Simplicity chief economist Shamubeel Eaqub. Photo: RNZ / Tom Furley
A chief economist believes New Zealand First's promise to increase the KiwiSaver contribution rate to 10 percent is necessary, but a tax cut to offset costs would be challenging.
New Zealand First has promised to make it compulsory and increase contributions from employers and workers to 10 percent - offset by a tax cut.
The party made the announcement at its annual meeting over the weekend, with leader Winston Peters saying he wanted to turn KiwiSaver into a serious, New Zealand asset-owning entity.
Simplicity chief economist Shamubeel Eaqub said a tax cut wouldn't be feasible.
"I think the tax cuts will be quite challenging just given the demographics of New Zealand. Our current tax settings are not really fit for purpose, so I don't think the headline buffer will be available, but there are other ways of achieving that.
"For example, we could make the employer contributions compulsory and increase that gradually. Rather than a tax cut, it would essentially be paid out of KiwiSaver members' own contributions gradually over time.
"That is much more likely to be sustainable and durable through the political cycle."
Shamubeel said any changes to KiwiSaver should be done gradually over time.
"My personal belief is that about a 10-year period to increase the contribution rates gradually would be just right.
"That gives us the opportunity to make the employer contribution compulsory and to increase the rate gradually over time so that people are not made worse off by this increased contribution."
Shamubeel said it is too early to introduce means testing for NZ Super like Australia.
"I don't think we can move towards a means testing of super until we've given people the ability to save enough in their KiwiSavers.
"That's why it's so important to make sure a KiwiSaver is one, compulsory and two, the contribution rates are high enough.
"When that happens, roughly about 40 percent of New Zealanders will have enough savings to not need super.
"Until we have done that, I don't think we can do means testing.
"But in the future, at some point in time, we must make New Zealand super means tested so that those older people who need it, do have it."
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