Thursday, July 13, 2006

Widening income and living standard disparities

It is interesting to look at the amount of debate kicked up by the recent "overview of living standards" released by the MSD, in a different context.  The report highlighted how it is not the absolute income of a familial grouping that determines their final living standard, but is just as closely linked to the income sources and decision making of those familial groups in terms of their income disposal.

In that respect I would turn your analysis to the same debate, but using New Zealand and Australia as test subjects, rather than New Zealand family units.  In that respect I would point out that it is still the continuing wasteful monetary mind sets of both the New Zealand Government and general public that would doom us to a continuing relative decline in living standards, despite our recent closing of growth rates. 

Australia is currently in the process of implementing a change to their superannuation scheme such that wage / salary earners will be saving at the rate (opt-out) of 12% of their pre-tax income.  Even if they opt-out of the 12% rate they will still be saving a compulsory 8-9% pre-tax.  Contrast this to the New Zealand situation of 4% opt-out, an optional 8% opt-in, or a 0% if you would still like.  The wealth generation difference of the Australian situation running between 9% - 12% of their salary / wage income versus New Zealand's prospective 4% savings (household savings are still negative so the superannuation stands as the only incrementing savings pool) means that the Australian capital pool will be increasing at a rate of double to treble our own. 

Even most of New Zealand's financially illiterate citizens should be able to understand that if you start with a greater capital base, and then continue to add to that base faster than your comparative position, you will quickly and irrevocably be in an unassailable position.

Even more than fighting our internal issues of beneficiary entitlement mindsets, bloated local Government bodies and high child abuse rates, we need to realize as a country that we need to start building a wealth base.  Otherwise we will continue to lose on the living standards scales, and beyond not being able to support those other Pacific nations that depend on us, we won't even be able to support ourselves.
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