Better attitudes towards saving and debt reduction in New Zealand are being driven by fear and are unsustainable, says the head of a major bank.

Since the Global Financial Crisis hit in 2007, there has been a sharp slowdown in the growth of New Zealand's household debt.

KiwiSaver can now boast nearly two million members enrolled with a combined $12.8 billion invested in the scheme.

But any claim that New Zealand is undergoing some sort of permanent change in attitude towards its spending habits is incorrect, says BNZ chief executive Andrew Thorburn.


"I don't think there's a culture shift happening. The reason people are saving more at the moment is because of fear rather than incentives."

When things improve in the local and global economy, kiwis will go back to bad habits, he said.

"The reality is we're in a consumption society and that's a fundamental system."

New Zealand needs to increase its national savings at government, household and business levels, he said.

Total borrowings in the country amount to about $300 billion, supported by total savings of about $210 billion, he said.

"It's OK if these figures aren't balanced. After all we're a small economy, but in an unstable world a $90 billion gap is too big - we need to reduce our dependency on external debt."

Speaking today at a Trans-Tasman Business Circle event in Auckland, Thorburn put forward his thoughts on how New Zealanders can become better with money.

New Zealand's tax system has created a "massive long-term bias" towards investment in residential property rather than savings, he said.

"I think it'd be great to go to a barbeque and have people talking about the sharemarket and how certain companies are doing, rather than property and mortgage rates."

The way to encourage that is to restructure the tax system, not introduce more taxes or increase existing ones, he said.

"Under current settings, dividends and savings are taxed at a much higher rate than the effective taxation rate on housing.

"If New Zealand and New Zealanders are to be good with money I do think we need to take a different path and face up to these fundamental anomalies at the heart of our current taxation system."

Thorburn is a proponent of compulsory KiwiSaver membership and says the minimum contribution rate should be increased every year until it hits 10 per cent.

"That forces people to save more, although they may not save more in other areas."

Continuing the debate around housing affordability, improving financial literacy and getting more companies listed on the stock exchange are all answers to improving the health of New Zealand's economy, he said.

Much of the responsibility lies with business leaders, who need to step up and start talking about the changes needed.

"I think we're quite passive about that. But actually, I think business leaders see what needs to be done and they need to be more courageous."

Thorburn said he sees "incredible potential" for New Zealand but unless proper debate is held around these issues, the country will not advance.

"My view is the world's going to be a difficult, vulnerable, volatile place in the years ahead and we need to prepare for that."