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How much new saving will kiwisaver produce?

Abstract
After two decades of tax neutrality for private saving, New Zealand policy changed radically with the recent introduction of tax incentives for KiwiSaver. A key issue for tax-favoured saving schemes is the extent to which existing saving is reshuffled versus new saving created by reduced consumption. Using data from a nationwide survey carried out by the authors, we estimate that each dollar of KiwiSaver balances represents only $0.09-$0.19 of new saving. The rest is either reshuffling amongst existing saving and debt by KiwiSaver members, or else taxpayer and employer transfers which reduce national saving elsewhere. Homeowners are least likely to fund their KiwiSaver contributions by reducing spending, indicating possible mis-targeting since owners are often blamed for excessive consumption arising from house price wealth effects. There is little evidence that KiwiSaver affects either the reported trend in saving or the presence of dis-saving. Since only one-tenth of households report negative saving, KiwiSaver may be a costly and ineffective solution to a relatively small problem of insufficient household saving.
Type
Working Paper
Type of thesis
Series
Department of Economics Working Paper Series
Citation
Gibson, J. & Le, T. (2008). How much new saving will kiwisaver produce?. (Department of Economics Working Paper Series, Number 3/08). Hamilton, New Zealand: University of Waikato.
Date
2008-03
Publisher
Waikato Management School
Degree
Supervisors
Rights