The issue of whether to make KiwiSaver compulsory is now firmly on the agenda after Prime Minister John Key gave the green light this week for a government-sanctioned pensions and saving working group to look at the issue.

But is New Zealand willing and able for another chunk of its national wage to be given to fund managers to look after?

The debate has been brewing for years about our lack of national savings and the high foreign debts incurred by households.

It's also centred around the capital starvation faced by many businesses that want to grow.

There are numerous cases where New Zealand companies were forced to bring in foreign capital to take the next step to grow or to take the last step and sell. Navman, Next Window, Sealegs and Trade Me are the most obvious recent examples.

A functioning set of capital markets as in Australia would connect our local savings with local businesses. They would act as a funnel for investment in listed companies or in private equity or venture capital funds.

Instead, at the moment, our companies are reluctant to list on the stock market and many individuals are similarly reluctant to invest. The finance company debacle has further undermined confidence.

So compulsory KiwiSaver seems the logical step to fix this problem of low national savings and a capital shortage for our companies. But there is a real risk that most of these extra savings will simply be shipped off into overseas investments.

There is a risk that we take the pain of saving more and our companies are still short of capital. We are trying to fix a savings problem by saving more, but we have yet to fix a capital markets problem.

Key hinted at a possible solution this week when he talked about any such investments via KiwiSaver being "home skewed". How that is achieved is the crucial thing. He is talking about a type of capital control involving blocking foreign ownership of land.

If he is to be consistent, then the capital controls would need to be broader. It will be a heated debate that challenges the orthodoxy in New Zealand Inc. But it is a debate that needs to be had when we consider making KiwiSaver compulsory.