The Government-appointed Savings Working Group deserves praise for the sternness and directness of its message. New Zealanders - the people and the Government - are not saving enough, it says, and if they do not move quickly back from the brink, serious economic disruption is likely to leave practically everyone worse off.
Given the group's terms of reference, its recommendations for increasing the quality, quantity and rewards of saving were never going to be quite so apposite. Nonetheless, a politically untenable proposal to raise GST from 15 to 17.5 per cent aside, they provide a ready template for Government action.
Reaction to the group's report will focus on two areas - proposed changes to KiwiSaver and measures to reduce the amount of savings tied up in residential property.
On KiwiSaver, it steers clear of compulsion, but its recommendations would go a long way towards making it that in all but name. All employees 18 and over, or possibly even 16, who are not KiwiSaver members would be automatically enrolled. It would be up to them to opt out within two months.
On the reasonable basis that most will not bother, the group believes the level of participation would be close to that of a compulsory scheme. It enhances that probability by several other means, the worst of which is a draconian proposal that would prevent employers giving non-KiwiSaver employees pay increases to compensate for not receiving KiwiSaver contributions.
In framing its recommendations, the group was obviously impressed by the success of compulsory superannuation in Australia. Yet it is only fair that it stopped short of mandatory KiwiSaver membership. As it notes, compulsion would force people to save at times that may be inconvenient or to invest in shares or the like when they would rather have their money in, say, housing or their children's education.
Additionally, it would be unfair on people aged over 45, most of whom, the report says, seem to be saving enough through their own superannuation arrangements. The young, however, face a far more uncertain future in terms of housing affordability and suchlike.
In addressing this, the working group was hampered by the Government's instruction to stay away from a capital gains tax and any land taxes. Thus, while it makes it clear it sees the Government's recent attempts to discourage property investment as inadequate, saying "serious tax distortions" remain, it must settle for responses that, while commendable, amount to tinkering.
These include indexing savings tax rates to inflation and reducing the tax rate on portfolio investment entities so they are up to 10 percentage points below savers' marginal tax rates. The problem here lies in persuading the Government the cost to its coffers, which is not stated, will be offset by the benefits of increased and more productive saving.
Reacting to the report, the Finance Minister ruled out an increase in GST but gave no indication of what recommendations the Government might favour. But there is little it should find too hard to digest. It is undoubtedly helpful that compulsory KiwiSaver, which may, ideologically and practically, have been an anathema to many National Party supporters, has been shunned.
Indeed, most of the recommendations may have been anticipated, given the terms of reference largely eradicated the chance of proposals the Government did not want to hear. If these do not always match the stentorian tone of the report, the working group has delivered a reasoned response to New Zealand households' debt mountain. This year's Budget should bear the fruits of its labour.