New Zealand named a working group to consider how to boost savings and reduce the nation’s reliance on overseas borrowing that has fueled its external deficit.
Kerry McDonald, a former chairman of Bank of New Zealand Ltd., will head the seven-member group, Finance Minister Bill English said today in an e-mailed statement. The group is expected to report back by January.
New Zealand’s net debt to the rest of the world has risen to about NZ$180 billion ($127 billion) and the nation has run a current-account deficit every year since 1973, highlighting the poor savings rate and the country’s vulnerability, English said.
“Increasing our national savings and investment levels is a critical issue for New Zealand because of our heavy reliance on foreign capital,” he said. “This has produced high and rising debt to the rest of the world, which cannot continue.”
The government will not change the existing pension arrangements and has ruled out broad taxation of capital gains or land but otherwise “we are not ruling anything in or out,” English said.
The group will consider the role of government savings and the impact of the tax system on savings and investment decisions, he said. It will consider the case for taxing income from savings at a separate rate to income from labor, he said.
Other members of the group are central bank assistant governor John McDermott, financial writer and lecturer Mary Holm, Bank of New Zealand Head of Research Stephen Toplis, investment consultant Craig Ansley, PricewaterhouseCoopers partner Paul Mersi and economic researcher Andrew Coleman.