From sugar rush to super savings: Christopher Luxon’s KiwiSaver reset

Monday, 24 November 2025

Have your say in the comments below

Luke Malpass is politics, business and economics editor.

OPINION: Prime Minister Christopher Luxon used a key speech on Sunday to lash “sugar-rush economics” fuelled by immigration and deficit spending to “juice up” economic growth and make economic performance look better.

As part of an antidote to this, Luxon also announced that if National is re-elected, New Zealand would move to a souped-up KiwiSaver system where Kiwis would put 12% of their incomes aside to provide for their retirements. It will be an Australian-style super system ‒ minus the tax breaks and the compulsion.

Luxon, who has been under pressure in the polls, used the speech to lay the case for sticking with the Government’s economic plan in the face of sluggish growth.

“At different times, governments have tried to lift immigration considerably, engineer much higher house prices, or inject billions of dollars of additional spending, ultimately funded through borrowing,” Luxon said.

“The reality is that those choices ‒ intended to juice short-term economic activity ‒ have provided an illusion of growth but often left us worse off over the long-term.”

When the prime minister stood up among the party faithful on a sunny day in the Hutt Valley for the Lower North Island National Party’s Christmas Party, there was a lot on the line. National has been in the hole; the ministers know it, the backbenchers feel it and the polls confirm it.

Luxon’s speech was the strongest he has given for at least a year ‒ realistically setting the scene for what has happened and providing a justification for where the Government finds itself, while beginning to lay out the stall for election year.

The KiwiSaver plan is a strong one, after after years of the National Party being seemingly allergic to big government-mandated savings schemes. In addition to the boost to KiwiSaver rates announced at the last Budget, from 2029 employer and employee contributions will rise by 0.5% per year to reach 6% each.

The policy aims to put something forward-looking in the mix for the National Party ‒ not the Government ‒ to campaign on over the next year.

This is a case where good policy equals good politics. NZ First promised something similar a few months ago; it must surely have been on Labour’s list for election year as well, but that’s now gone.

It is not just about helping people make provision for their own retirement and taking the load off NZ Super in time, which is already set to gobble up even more of the national tax pie.

It is also about growing a national savings pool, a funds-management industry and having much more capital to deploy — some of which will no doubt be deployed in New Zealand.

The political economy of it is undeniable. In Australia, good profits equal national prosperity as ordinary Australians benefit from successful Australian companies ‒ as well as global equities, of course. When 12% of your income is going into investments, people tend to pay closer attention to boosting it.

Over a little more than three decades, the Australian system has grown to over A$4 trillion in assets today.

Ever since KiwiSaver has existed, the National Party has been pretty cool on the scheme overall, progressively getting rid of the handouts around the edges and even cutting compulsory contributions around the time of the GFC.

Luxon often says he is a different sort of politician ‒ and in this area he may just be correct. He may have been the leader National needed to really push this, although it is notable that compulsion is not part of the system.

Yet even when matured, a New Zealander earning the same amount as an Australian still will not build as large a retirement balance. That’s because a key feature of the Australian system is concessionary tax treatment.

Employers pay contributions on behalf of employees and these are taxed at only 15%. Returns in the fund are also taxed at only 15%.

In New Zealand, KiwiSaver contributions come out of after-tax income, so are taxed far more heavily for many, and returns within the fund are mostly taxed at 28% (the PIE rate).

And while the Government might get the usual stick for Kiwis not getting as good a deal because employers and employees pay half each ‒ instead of the employer as in Australia ‒ this is bookkeeping, not economics.

Employers look at total cost per employee. The total amount that goes into locked-up retirement savings is what matters, regardless of who writes the cheque.

The reason given by Finance Minister Nicola Willis for not offering tax concessions is because the Government already tips huge amounts into NZ Super, which is not means-tested (unlike the Australian age pension).

In Australia, taxpayer money is effectively spent on tax concessions instead of the pension.

This is a strong ‒ and overdue ‒ first policy for National with an election a year away.

And strategically it is clever. It is not going to be practically or ideologically pulled down by opponents.

Labour was the architect of KiwiSaver, so it is not going to take up arms against it. In fact, Labour should promise to do the same and lock it in. Then the only direction Labour can credibly move is toward compulsion ‒ which is surely coming.

The only way to ensure a larger contribution scheme like this benefits everyone is by everyone being in it. And it could be sold as the quid pro quo for getting no-strings-attached NZ Super.

National will likely pair this with a promise to increase the retirement age sometime next year.

This is a good start for re-election. It will frame the political economy heading into the election while not requiring the Government to tip in any money for years.

And it gives National a new story to tell. Now for the small business of getting economic growth going in the here and now.