1. Saving and Investing Hon Dr Michael Cullen Minister of Finance Saving and Investing

2. Longest expansion in 30 years…

3. Saving and Investing Longest expansion in 30 years…

4. Saving and Investing …but imbalances have built up

5. Saving and Investing …but imbalances have built up

6. Saving and Investing Budget 2007 is supportive Leans against domestic demand Raises the speed limit Helps correct any structural imbalances

7. Saving and Investing Low saving has become critical…

8. Saving and Investing Low saving has become critical…

9. Saving and Investing …so KiwiSaver is being enhanced 4% or 8% $20 per week $20 per week per employee 4% (phased in)

10. Saving and Investing …so KiwiSaver is being enhanced Top up tax credit of up to $20 per week for savers (including self-employed) Compulsory 4% employer contributions phased in over four years Offsetting tax credit for employers up to $20 per week per employee Applies to complying schemes as well

11. Saving and Investing Meg and Jack earn $75,000 ($37,500 each) and contribute 4 per cent each …so KiwiSaver is being enhanced They have a first home deposit of $35,500 after five years At 65, they have savings of $390,000, enough for an extra annual income of $20,000

12. Saving and Investing Saving is boosted by employer contributions and tax credits FromEmployee contribution Tax credit* Employer contribution Total 1 April 20084%2%1%7% 1 April 20094%2% 8% 1 April 20104%2%3%9% 1 April 20114%2%4%10% e.g. an individual on $52k contributing 4% * Note that the tax credit is a fixed dollar value ($20 per week), which is equivalent to 2% of a $52,000 income.

13. Saving and Investing Funds build up

14. Saving and Investing Saving yields wider economic benefits Stronger and deeper capital markets –lower cost of capital over time –easier to access capital Reduced pressure on –inflation –current account

15. Saving and Investing Tax credits limit cost to employers e.g. a company with 30 staff paid (15 at $35k, 5 at $45k, 5 at $60k, 5 at $90k); 60% join KiwiSaver contributing at 4% FromNet cost Portion of total wage bill 1 April 2008$00% 1 April 2009$2,7600.2% 1 April 2010$8,2800.6% 1 April 2011$17,2801.2%

16. Saving and Investing Business Tax Reform Corporate rate  30% R&D tax credit  15% volume-based International Tax  Active income tax exempt

17. Saving and Investing Helping exporters expand offshore Current rules: disadvantage NZ companies expanding overseas New proposals: makes overseas active income tax exempt

18. Saving and Investing Building on previous tax relief 0 1 2 3 4 5 2007/082008/092009/20102010/11 $ billion Working for Families (Budget 2004) KiwiSaver (Budget 2005) Business Tax Reform (Budget 2005) Working for Families (Budget 2006) KiwiSaver (Budget 2007) Business Tax Reform (Budgets 2007 & 08)

19. Saving and Investing Investing World class infrastructure $600 million for Akld/Wgtn rail $50 million national rail track Regional fuel tax $145 million State Highways

20. Saving and Investing Economic Transformation Expanding export market development assistance ($88 million) Supporting sustainability ($32 million) and energy efficiency ($72 million) Improving tertiary skills ($170 million), industry training ($53 million), and lifting firms’ innovative capacity ($67 million)

21. Saving and Investing Families – Young and Old Raising New Zealand Superannuation to 66% of the average wage ($257 million) Strengthening communities by removing the cap on charitable giving ($65 million) Improving access and quality of health services ($3 billion) Supporting education, including early childhood education and reducing school class sizes with extra teachers ($359 million)

22. Saving and Investing National Identity Boosting annual Official Development Assistance by $246 million by 2010/11, to 0.35% of Gross National Income Implementing the Digital Content Strategy ($8.2 million) Supporting Maori initiatives including Maori Television Service and iwi radio ($35.6 million)

23. Saving and Investing The fiscal position is strong

24. Saving and Investing Meeting long term fiscal objectives…

25. Saving and Investing …and mindful of short term stimulus

26. Saving and Investing Budget 2007 Supports monetary policy Enhances productivity Addresses structural imbalances Promotes sustainability Maintains strong social services Supports our role in the world

27. Saving and Investing Hon Dr Michael Cullen Minister of Finance Saving and Investing