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Employers now want KiwiSaver to be compulsory

Rob Hosking

Monday 28th January 2008

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The country's largest regional employer group is calling for KiwiSaver to be made compulsory and to be funded by tax cuts.

The Northern Employers and Manufacturers Association, which has been critical of KiwiSaver, says delivering tax cuts by way of compulsory savings is the best option to deal with several of the country's economic problems.

Chief executive Alasdair Thompson says calling for anything to be compulsory is anathema for the association, under normal conditions, but the association has reluctantly come to the view it is the best way forward for savings.

"We need to increase personal savings: the country is too reliant on overseas borrowing and it pushes up our interest rates. As a country we may be saving enough but the government is doing that by over-taxation," he told Good Returns.

"We've come round to the view that making it compulsory is okay, a la Australia and a few other places, but the way to do it painlessly for employees would be to give every taxpayer a cut and chuck it into a KiwiSaver account."

The group initially supported KiwiSaver when it came before Parliament but was scathing about the last minute add-ons last year, condemning them as a policy ambush made with no consultation.

"We've always liked the idea of KiwiSaver," says Thompson. "But the implementation of it has been absolutely frightful."

Compulsory savings through tax cuts now would, if done in meaningful size, mean a drop in New Zealanders' over-taxation, add to the country's savings; and deal with any concerns about tax cuts causing inflation, he says.

"We're not keen on compulsion but sometimes you have to take account of the political and economic realities."

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