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May 16, 2006

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t selwyn

Re the NZ Super Fund - as long as a lot of that is in Euro denominated assets we are safe.

Your thoughts regards min. wage are interesting.

maksimovich

What can be seen is as the undistributed middle has no incentive to invest or save,or even work harder.

The best way for capital appreciaiton here would be for a tax free incentive on savings interest.The cost is quite minimal around 1b$ for resident savers.This would lessen the diversification into property and would allow control of the individuals liquid assets.

If a price indexed interst income of say 10000 tax free there would be some movement from property to interest bearing instruments.

NZ will be too small for major investment capital from the NZ fund without distorting the market.If investment is to be increased it should be on infrastructure say the pension fund being a lender to say transpower for infrastructure development.This is relatively less risk then playing the derivatives market as they do now.

sagenz

I do not disagree with that in the short to medium term maks. But the availability of capital will make it a better place to list. If the super fund took up to 30% of new placements it would become a desirable place to raise capital & invest.

The tax free incentive on savings is interesting. To some extent it would replace foriegn borrowing only. I am not sure whether there a re not better ways to use $1bn of tax cuts. I would certainly place it behind depreciation & restructuring marginal tax rates.

maksimovich

I am not against the accelerated depreciation as per the FDR model it is without doubt why the FDR is the worlds largest exporter.

The RF model is based partially on the German but the depreciaiton is more targeted namely to efficiency and productivity,The levels are set by the improvement of output per imput not a carte blance approach.The reasoning is on falling demographics in the RF.

The savings incentive model was one oF the Illironov intiatives under the Putin Govt.Illironov is a libeterian who is a great follower of Lord Rees Mogg.His idea was for the Sovereign Individual,the possibility of the individual having a passive income rising to equal the individuals work income.

The incentive rewards were identified by changing the tax to 13% flat rate,Interest free income to moving levels,then 5% and tax amnesty on mattress money to bring money from the Black,Grey economy into the RF economy.Result 150bUS$ increase in the economy in 2 years and a budget surplus of 66bus$.

The self funding of capital in NZ would lessen the current account deficit by around 3.5bnz.Without incentive this will not happen.

sagenz

The low flat tax is certainly an interesting idea. I think it is a reasonable long term objective for New Zealand but the political environment is just not conducive to bringing it in successfully. the intellectual arguments need to be expressed more forcefully and a lot more people convinced before it could become a reality. RF is not really a good comparator for NZ. Giving a successful small nation like Ireland or a growing nation like Slovakia a few more years to demonstrate that flat tax works is a requirement before the arguments can be made that would convinec enough people.

I think the savings incentive is a good idea. It would mainly help the elderly. Until their share of government monies through expensive super is reduced I find it difficult to argue that they should be rewarded. The two would need to combine and that w9uold be politically explosive

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