Workers who join the KiwiSaver retirement scheme are likely to get smaller annual pay rises to offset the money their employers will have to put into the scheme for them.
New incentives added to the scheme in yesterday's Budget, including a $40-a-week top-up, will boost KiwiSaver's appeal toemployees when it starts in July.
KiwiSaver, which all new employees will join automatically, will channel up to 8 per cent of pay packets directly to long-term savings schemes.
Participants can opt out early to buy their first home, or have their savings tied up until they are 65.
In a surprise move, yesterday's Budget said employers would have to match workers' deposits up to 4 per cent of gross pay, giving a far greater savings pot for individuals at retirement.
But Finance Minister Michael Cullen said smaller wage rises might be expected as a result.
To soften the blow to employers, the Government is phasing in the level and timing of their contributions.
And it is giving them a subsidy which will more than cover their commitments in the first year at least.
KiwiSaver is intended to kick-start the development of a savings culture.
That should result in greater wealth for individuals and the country, make New Zealand less reliant on foreign investment and give Kiwis a greater incentive to stay in New Zealand, Dr Cullen said.
"KiwiSaver is likely to result in a fundamental shift in the New Zealand savings landscape."
He expected KiwiSaver to become part of the total remuneration package of employees, as had been advocated already in the "very sensible approach" of the Engineering, Printing and Manufacturing Union (EPMU).
"We expect the phasing of the employer contribution to be considered in wage negotiations over the next four years."
Employers' delight at their $3.4 billion tax package including a tax-rate cut from 33c to 30c, has been soured by the surprise KiwiSaver provision.
Business New Zealand chief executive Phil O'Reilly said loading the cost on to employers "without their agreement or buy-in is not helpful given the significant negative elements in the current business environment".
EPMU secretary Andrew Little believed the money employers would have to pay would be a tiny proportion of the value of their tax cuts.
In Parliament, National Party leader John Key delivered a fiery speech on tax cuts and KiwiSaver.
"It's going to be very interesting for workers when they go through this - not only will they not get a tax cut under Labour, they won't get a pay increase."
The low-paid would not join the scheme because they could not afford to save and they would have to forgo wage rises to pay for the top-ups of the higher-paid who could afford to save.
Mr Key said there was "a special little treat" for Aucklanders.
"They get a tax increase," he said, referring to the regional petrol tax to pay for improvements to Auckland's transport, including electrification of the city's rail network.
The tax level is yet to be set, but a 10c-a-litre tax would raise $120 million a year and could support a debt of $1.5 billion over 30 years - in addition to $600 million already committed for electrification.
