By Richard Yetsenga
ANZ Group Chief Economist
New Zealand’s retirement debate has increasingly turned its gaze towards Australia.
Across the Tasman sits a retirement savings system with A$4.5 trillion in assets, equivalent to around 150% of GDP and the fourth-largest retirement savings pool in the world.
Australia didn’t discover the perfect retirement system. But it didn’t allow perfection to become the enemy of the good.
Australia’s superannuation system today is the product of 34 years of decisions, compromises, reforms and adjustments. It is characterised by compulsory employer contributions, concessional taxation, voluntary employee contributions, strict preservation rules, investment choice and portability as employees change jobs. But none of these have been sacrosanct from day one, and they collectively mean the system is complex.
The objectives of a retirement savings system are inherently complex. Market forces need to work while prioritising safety. You want individual choice while preserving the integrity of the system. Concessional taxation encourages contributions but needs to be protected from exploitation.
Complexity may well be a feature of the system, rather than a bug.
Australia’s system has not evolved on a deterministic track. Some reforms were designed to provide more choice. Others were intended to improve equity, standardisation or system integrity. Even the compulsory contribution rate itself began at just 3% in 1992 before gradually rising to 12% today. Reforms to the system were debated.
Looking back, it is tempting to treat the success of the system as inevitable. It was not.
At the time compulsory superannuation was introduced, there were many voices arguing Australia could not afford to lock up savings in the way proposed. There were also concerns that compulsory savings would simply displace voluntary savings.
The evidence suggests otherwise.
Studies conducted over a number of decades have produced remarkably consistent results. More than half of compulsory superannuation contributions appear to be a net addition to household savings. Roughly 40% is offset elsewhere. That means compulsory saving has genuinely increased Australia’s household savings pool.
The result is visible today.
Australia has accumulated a significant stock of retirement savings, helping households build wealth and creating a larger pool of capital available for investment. Superannuation is estimated to have increased household savings by around A$500 billion and contributed to higher economic output over time.
Importantly, higher household savings have allowed Australia to invest more without accessing foreign capital, which raises living standards. The private business investment to GDP ratio is at its highest level in 10 years, but external liabilities as a share of GDP their lowest in around 15 years.
The contributions into the system are part of the story. But the real power comes from compound earnings.
Treasury projections suggest the earnings generated by Australia’s superannuation system will continue growing strongly for decades. In fact, accumulation flows are expected to exceed drawdowns until the 2060s, despite the population ageing and more retirees entering the withdrawal phase.
Those earnings are the secret sauce.
It is the power of those earnings that also recommends keeping the costs of the system in perspective. Naturally, the lowest cost system is best. But becoming overly focused on fees at the expense of investment returns risks missing the forest for the trees.
None of this means Australia has solved every problem.
The country still runs current account deficits. The system remains complicated. There continue to be active debates about whether more should be invested domestically, how the system should be taxed and whether various features remain fit for purpose.
But it does demonstrate the benefits of taking a longer-term approach to building financial resilience.
That long-term perspective is probably becoming more important, not less.
The world has entered a period where real resources increasingly matter. Birth rates are declining faster than expected across much of the world, bringing forward the point at which global population begins to decline. Even successful immigration economies such as Australia and New Zealand will be drawing from a smaller global pool of workers. At the same time, investment requirements associated with demands such as the energy transition, defence and artificial intelligence are rising sharply.
In that world, domestic savings become increasingly valuable.
The Australian experience suggests there is no perfect time to begin a reform with effects measured over decades rather than years.
Every generation can find reasons to wait.
But retirement policy is, by definition, a long-term endeavour. The benefits emerge slowly, and so do the costs.
When I look back at Australia’s experience, I do not see a gold-standard system at inception. I see a decision to start, with adjustments along the way guided by a commitment to the broad objective, even when individual reforms proved controversial.
Whether New Zealand adopts compulsory KiwiSaver, raises contribution rates, changes eligibility settings for the pension or pursues another path altogether is ultimately a matter for New Zealanders.
But beyond the detail, the best time to plant a tree was 20 years ago.
The second-best time is right now.
This article first appeared in The Post 1/7/26