Had the 1975 retirement scheme not been abandoned it would have been worth more than $240 billion today.
What can we do to give our economy a boost and address our net external debt? One way would be to consider introducing compulsory savings. We could also take a closer look at the state provision of superannuation in New Zealand.
It doesn't matter who the fund providers are. The most important thing is that funds under management grow fast in a well-governed and well-regulated environment.
Some commentators have indicated that Australia may not be better off for having compulsory savings. I disagree.
There are two reasons why we need to look at compulsory savings and the state provision of superannuation. These go hand in hand.
First, New Zealand Superannuation is increasingly just one part of the picture.
The overarching goal should be to ensure that the mix of compulsory savings, voluntary savings, and state provision, including health and social services, provides a reasonable standard of living for retired people in New Zealand.
NZ Super is often perceived as the most generous scheme in the world. Some commentators disagree. It depends where you set the poverty line.
If it's defined as 50 per cent of median income, New Zealand has the lowest proportion of older people in poverty in the OECD. If the bar is raised to 60 per cent, consistent with the OECD measure, New Zealand has the highest proportion of retired people in poverty in the OECD.
Secondly, the government has to fund universal NZ Super for all who reach the age of eligibility, regardless of their need.
The purpose of the New Zealand Super Fund was to assist with this, but it won't be enough. Debt funding by the government of the remainder contributes to our net external debt position.
The government borrows to fund superannuation, and we have to pay that back. Largely this borrowing occurs in overseas markets.
New Zealand's burgeoning retiring population means that, left alone, the costs of funding national superannuation will become an incredible burden on the state, limiting both policy choices and our ability to adapt to changes in economic circumstances.
The cost of NZ Super as a proportion of GDP is projected to double from around 4 per cent now to 8 per cent in 2050.
We simply don't generate enough earnings from investments elsewhere in the world to offset these costs, which impacts our current account deficit. In the absence of an economic miracle this won't change.
Our level of personal retirement saving is another factor to consider. Australia currently requires contributions of at least 9 per cent in its compulsory savings schemes, moving to 12 per cent in the next few years. If we were able to raise our individual contribution rates to similar levels over time, we could seriously look at reducing the burden on the government of funding NZ Super.
Compulsory savings would help increase our pool of savings, reduce our public and private reliance on foreign sourced debt, and reduce our vulnerability to economic shocks occurring elsewhere in the world.
Briefly in 1975 we had a compulsory retirement savings scheme.
Had it been left intact, today it would be worth more than $240 billion, roughly 170 per cent of GDP.
Our net international investment position, currently a liability which is the equivalent of GDP, would be a lot stronger, and our current account deficit would either be a lot lower or not exist.
In the years since Australia has had compulsory retirement savings, outward investment has increased 1100 per cent.
During the same period New Zealand's outward investment increased by less than half that. Inward investment into Australia increased by 630 per cent, and by 840 per cent for New Zealand.
The pool of funds invested in Australia is now more than $1.3 trillion, or the equivalent of Australian GDP.
Notwithstanding the economic benefits of compulsory retirement savings for Australia, the framework has its critics.
One of the challenges facing Australian policymakers is that, because funds are paid out in a lump sum on retirement, those nearing retirement are treating the payout as a windfall and incurring higher amounts of debt in the knowledge that they can pay it off with their lump sum.
Arguably this is a matter of effective design rather than a problem with compulsory savings itself. The 1975 New Zealand scheme anticipated this issue.
Contributors could receive a lump sum payment up to a maximum of one quarter of the value of their individual fund on retirement with the rest distributed as income on a regular basis.
It applied to employees aged from 17 to 65. Contributions weren't taxed, and neither were lump sum payouts, but the annuity was.
The 1975 New Zealand compulsory retirement savings scheme was well thought out and well designed.
Had it been left intact it would have provided considerable benefits for New Zealanders and for New Zealand. Pity it lasted only 37 weeks.
We shouldn't repeat the mistakes of the past. It will cost us more than we might think.
Kirk Hope is chief executive of the New Zealand Bankers' Association.