Savings help coming for families

Struggling young families are to get help funding tertiary education, a first home and retirement, through a government-sponsored savings plan.

Prime Minister Helen Clark is expected to foreshadow the package in her "state of the nation" address to open Parliament on Tuesday.

Skyrocketing house prices (the average Auckland home now costs $350,000), comparatively low real wages, student loan debt and the lack of a savings culture in New Zealand are blamed for a plummeting home ownership rate.

Housing Minister Steve Maharey has indicated up to 10,000 families could need assistance from the package, expected to be the centrepiece of the pre-election Budget.

Among those having difficulty are Aucklanders Andrew McDowall, 26, and Emma White, 27, who the Herald on Sunday has followed as they search for a first home within their price range.

They accept they will have to take in boarders, but prices are still escalating out of their reach: "What looks like $400,000 is $500,000," says Mr McDowall.

It is thought the Government's savings plan could be based on a workplace superannuation plan designed by economist Peter Harris' working group, using a special tax code to deduct savings from employees' pay.

The Herald on Sunday discussed such a package this month in its first home buyers investigation, revealing Auckland houses were among the least affordable in the developed world.

Yesterday, Mr Harris said a key question was what "sweeteners" the Government would put in, such as contributing cash rewards to an individual's savings every few years, in order to persuade people to stay in the scheme.

New Zealand Institute chief executive David Skilling welcomed signals of an integrated savings plan, but was concerned it might not be aggressive enough to combat a wide-reaching home ownership problem.

"Our view is that this is a challenge that affects many, if not most, New Zealanders."

The institute is expected to publish research this week arguing New Zealand's consistently low levels of household savings and high levels of external debt have significant costs to the economy.

"New Zealand can't simply spend its way to prosperity," Dr Skilling said.

Sick of lining their landlord's pockets, Mr McDowall and Ms White devoted yesterday to house-hunting in Onehunga, where they hoped to find a house under $400,000.

They liked what they saw in the first two houses - gas, open-plan, decks and a little bit of a Manukau Harbour view from one - but the real estate agent told them the houses would sell for well over $500,000.

At a nearby three-bedroom villa, the real estate agent refused to even discuss their price range.

Mr McDowall wondered how people in Onehunga could afford such prices. "They can't," replied his fiancee.

- HERALD ON SUNDAY