As he has for well over 20 years Brian Gaynor gets it. In todays Herald he looks at difference in savings and investment between NZ and Aussie.
While he doesn’t quite say it the implication is that at some stage we are going to have to bite the compulsory savings bullet.
And Key/English with their gutting of Kiwisaver and abandoning of the Cullen fund have put us in a much worse position than a year ago,
Kiwisaver and the Cullen fund are important,
One item to watch when comparing govt expenditure to GDP ratios. Is that Australia doesnt count their GST as government revenue!! Yes , strange but true. The reason for this is that the GST is distributed to states, so they consider it a ’state tax’. Yet the states pay for school, hospitals , and police and so on. So any comparison with NZ must add back the GST to the Federal government spending.
I Think the most important part is
“The market failed then and it will again because we don’t have the seeds to start up new enterprises and the fertilisers to encourage their growth. Thus the empty space vacated by the State and old and inefficient business is not being repopulated by new and enterprising productive organisations.”
The first point this raises is that that Kiwi mums & Dads actually need spare cash to invest into the share market. At the moment the returns are much greater if they use this to pay off the mortgage (with no tax break). This also removes the need to learn the intricacy of the market or hand their hard earned cash to someone else knowing all the return is taken by fees and taxes. There is a good reason Kiwisaver or compulsory schemes or any mutual funds are bad investments, without the free money on offer.
The big point being that what we teach in school about investment is focused on what the economist looks at, not the successful investor strategies. The best programs on telly for investment are either debt reduction or property renovation. So where do people turn for investment advice – Salesmen! (see consumer survey).
In the absence of real education then Kiwisaver and the Cullen fund are vital as we are doing something, but these are not investments (and should not be called such as it adds to the confusion).
hello, the money in Kiwisaver is in your name and is invested. What would you call it. Lunch money.?
For your information, until recently,the amount of money in banks and finance companies etc exceeded the amount of mortgages.
The retirement ‘investments’ is allways the best place to start as the long time and small amounts along with compound interest have the largest final sum.
Funny too that Brash & Co didint mention Australia’s compulsory 9% employer super contribution, ours being a measly 2%.
I consider my Kiwisaver to be an investment. I enlisted the advice of an investment adviser, and invested my money with an investment firm.
As far as education, I believe it is vital to teach basic financial literacy in schools. I had the eye opening experience of having to explain the concept of interest to three twenty-somethings. It was in order to promote the idea of saving for larger purchases as opposed to getting locked into a rent-to-own scheme.
the 2% isn’t the maximum people can pay .. my understanding is that you can pay what you want .. there maybe a maximum??
In what way has the Govt “gutted” and “abandoned” the fund?
It is still going reasonably well considering the world financial situation. maybe my understanding of those 2 words is different .. I will go check my dictionary
I’m no fan of Cullen, in fact I’d put him in Mt Eden if I could but Kiwisaver is going to be a very important tool for us in 20 or 30 years so good on him for that.
Ghostwalker,
It comes down to the definition of the term ‘investment’. Often as not financial advisers and investment advisers are unqualified salesmen who repeat the stats they are given, and do no ‘investing’ themselves leaving it to another set of expert investors.
Some people go as far as to call a term deposit an investment, it is not. It is a loan. Similarly, putting money into mutual funds, you are not investing into business to share in the profits. You invest in (give to) the fund (or equitycorp/judgecorp/hanover) and get what is left that the managers deem to be your return, after they take fees even if you loose money.
A big clue is that an ‘active’ investor does not touch investments unless the return is over %10 (Infratil work on %20pa return min) and the return is guaranteed, not left to the vagaries of the market.
P.S. Yes it is a full time job, not a sideline for whats left over at the end of the week.
I’m not in Kiwisaver because I’m in a company scheme paying 8% .. trust me people, I would love to put it on hold at the moment
Trevor we need compulsary saving… Please, please can Labour have the courage to come out for this..?
It is critical about moving wasted investment money away from our over-inflated housing market and into export lead business… This needs to be combined with a capital gains and property tax…
Courage required..!