New Zealand

Prime Minister John Key this morning confirmed his Government will reduce KiwiSaver's Member Tax credit - the 2 per cent subsidy the Government pays to savers in the scheme - in a move to make it more affordable, The New Zealand Herald reported. Individuals and employers would be expected to make up the difference, he said in a pre-budget speech in Wellington today. Mr Key acted to clarify his Government's intentions toward the scheme after days of hints of changes to the scheme and Working For Families to come in next week's Budget.

Allied Farmers, which has been reduced to a 'penny-dreadful' stock after putting too high a value on loans acquired from Hanover Finance, has completed the sale of property at Clearwater, near Christchurch, and will use the proceeds to repay debt, The New Zealand Herald reported. The property was among assets acquired from Hanover in December 2009 in a disastrous debt-for-equity swap. The loans have lost more than three-quarters of their $400 million value at the time of the deal, which left Allied shareholders with some 2 billion of near-worthless shares.

Investors in failed lender Strategic Finance are facing a smaller return with the receiver cutting 9 cents in the dollar from the top end of the prospective recovery range, The New Zealand Herald reported. Receiver John Fisk, of PricewaterhouseCoopers, expects a return of between 12 per cent and 26 per cent of the principal owed to debenture holders, down from the 12 per cent to 35 per cent range previously flagged, according to a letter to investors on April 29.

Troubled property investment company Irongate has asked trustee Perpetual to call in the receivers after failing to secure a deal to raise the $50 million it needs to pay out retail bondholders this month, BusinessDay.co.nz reported. Formerly called St Laurence Property & Finance, Irongate has been selling properties and seeking an equity injection to remedy a continuing breach of its two trust deed ratios and enable it to meet the listed bonds repayment.

The percentage of New Zealand's $168.2 billion worth of mortgages on floating, or variable, interest rates has popped up above half for the first time since the Reserve Bank started collecting the data on floating versus fixed-term rates in June 1998, The New Zealand Herald reported. Figures out from the central bank show $84.6 billion, or 50.29 per cent, worth of mortgages on floating interest rates and $83 billion, or 49.34 per cent, on fixed-term interest rates. A small sum is recorded as unallocated.

Restoring investor confidence in New Zealand’s financial markets is the major goal of the new Financial Markets Authority, which was formally established Monday, The National Business Review reported. The FMA takes over the functions of the Securities Commission and Government Actuary which are being disestablished, and consolidates other regulatory functions from the Ministry of Economic Development.

A new report by the Organisation for Economic Cooperation and Development (OECD) argues New Zealand to favour a capital gains tax, and lift the retirement age, The New Zealand Herald reported. The OECD's latest economic survey of New Zealand, published today, said lacklustre growth reflected structural shortcomings of the economy. As the 2000s progressed, the main sources of rising prosperity had increasingly become commodity-based terms of trade improvements, credit-fuelled capital gains on property, and rising government spending, the OECD said.

Struggling insurer AMI says it does not yet know if any government bailout will be necessary and its boss says it will be weeks before that becomes clear, The New Zealand Herald reported. John Balmforth, chief executive of Christchurch-headquartered AMI Insurance, said the outlook remained uncertain. "The purpose of the Government support was to provide our customers with confidence in AMI and provide us with time to fully assess the situation, particularly that relating to overall claims from the Christchurch 22 February earthquake.

Collapsed insurer Western Pacific has had its policies cancelled by liquidators, The National Business Review reported. Western Pacific had 7000 policyholders, and entered liquidation on April 1 after receiving 78 claims following the Christchurch earthquake. Liquidators David Ruscoe and Simon Thorn of Grant Thornton said they were unable to sell, transfer or assign Western Pacific's business. "We disclaim the insurance policies as onerous property, the effect of which is the cancellation of all policies immediately," they said.

This week, the Government went to its bankers and asked to borrow a record $1 billion in one week—effectively re-mortgaging an already indebted house just as its retirement costs are about to surge and the ability of its taxpayers to support that cost is about to sag, The New Zealand Herald reported in an analysis. How will we repay that debt in 2019? By then many of the baby boomers making the decisions to borrow now and pay later will be retiring, asking for their "free" national superannuation and "free" health care.