KEY POINTS:
Finance Minister Michael Cullen yesterday gave a bleak reminder of New Zealand's national debt challenge while opposition finance spokesman Bill English painted a rosier picture of a country coping well with tougher times.
The two politicians were speaking on the same topic at the Association of Superannuation Funds of New Zealand annual conference - sustainable workplace savings - but were poles apart on their views of the economic state of the nation.
In his speech Cullen said New Zealand was facing the most complex and challenging economic forces for 20 years.
"New Zealand is facing a serious economic challenge generated by the global credit crunch and steep rises in global commodity prices.
"These are the most complex and challenging set of economic forces we have confronted in at least two decades."
Cullen said the last year had been a major year for savings in New Zealand but also reminded that it came in response to a serious debt problem.
"New Zealand does have a very big debt problem. And that debt problem is a drag on our economic growth and a major and ongoing risk for our economic security."
He said 2008 had been a tough year for the economy and Treasury expectations were that the second quarter would follow that of the first, in which negative economic growth was recorded.
Cullen said the take-up of KiwiSaver showed New Zealanders were serious about improving the country's record on household savings, but from a wider economic perspective the deficit of household savings was both a weight around the country's economic neck and a risk to our national economic security.
"Our poor savings record can be directly linked to our huge debt to the rest of the world. That is a significant risk to our position as a safe place for investment from offshore."
He said it was key to ensure people kept investing in their future and if re-elected Labour was committed to lowering national debt and keeping Crown debt low.
But English said he believed Kiwis had gained resilience since the Asian crisis of the 1990s and confidence was already picking up.
"We are now going through a reasonably tough adjustment. However we believe it is an adjustment we can have confidence in. New Zealanders have learned a lot of resilience in the last 20 years. The Asian crisis really knocked us for six. New Zealanders believe we can make it in a global economy. People have absorbed the oil prices and confidence is picking up. We are resilient enough to get through it."
English said there were two reasons why National remained confident about New Zealand's future. First, he said the balance of the world was changing in a way that favoured us.
"People are prepared to pay more for what we produce and now we are only half a world away. Asia is not that far away from us. Our most basic commodity - water - is turning out to be very valuable. Milk is just value added water. We are back to where we have deep confidence and skills."
But he said future growth was going to have to be fed by retained earnings and strong export earnings, not cheap credit.
"When the books are opened in a few weeks time we believe there will be $15 [billion] to $16 billion in cash deficit. It is already $13 billion now. It's roughly the amount the Government has committed to the Superannuation Fund and KiwiSaver."
English said that was a significant commitment which would have to be funded through a new framework.
"We have had a lot of policy concentrated on savings. Our focus will be much more on investment and on investment opportunities."
* The Association of Superannuation Funds of New Zealand conference is being held at the SkyCity conference centre in Auckland and finishes today.
