Friday's Top 10: How broadband impacts Z, back to Greece, perspective on Australia's housing bubble, QE as financial morphine Dilbert and more

Friday's Top 10: How broadband impacts Z, back to Greece, perspective on Australia's housing bubble, QE as financial morphine Dilbert and more

Today's Top 10 is a guest post from Oliver Hartwich, the executive director of the New Zealand Initiative.

As always, we welcome your additions in the comment stream below or via email to

And if you're interested in contributing the occasional Top 10 yourself, contact

See all previous Top 10s here.

1. If only we had saved, we might be rich (or not)
The Financial Services Council released a new study this week claiming that New Zealand could be $278 billion better off today had it not dropped its compulsory savings scheme in 1975 (which had only been set up a year earlier).

Calculating the contributions that were never made and adding them up over the years led to this startling figure.

But not everybody is convinced it is that easy to assess what would have resulted from the scheme.

Michael Littlewood of the Retirement Policy and Research Centre at Auckland University explains why the logical behind the Financial Services Council study is flawed:

Michael Littlewood, said the figures were calculated in a vacuum that assumed contributions made by employees did not change people’s behaviour and assumed a positive rate of return. “You only need to look at Australia to see how a scheme like this changes behaviour.” Mr Littlewood said that in Australia people tended to retire earlier. But they retired with more debt because they incurred it knowing they would be able to access that savings pool to pay it off in the future. “There are a whole bunch of distortions.”

It was also a big assumption to say that the amount of money would be good for New Zealand’s capital markets. There was no evidence of a capital shortage and putting extra money into the sharemarket might have resulted only in prices going up. “The calculations are totally notional.” Mr Littlewood said more savings did not necessarily generate more growth. “You just need to look at Japan. They have oodles of savings but have had negative growth for years.”

2. Markets at their best
This week, American airlines demonstrate how markets respond to changing scarcity levels.

Due to unrest caused by drug cartels and flooding from heavy rains in Mexico and a drought in California, the price of limes had skyrocketed.

Passengers would not need to know about these background developments but they might notice that there is something else in their drinks.

A wonderful example of how decentralised decision-making in markets adjusts to changing circumstances without the need for a Lime Distribution Authority:

“We still serve limes, though they’re more difficult to source. So, on some flights we’re substituting with lemons,” says spokesman Rahsaan Johnson. For frequent fliers like Ben Schlappig, author of the travel blog One Mile at a Time, that won’t cut it. “There are lots of cocktails where lemon simply isn’t a substitute for lime,” he says. One of United’s largest caters told the airline that it has 15 to 20 percent of the typical lime inventory. The airline expects to have a normal supply of limes by late May.

3. Fuel reductions from the granny cloud
And yet another example of how in an interconnected world everything depends on everything else.

Who would have thought that Skyping your granny would leave a dent in the demand for petrol?

Well, Z Energy chief executive Mike Bennetts has found a clear effect of broadband availability on his business. 

“People are doing less discretionary motoring and that may be about the price but what we have found is quite a strong link between broadband connexions and fuel consumption,” he said. “People are doing online shopping and Skyping granny rather than making the fortnightly visit.”

A 1 per cent improvement in broadband connectivity is estimated to cause a drop of 200 million litres a year in national fuel demand, more than the impact of GDP growth, population, fleet turnover, vehicle efficiency and the petrol price.

4. Greece is back – or is it?
Greece is preparing for a return to capital markets. In a few days time, the crisis prone country plans to issue a government bond for the first time in years. It seems safe to do so, given that Greece’s yields have fallen back to (almost) pre-crisis levels.

There is only one small catch: The new optimism about Athens is fuelled entirely by an expectation that other European countries will continue to bail out Greece if necessary. (The Greek bond auction overnight was eight times over subscribed and had an average yield of 4.95%).

Fiscal and economic figures today are actually worse than at the beginning of the crisis. The Financial Times ends on a note of caution:

While it was “natural” for Greece to test the market, the country should be wary of paying too high a price, Klaus Regling, head of the European Stability Mechanism rescue fund, warned in a Greek newspaper at the weekend.

Despite the potentially attractive yields, many longer-term investors remain cautious given the country’s perilous public finances: Greek public debt is still forecast to be equivalent to almost 180 per cent of gross domestic product this year. That is much higher than in emerging market countries, with which Greece is now compared, says Salman Ahmed, fixed-income strategist at Lombard Odier Investment Managers.

“We can get similar yields on much stronger countries – at least when you look at debt to GDP ratios,” he says..

5. Putting Australia’s housing bubble into perspective
Remember the times when the inner city of Tokyo was allegedly worth more than the whole of California combined?

That was of course at the peak of the Japanese housing bubble. Now it might well be Melbourne’s turn.

The total value of the Victorian capital has reached AU$1.2 trillion – or about five times Greece’s domestic product.

So what can be done about that? The Herald Sun has a few ideas – just don’t suggest this might be just another housing bubble.

We crossed the trillion-dollar mark back in 2011, but last year added $150 billion to our bottom line. Right now, we could cover almost five years of Greece’s annual gross domestic product, about $299 billion in 2011 according to United Nations figures. They’d probably consider selling for that. They could use the money. And we could use the Greek Islands.

