David McLean warns that unless New Zealanders increase their savings, the country will not have sufficient capital to grow businesses and create economic growth.
McLean - who is chief executive of Westpac Institutional Bank - says that compared to Australia, a lot more savings investment in New Zealand goes directlyinto business.
"Much of the New Zealand business market are SMESs that are owned by families who put the money in," observes McLean. "That's good. It's just as good as saving in a super fund. And both of these are better than saving in your house."
"That just stimulates the housing boom but does nothing for growth."
He is disappointed that National leader John Key will not talk about raising the age of entitlement to NZ Superannuation (National Super) above 65 years. "Not moving it up is just unsustainable. The rest of the world's doing it. It's a fact of demographics. It's just unarguable."
"I do think Labour has stolen the march on the Government with savings and super. I was pretty disappointed with National's response to that.
"That's one area where I think Labour has got a much better policy."
McLean says if the country's cost of funds goes up as a result of the international turmoil in Europe, that will flow through to business. The situation will be compounded if the Northern Hemisphere economies fall flat and stop buying Chinese goods - "then the whole virtuous circle comes to an end".
"I think we have to be really careful not to kill off what is really quite a fragile recovery by being too aggressive on things like spending cuts, tax rises and interest rate rises.
"Trying to do that too aggressively will kill off growth so it actually takes longer - it's a very fine balance. We have to be careful."
The big positive is that companies have got their balance sheets into much better condition since the Global Financial Crisis which exposed highly geared Kiwi firms. "There's been great risk management by New Zealand businesses. But there's a lot of cautious conservatism about risk-taking because of that."
There is no difficulty accessing bank debt for good companies.
McLean is concerned about New Zealand's foreign debt ratios - particularly the private debt level. "That is risky for the country. What it means, unfortunately, is that we have to save more to cure that problem but in the meantime we have to be prepared to accept foreign investment because we live in a globalised world."
He says New Zealand also has to get used to a higher currency. With interest returns low in other Western economies, global investors are instead turning to Australasia. "If we have a permanently higher currency - but not so high it kills exports off - it forces you to say we've got to add more value here. Singapore for 20-30 years had a policy of trying to get the currency stronger to force people to develop more sustainable businesses."
