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Should the Reserve Bank be able to vary Kiwisaver contributions?
Labour says it will allow the Reserve Bank to vary the amount people with Kiwisaver have to pay to the scheme, if elected.
The change is part of big changes to monetary policy the party has proposed to lower interest rates and tackle New Zealand's high dollar.
The party plans to broaden the Reserve Bank's objectives to target economic stability and employment growth as well as the traditional focus on stable prices, finance spokesman David Parker announced today.
It will also introduce a new monetary policy tool for the central bank - a variable savings rate (VSR) that will allow contribution rates to KiwiSaver to be adjusted as an alternative to raising the official cash rate. Labour will make KiwiSaver compulsory if it wins this year's election.
In a speech in Auckland today, Parker said New Zealand hadn't had a current account surplus for 40 years and would have a deficit this year despite "fantastic" terms of trade.
"Forty years of living on the national credit card. Forty years of spending more than we earn. Forty years of borrowing and hoping it will all come right in the end, somehow," he said
Parker said New Zealand's monetary policy regime had resulted in the country paying higher interest rates than its competitor countries.
It had also caused New Zealand's dollar to be over-valued relative to other countries, hurting the export sector.
"Despite recent drops in export prices, and with higher interest rates, the exchange rate is now going up even further," he said.
Parker said the Government's target of exports making up 40 per cent of GDP by 2020 was impossible under present settings.
Major trading partners such as Australia and the United States already had policy targets that included employment and economic goals.
However, he said Labour would maintain the Reserve Bank's independence.
The VSR would allow changes in the savings rate as an alternative to changes in interest rates, which mostly went to foreign lenders, Parker said.
"Instead of paying more interest on your mortgage, a similar amount of extra savings would go into your KiwiSaver," he said.
Parker said Labour remained committed to controlling inflation and the existing inflation target, to a floating currency, and to free capital movement.
"But that does not mean we are blind to the limitations of current arrangements, and we are willing to act to improve them."
He said that since National came into power its biggest move had been to cut income tax for high earners and put up GST.
The accompanying documents released by Labour, said the "over-valued dollar and high interest rates" meant businesses found themselves less able to compete abroad - "undercut by imports at home."
"Our high interest rates also draw in foreign money, which fuels the housing market," he said.
"We have low general price inflation, a housing market which is inflating at rapid rates, while our tradeable sector is in deflation."
Parker said that alongside a capital gains tax, its KiwiBuild housing policy, universal KiwiSaver and reduced costs to businesses through NZ Power, Labour was offering an alternative that would help New Zealand families by creating "better jobs and higher wages".
"Governments around the world have changed how they operate monetary policy since the global financial crisis," he said.
"New Zealanders have a dollar overvalued by up to 15 per cent, a weakened export sector and mortgage rates that are among the highest in the developed world."