This obviously means further belt-tightening because the Government’s books show it is expected to run deficit of $11.1 billion (5.5% of GDP) this financial year, up from the $8.6b deficit projected in May.
At question time in Parliament on Wednesday, English said private savings had lifted over the past two years but government savings had fallen. “The net effect is that national savings have lifted substantially, as witnessed by the improvement in the balance of payments. Looking ahead over the next three years the external deficit is likely to increase as the economy improves, but it is expected to be at about half or less of the level that it was at in the five years prior to 2008. The Government will continue to look for opportunities to reduce its deficits and therefore make more of positive contribution to national savings.”
Statistics released yesterday reinforced Finance Minister Bill English’s contention that householders were improving their savings performance, although household expenditure continues to outpace income and New Zealanders show steady preference for investment in the property market. The household saving rate, expressed as percentage of household net disposable income, has been mostly negative since 1999. However, it has improved in recent years, reaching negative 2.2 percent in the year ended March 2010 from negative 4.5% the previous year.
The Working Savings Group which released its interim report yesterday said data on household saving “are very uncertain”. Considerable work was needed to differentiate household and business savings.
The group has left open its thinking on compulsory savings, saying only that making KiwiSaver compulsory from the age of 18, or at certain income levels, might be worth considering. But it does urge the Government to increase its savings sooner than signalled in Budget 2010.
