KEY POINTS:
Kiwisaver is excellent in principle but represents many lost opportunities. The scheme could have been so much simpler and more attractive if it had been introduced differently.
For example, every New Zealander could have had a tax cut diverted to a KiwiSaver account in their name. That is, their present tax rate could have been split between income tax and a contribution to a KiwiSaver account.
The opportunity, from July 1, to get all income-earners into KiwiSaver in such a non-inflationary way, without anyone getting a net pay reduction from July 1, has been lost.
Another lost opportunity relates to employer contributions. If Finance Minister Michael Cullen had said from the outset that employer contributions would be compulsory, employers would not have been so concerned. They would simply have made them a component of total staff remuneration to take into account in pay reviews and negotiations.
By springing them on employers in the Budget just weeks before KiwiSaver's introduction, Cullen did an about-face on an earlier commitment he had made, while creating unnecessary costs for employers and adding a lot of fishhooks to the scheme.
Employers readying themselves for KiwiSaver Mark I were obliged to re-work their costly preparation efforts.
Those who had just completed pay reviews, or signed new collective employment contracts, missed the opportunity to have the employer contributions counted in total remuneration.
Another lost opportunity is the exclusion from KiwiSaver of people 65 years or older. Their inclusion could have been a means to encourage them to stay working beyond 65.
In contrast, the Australian Government has made it very lucrative for those 60 or over to continue working. In its superannuation reforms from July, Australians aged 60 pay no tax on their super payout if they are in a taxed super fund, as are most of them.
And people aged 55 or more who want to work part time can take part of their super as regular income, tax free, and use it to top up their take-home pay.
We need older people in our workforce. There is a substantial loss of knowledge and skill as baby boomers reach that age and start leaving the workforce.
Large numbers are involved, and we don't have people to replace them. And 65 is not old in today's world. Such age discrimination hardly complies with the Human Rights Act, does it?
As well, there is discrimination against workers aged between 16 and 18, seemingly more designed to suit Government's actuarial calculations for superannuation than for reasons of social equity.
KiwSaver will not help us catch up with Australians. Personal tax thresholds in New Zealand haven't changed since April 2000, when they went up.
The Government now says the rates need to stay at those high levels until 2011. KiwiSaver is based on these levels until then, which is the time employer contributions reach the maximum of 4 per cent of pay.
This fiscal drag will put at least another $1 billion into state coffers.
Australia, however, has progressively reduced personal tax. In 2000, the Australian top tax threshold was A$60,000 ($66,250) and next year it will be $A180,000 ($198,750).
From 2000 to 2006, New Zealanders' gross wages rose 22.1 per cent, but their net incomes increased only 18.9 per cent.
Australians' gross wages rose 34.3 per cent and their net wages 33.6 per cent.
Our Government's approach was to introduce the Working for Families package instead of giving tax cuts, but this hasn't changed anything. Tax reductions in Australia mean lower-income families are much better off than ours are under Working for Families.
These past seven years, our Government has had its main focus on social policy and redistributing the economic cake we all produce in New Zealand.
Had the Government provided an expanding pool of KiwiSaver funds for investing in productive assets for the future benefit of everyone, it could have made sure every New Zealander became part of the national drive to lift our level of accessible savings.
Instead, it chose to create unwarranted costs, and discriminate against potential contributors. But it's not too late to make KiwiSaver far better.
* Alasdair Thompson is chief executive of the Employers and Manufacturers Association (Northern).
