Originally Posted by
ronaldson
There is a problem with raising interest rates as a lever to take money/demand out of the economy. While it impacts borrowers (hard in some cases) it has the corresponding effect of higher interest rates being paid to depositors which returns money into the economy.
I still say the best option in this country at present is to raise the minimum rate of KiwiSaver contribution to 4% (and end any further "holidays"). This takes significantly more out of the economy given more folk are contributors than have mortgages, but the money remains their property in their account whereas money paid as interest by any borrower is dead and gone. Given our savings rate/contribution in this country is far below other countries (Australia is 10.5% contribution presently, about to be raised to 11%) and the yield after inflation from KiwiSaver will be inadequate for most retirements in due course it strikes me as a no brainer.
Of course, ORR can't do this but he could at least make clear to Government it is the optimum solution just now as a trade off against further interest rate rises. But it would be too hard for Labour to do something sensible. They would rather promote a manifestly stupid employment insurance scheme!