Latest / Best of Business / Shamubeel Eaqub: Simplicity chief economist on the feasibility of NZ First's proposed KiwiSaver reforms

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Shamubeel Eaqub: Simplicity chief economist on the feasibility of NZ First's proposed KiwiSaver reforms · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from News Talks'd be follow
• 0:12
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• 0:16
  Speaker 2: One of the big political stories over the weekend was
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  Speaker 2: the New Zealand First conference and one of the ideas
• 0:21
  Speaker 2: that came from that was reforms to KIW saver. New
• 0:24
  Speaker 2: Zealand First is proposing to make key we save a
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  Speaker 2: compulsory raise the minimum contribution to ten percent, and then
• 0:29
  Speaker 2: give a tax cut to offset that extra cost. Schamabil
• 0:32
  Speaker 2: Yakup is the chief economist at Simplicity and with us.
• 0:34
  Speaker 3: Hey Shammo, good he how are you? I?
• 0:37
  Speaker 2: I'm well, thanks man. I was talking to Nikola Willis
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  Speaker 2: just about half an hour ago. She reckons, back of
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  Speaker 2: the envelope at the tax cut will cost about fifteen
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  Speaker 2: billion dollars annually. Does that sound about right?
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  Speaker 3: It does? And I love the idea of a compulsory
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  Speaker 3: superannation scheme, but I don't love the idea of a
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  Speaker 3: tax cut funded one because I don't think we can
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  Speaker 3: afford it.
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  Speaker 2: No, how would you even do it? If you could
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  Speaker 2: do it, would you? Is it possible?
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  Speaker 3: And he suggested absolutely, He suggested target ideas okay, but
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  Speaker 3: he suggested this is Winston. Right.
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  Speaker 2: Then you target the tax cut two people who are
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  Speaker 2: going to be contributing at ten percent, which is everybody,
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  Speaker 2: because it's compulsory. Can you do that?
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  Speaker 3: Well, that means every wager and it gets a tax cut. Right,
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  Speaker 3: that's our biggest source of taxes. It doesn't the numbers
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  Speaker 3: don't work. We can't afford those kinds of tax cuts, right,
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  Speaker 3: I mean we already can't. We're already running deficets. So
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  Speaker 3: it's not to diminish the idea because the reality is
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  Speaker 3: that kvserver is actually really good policy. Most New Zealanders
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  Speaker 3: are in a three and a half million of us.
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  Speaker 3: We're contributing regularly. It's all good. But we can probably
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  Speaker 3: pick and choose a little bit of how Australia does
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  Speaker 3: it to move us towards the compulsion idea. And I
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  Speaker 3: think therein lies the germ of the idea that Winston's
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  Speaker 3: come up with that is really good, that if we
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  Speaker 3: could make that employer contribution compulsory, not the employee one,
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  Speaker 3: the employer one, and then increase that gradually over time,
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  Speaker 3: it would have the same effect. And the reason for
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  Speaker 3: that is when you increase your Kisilver contributions. Essentially, it's
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  Speaker 3: the total cost of employing somebody, so it would it's
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  Speaker 3: buy and lge. It's worn by the workers anyway, one
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  Speaker 3: way or the other, so it doesn't really matter. As
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  Speaker 3: long as you do gradually over time, it becomes a
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  Speaker 3: non issue. And that's how Australia has done it in
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  Speaker 3: two steps right, and when they first started it, they
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  Speaker 3: increase it gradually over time, and they're doing it again
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  Speaker 3: at the moment and they're going up to twelve and
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  Speaker 3: a half percent. No tax cuts in sight.
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  Speaker 2: If you do it, do you have to accept that
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  Speaker 2: you will be increasing the super contribution in lieu of
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  Speaker 2: pay rise.
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  Speaker 3: Absolutely, that is exactly how it works in Australia. So
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  Speaker 3: the incidence what we talk about as an economist is
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  Speaker 3: the incidents who bears the cost of that increase in contribution.
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  Speaker 3: By and large, it's borne by the workers, because from
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  Speaker 3: our employer's perspective, essentially, the cost of employing you is
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  Speaker 3: the cost of employing you. Whether they're pay it into
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  Speaker 3: your bank account or into your cus of your account
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  Speaker 3: is much the same.
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  Speaker 2: Does it do anything? Will it actually create wage inflation?
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  Speaker 2: Will it make us a higher wage country?
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  Speaker 3: Not really that's not really how increased wages like, if
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  Speaker 3: you want to have increased wages, we just need to
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  Speaker 3: have businesses that are far more efficient and far more profitable,
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  Speaker 3: and some of them will be shared with workers. And
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  Speaker 3: that's having workers who are well trained, business places and
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  Speaker 3: workplaces that are efficient and all those other bits and pieces.
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  Speaker 3: So no easy wins. You can't enforce higher wage increases
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  Speaker 3: that are sustainable.
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  Speaker 2: And it's ten percent what we should be roughly aiming at.
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  Speaker 3: Roughly I mean Australia's gone for twelve and a half,
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  Speaker 3: so that's probably the benchmark. That's probably where you get
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  Speaker 3: about forty to fifty percent of kiwis that will have
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  Speaker 3: enough savings in retirement to not need New Zealand Super.
• 3:40
  Speaker 3: They'll be independent, now, Shamu.
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  Speaker 2: When Nikola Willis was talking about it, she was talking
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  Speaker 2: about it as in some way replacing, Like she said,
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  Speaker 2: because we have got the pension, you can't have the
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  Speaker 2: pair of them. You have to take one away for
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  Speaker 2: the other. Would you advocate that? Would you say, yet
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  Speaker 2: you phase out the pension go for the super instead
• 4:02
  Speaker 2: over time?
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  Speaker 3: So over time, so because with the QUI server, if
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  Speaker 3: it's high enough, you will save enough by retirement. Then
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  Speaker 3: you can start to pull back on New Zealand Super
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  Speaker 3: as being means tested. But not until you have a
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  Speaker 3: qserver system that's actually giving people enough money to retire comfortably.
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  Speaker 3: At the moment, it's not enough, so our contribution rates
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  Speaker 3: are still far too low to let people retire comfortably.
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  Speaker 3: So I don't think we can even continance reforming New
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  Speaker 3: Zone super until we have made qisiver much stronger.
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  Speaker 2: Yes, stake heads a way probably. Hey, thank you very much, Shamo,
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  Speaker 2: appreciate it. Schamovil Yakap Simplicity, Chief Economist.
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