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Concern has been raised by an apparent lack of saving in New Zealand New Zealands household savings performance is amongst the worst in the OECD Despite strong economic growth over the last decade New Zealands household savings rates have declined when compared to other countries such as United States Canada Australia and United Kingdom It is often argued that policies which faster savings are important as higher savings will contribute to higher investment and productivity thus it will lead to an economic growth David Skilling of New Zealand Institute states that the increasing household savings should be a national priority and it is likely to lead to higher rates of investment productivity and growth Is there any relevant link between saving investment and growth Opponents of this view argues that New Zealand is able to access foreign saving to meet investment demands and domestic savings does not appear to have constrained investment and growth However many evidences and theories predict that increased total saving will lead to higher investment and output This essay discusses the importance of saving from three perspectives investment productivity and growth To start with there is a strong relationship between household saving and investment Investment is what provides for growth in national wealth However we cannot increase investment without increasing national saving If people are investing then the saving to fund that investment must be coming from somewhere But it should not be coming from the foreign sector and it should be coming from home According to the International Monetary Fund and the OECD the low level of saving was a key factor in New Zealands lower productivity business investment and incomes Skilling 2005 Low level of household savings are likely to constrain the development of a countrys capital markets in terms of their liquidity and depth In the other words it will reduce investment in the New Zealand economy Opponents of this view however argue that the low level of
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