Mandatory Savings

the saviour of New Zealand’s welfare state

Abstract

New Zealand faces an impending cost spiral of public spending on healthcare and pensions, as well as ongoing and substantial payments to those out of work. None of the solutions conventionally proffered, such as generating markedly higher productivity growth or levying significantly higher taxes, seems plausible. Mandatory savings accounts, however, offer more promise. Ending unnecessary transfer payments to businesses and wealthy individuals would allow health, out-of-work and retirement savings accounts to be set up and funded for all individuals. This policy change could secure the future welfare needs of low earners, enhancing opportunity, dignity, choice and fair treatment. It would also alleviate fiscal pressures, encourage efficiency gains and reduce wealth inequality.