Currently, the taxpayer purse gives up to $521.43 a year to every eligible KiwiSaver member who contributes at least $1042. This has now been halved to $260.72 annually.
And as commentators and economists speculated for weeks before the Budget, those in the top tax bracket earning $180,000 a year or more will receive no Government contribution.
These two changes are expected to save the Government $2.46 billion over four years.
To help offset its reduced contribution, the Government will lift the default rate of contributions for employees and employers from 3% to 4%.
But, unlike in Australia, the higher rate won’t be compulsory. Employees can still opt to stay at 3% if they choose, and their employers will then match that rate.
The higher rate will be phased in: from next year, it will go to 3.5%, and in April 2028, it will shift to 4%.
In short, this Government has made the first hard decision as our population rapidly ages and we face the reality of having fewer workers contributing to the taxpayer pot.
By 2028, Stats NZ projects one million Kiwis will be aged 65 or older.
Willis had already said the Government will make the first withdrawal from the New Zealand Superannuation Fund in 2028, significantly earlier than the projected 2035.
This Budget may well be remembered as the first of many in which our Governments tell us we can no longer expect the same level of state support.
Willis and Prime Minister Christopher Luxon are squarely putting the responsibility on individuals.
Young New Zealanders, particularly younger Millennials and Generation Z, will be those asked to carry the heaviest burden after decades of short-sighted decision making from Wellington.
This attitude hit home strongest with the Government’s message to parents: do not expect the state to help your unemployed teens.
Under changes announced yesterday, from July 2027, eligibility for Jobseeker Support and the Emergency Benefit will be tightened.
There will be a parental assistance test for single people aged 18 and 19 not in work or study. How this test will be set has yet to be disclosed.
Young Kiwis will also now be asked to pay back their student loans at a higher rate, while the Government will begin to income-test the first year of the Best Start tax credit, as it already does for the second and third years.
Willis said the move to means-test Best Start was to ensure the money went to families who needed it most.
At the heart of the Budget, Willis announced a tax incentive called Investment Boost. It will allow businesses to deduct 20% of the cost of new assets immediately from their taxable income, on top of normal depreciation. The hope is this will help super charge economic growth.
There are also several subsidies, including those for private schools and tertiary education. The hope here is we will be better educated and ultimately less dependent on the state later in life.
The Government has sent a blunt, clear message to us all, but particularly young New Zealanders.
The days of universality are over. The quality of your future lives is up to you.
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