Broker comment Super, answer to recession
There has been encouragement from Government leaders in recent weeks for us to throw off our winter ills, said Mr T. K. de Castro, of the Christchurch offices of Jordan Sandman Smythe.
“We agree — spring is a good time of the year to do this. Looking back to the spring of 1976 New Zealanders had their mouths open for the teaspoonful of Muldoon medicine that never came. Furthermore we weren’t offered a dose for the next eight years.” Now a remedy. The Government should have another look at its policies for superannuation. This is an area which should be actively encouraged, not clobbered as the present rules stand, With the sharemarket in the doldrums New Zealand enterprises — farming and industry alike — were crying out for long-term capital. Superannuation funds were just those sort of investors — they had long term objectives.
The average age in the greater Auckland area was 27 years. Given that some of those were still in cots it meant that the average worker had possibly 25 years to 30 years ahead in the work force.
"These people should be encouraged to provide for their retirement by joining a superannuation fund. Fur-ther-more, since superannuation benefits form part of an income package employers should be encouraged to expand superannuation benefits in partnership with the em-
ployee,” he said. The withholding tax at 33 per cent of employer contributions discouraged this as it put up the cost of labour. The Government had consistently said that investment decisions should be neutral as these were influenced by taxation considerations. Generally this stance was agreeable but when it came to longterm savings for the benefit of the (eventually) retiring employee it should be encouraged.
Taxing the profits of superannuation funds was counterproductive and for the amount of tax to be gathered the question was whether this was justified, Freeing up funds for investment would have the effect of:
• Continuing the downward pressure on interest rates for Government stock, local authorities, State-owned enterprise borrowers, and finance companies. • Assisting in reducing mortgage finance costs. • Helping the commercial property market. • Some funds would find their way into the sharemarket, bringing about increased activity, an important barometer of investor confidence.
“New Zealand is looking for an investment-led recovery from the recession now gripping the country. Government should take another look at superannuation and the latest taxation proposals so that these important investment funds can play their part in our recovery.”
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Press, 24 September 1988, Page 36
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409Broker comment Super, answer to recession Press, 24 September 1988, Page 36
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