Budget 2026: The political fight over NZ Super starts now

Saturday, 30 May 2026

OPINION: When Nicola Willis handed down her third Budget on Thursday, it was against the backdrop of a war in Iran, a demographic crunch that has arrived, and a fiscal situation that needs to be dealt with.

But amidst the usual bureaucratic showbiz vibe of Budget Day — Willis rolling out the plan, bagging her predecessor and running through her slides — there was something else going on.

During the Budget lockup, Willis spent significant time pointing out that New Zealand's superannuation affordability challenge is not something for the future. It is something that is here right now.

This has been highlighted in The Post’s reporting and analysis in the lead-up to and wash-up from the Budget. From 2023 to 2030, the annual cost of superannuation will have increased by about $10 billion.

In order to simply keep the Budget at the same nominal dollar amount as the previous year, any government would have to find around $1.8b somewhere else in the Budget just to make room for the increase in superannuation expenditure.

And it isn't just superannuation. It is also health. As people get older, they get sick more frequently.

This isn't to denigrate older people. It is simply to acknowledge the reality that as the body breaks down, more healthcare is required — and overwhelmingly the taxpayer picks up the bill for this.

On Budget Day, and again on Friday, Willis clearly put superannuation right in the middle of what she will be talking about over the coming months, and what the National Party will likely campaign on.

New Zealand First will also clearly campaign on it — and in opposition to the National Party.

That means superannuation, and probably the wider issue of retirement savings including KiwiSaver, will now almost certainly play a central role in the election campaign.

We don’t yet know exactly what form that debate will take, or how important it will be compared to cost-of-living concerns, but it will be there.

New Zealand First has steadfastly refused to countenance changes to NZ Super, either to the eligibility age or through means testing.

In reality, means-testing NZ Super, while it might save some money, is probably not going to make a material difference to its long-term cost trajectory compared with leaving the system universal.

The current advantages of universal super are that everyone qualifies for it and it is relatively easy — and therefore cheap — to administer. As soon as means testing becomes part of it, the system becomes more complicated.

The current system also incentivises, or at least does not disincentivise, people continuing to work past the age of 65 while also receiving NZ Super.

Raising the age, however, is another matter.

Bill English, ahead of the 2017 election, promised to raise the age of eligibility to 67, beginning in 2037. Australia has had a retirement age of 67 since 2023. That change was announced in 2008 and had a 15-year lead-in.

The fact is that even once the New Zealand Super Fund — into which the Government deposits money every year to help ameliorate the cost of future super payments — reaches its peak, it will still cover less than 15% of the annual cost of superannuation.

It is helpful, but it is not a game-changer.

That is why, heading into this election, KiwiSaver and the settings around it — including compulsion and tax treatment — are likely to become a major part of the discussion.

And while New Zealand First will not countenance any changes to superannuation itself, the party has proposed significant changes to KiwiSaver, including making it compulsory, lifting contribution rates, and giving every baby born a $1000 contribution.

But it is really on the tax side that more thought probably needs to be given in the New Zealand system.

Because, in all likelihood, the politics of the matter means the only way young New Zealanders and those entering the workforce now will be able to crawl out from under the crushing superannuation rock will be by making KiwiSaver schemes proper retirement savings vehicles, rather than bolt-ons to the current universal system.

Tax breaks and carve-outs are generally considered antithetical to a clean modern tax system. However, the following also appears true:

The ratio of workers to retirees is going to materially reduce over the coming 40 years. The likelihood that superannuation will be able to stay at its current level of roughly two-thirds of average weekly earnings without either punitive taxation or major cuts to other areas of government spending appears low.

And so introducing — or at least considering — tax-advantaged treatment for KiwiSaver, while simplifying it to an employer-pays model along the lines of the Australian system, may ultimately be equitable.

Because, let’s face it, anyone qualifying for superannuation in 30 or 40 years cannot count on the system looking exactly as it does today.

Australians are generally taxed at 15% on super contributions and returns. For New Zealanders, KiwiSaver contributions come from after-tax income and returns can be taxed at rates up to 28%.

The compounding effect of that lower Australian tax rate over a lifetime of savings is significant. And it encourages more contributions.

Lifting the retirement age somewhat would probably help, but of course that would need to be a long-run policy with many years of lead-in to be fair.

Changing KiwiSaver from a co-contribution model to something more closely aligned with the Australian employer-contribution model also has some merit.

The reality is that even though employers technically pay for superannuation in Australia, it is really just part of the overall employment cost attached to each worker. Changing the system here would not necessarily impose a sudden new cost on employers if introduced gradually over time.

There are a lot of places this debate could go and the election campaign may well flush some of them out.

What is still not clear is what the politics of this will ultimately be for the National Party.

On the one hand, having created a rhetorically austere backdrop to the current economic situation — not to be confused with the political slogan about austerity — National may be rewarded for attempting to confront a difficult issue.

Anything it proposes would almost certainly be years and years in advance.

However, the politics become much more challenging when you consider that New Zealand First will oppose changes and will, barring some extraordinary political event, likely be part of the next government.

Will any changes actually happen?

Add to that the likelihood that Labour and the Greens would also line up against National on the superannuation side — ACT looks likely to be its only supporter on this — even though any reforms proposed would likely be relatively modest.

It will be politically risky.

That said, National probably has little to lose at this point. The party has been polling at around 29-30%.

Sometimes voters reward governments for attempting to deal with problems they know are politically unpopular.

Either way, superannuation is the single biggest long-term budgetary issue facing New Zealand, and working out a sustainable path forward is probably the country’s biggest domestic political challenge.

Having an election campaign about it can only be a good thing. And good on Willis for kicking it off.