating chamber yesterday

The standout feature of yesterday’s budget was the big changes to the Kiwi Saver scheme.

Everyone who works stands to benefit and employers, who are to get $1 billion in tax cuts, are being forced to contribute to worker’s savings too.

The Government will contribute $1000 dollars up front and from July anyone who signs up for the scheme will put in at least 4% of their income.

The Government will then give a tax break of $20 twenty dollars a week to put into a kiwisaver account.

After 5 years you can withdraw the money to buy a first house, and the Government will give you another $5000.

But the biggest surprise is that employers are being forced to contribute too.

Along with your 4% from next year your employer will be forced to put in 1%.

From 2009, 2%, 2010, 3% and from 2011, your employer will have to match your contribution.

Businesses will get tax breaks for their contributions.

The changes mean that a couple who are 30 years of age earning the average wage, will now be able to retire with $300,000, while under the old Kiwi saver rules the figure would have been around 100,000.

An extra $3.2 billion dollars is going into Kiwisaver over 4 years and Cullen says it will lift prosperity in retirement for future retirees.

But National says the scheme is a hoax for businesses that received tax cuts today but now must then give them back.

“They get given $1-billion and they get $2-billion taken off them,” said National leader John Key.

Big business is also against the scheme, saying workers will pay through lower wages.

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