Economist Questions Feasibility of NZ First’s KiwiSaver Reforms

An economist has voiced skepticism regarding the feasibility of New Zealand First’s proposed reforms to the KiwiSaver contributions. NZ First has pledged to make contributions compulsory and raise the rates from both employers and employees to 10 percent, which they intend to offset with a tax cut.

Shamubeel Eaqub, chief economist at Simplicity, expressed his support for the concept of a compulsory scheme but cautioned that a tax-funded approach may not be financially viable. He emphasized the need for a careful examination of the proposal’s implications on the economy.

Eaqub’s comments come in response to NZ First’s recent announcement, which aims to bolster retirement savings for New Zealanders. The party believes that increasing contributions is essential for ensuring financial security in retirement. However, Eaqub raised concerns about the potential economic impact of simultaneously implementing a tax cut.

October 2023 marks a pivotal moment for discussions surrounding KiwiSaver reforms, as various stakeholders evaluate the sustainability of increased contributions. Eaqub noted that while the idea of mandatory contributions is appealing, the mechanism for funding such initiatives must be scrutinized.

The KiwiSaver scheme, established to encourage retirement savings among New Zealanders, currently operates with varying contribution rates. The proposed changes by NZ First could significantly alter the landscape of retirement savings, but the feasibility of such measures remains a topic of debate.

Eaqub argued that without a clear funding plan, the reforms could place undue strain on both workers and employers. He cautioned that increasing financial obligations in the form of higher contributions might lead to unintended consequences, particularly for small businesses already facing economic pressures.

The discussions surrounding KiwiSaver reforms highlight the broader conversation about retirement savings in New Zealand. Eaqub advocates for a balanced approach that considers the needs of all stakeholders involved, emphasizing that any substantial changes must be grounded in economic reality.

In conclusion, while the notion of compulsory contributions to KiwiSaver has garnered attention, the practicality of NZ First’s proposal remains uncertain. As the dialogue continues, it will be crucial for policymakers to carefully assess the potential impact on the economy and the financial stability of New Zealanders.