If we’re not prepared to run a clearance sale, we should at least consider selling Brighton. It’s worth $16.2 billion by itself, about what Jamaica’s entire economy turns over per year. … Better yet, if we hawked our top ten highest valued suburbs we could claw back $122.5 billion. That would be more than 80 per cent of the $150 billion cost of the International Space Station. Think about it. Our own space station.

6. More space in cattle class probably means more cattle
Ten years ago, when the Airbus A380 was introduced, there was hope that this spacious aircraft would finally add a few extra inches to passengers travelling in economy class.

From experience we know airlines opted instead to put in extra chairs.

At the launch of Airbus’ new A350 long-haul jet, history is repeating. Its extra 30 centimetres of width has the potential to finally make travelling a little less painful, according to Chris Emerson, senior vice president of marketing at Airbus.

But you guessed it, this extra bit of space could actually make seats narrower, not wider. Instead of squeezing nine passengers in a row, now there could be ten.

Sometimes efficiency can be painful.

As for the passenger experience on the A350, Emerson touted the new jet’s wider-than-normal 221-inch cross section. He said the extra width on the wide-body jet would give customers a more-comfortable seat width of 18 inches – provided airlines that buy the jet don’t instal more than nine seats per row. While that nine-abreast count is the layout Airbus envisions for the economy class, airlines are free to configure the jet as they see fit. And that could include a “high-density” layout that would pack in 10 passengers per row in coach class. When asked for his thoughts on the possibility that Airbus’ A350 customers could opt for such a layout, Emerson responded “airlines know best” what works for the markets they serve.

7. Our future is in Asia but are we there yet?
The Asia New Zealand Foundation just released the results from its latest opinion poll on attitudes towards Asia. It shows that New Zealanders understand that our future is in Asia but it also reveals that there remain gaps in our knowledge about the region.

Unfortunately, there is still some scape-goating about Asians in New Zealand – and while we welcome Asian investors, we really do not want to cede any control.

Four out of five people (80 percent) polled in the 2013 survey believed Asia was important to New Zealand, up from 77 percent in 2012. But two-thirds said they knew only a little or almost nothing about the region. … Most New Zealanders (75 percent) agreed it was good for the New Zealand economy to have Asian companies investing in New Zealand businesses – an increase of five percentage points since last year. However, those interviewed in a follow-up forum felt that ownership and control of assets and organisations should remain in New Zealand. The survey also found that, nationally, New Zealanders were more likely to disagree (43 percent) than agree (33 percent) that rising house prices were due to Asian people buying properties. But the opposite was true in Auckland. Aucklanders were more likely to agree (46 percent) than disagree (31 percent) that Asian people were responsible for rising house prices.

8. Who suffers most from inflation?
US economist Tyler Cowen, writing in his blog Marginal Revolution, takes issue with Paul Krugman’s latest column.

In it, Krugman claims that inflation mainly affects the wealthy. In contrast, Cowen points out that rising prices are a problem for those who do not have the means to protect against them and who cannot renegotiate their salaries easily.

But is that enough to construct a conspiracy theory of inflation?

In other contexts, Krugman (correctly) stresses that price inflation lowers the real exchange rate of a country (and thus is not neutral, supporting the view that nominal variables really do matter). So one big group of gainers from domestic inflation are those who invest lots of money overseas, wait for some inflation, and eventually convert their foreign currency holdings back into dollars for a very high net rate of return. Which group of people might that be? The super wealthy of course. (This internationalization of returns for the super wealthy, by the way, is one big difference between current times and the 1970s.)

I am not suggesting that the very wealthy are out there pushing for higher inflation. But they are much more protected against such inflation than Krugman’s analysis suggests, and the middle class in protected service sector jobs is more vulnerable than is usually recognized. There is a reason why 4-6% price inflation has become the new third rail of American politics.

9. You can’t start saving too soon
Over at the British Daily Telegraph, Richard Evans demonstrates the power of compound interest with a simple illustration.

The message is simple: What you do not save earlier in your life, you will struggle to make up for in your later years. 

Which will give you a bigger pension: saving for 40 years or just 10? Believe it or not, the answer is 10 – if those years are at the very beginning of your working life.

Someone who starts saving at the age of 21 and then stops at 30 will end up with a bigger pension pot than a saver who starts at 30 and puts money aside for the next 40 years until retiring at 70.

This astonishing outcome is entirely due to the power of compound interest – the way that investment returns themselves generate future gains. Having 10 extra years for compound interest to work its magic has the same result as all those years of extra contributions..

10. Quantitative Easing as financial morphine
Economist Bob Swarup, the author of Money Mania: Booms, Panics and Busts from Ancient Rome to the Great Meltdown, was a supporter of quantitative easing when it was first introduced.

But writing in City A.M. he now concludes that ultra-loose and unorthodox monetary policy has prevented a recalibration of the economy.

The palliative medicine has turned into a poison:

Most importantly, QE holds back much-needed structural change. A falling money supply was the symptom. Its deeper cause was a toxic build up of debt and misallocated capital. By keeping the patient in statis, QE propagates that zombie debt – Japan’s mistake for two decades. Simply put, we need creative destruction. Genuine sustainable growth requires a cleansing of the Aegean stables. We need to accept and exorcise the bad debts of the past, so that money can flow once again to where it is needed within the economy. Without completing this critical process of reallocation of capital, growth remains a mirage.

QE was once a necessary sedative. But we escaped the liquidity trap only to stumble into a cognitive trap instead. And that is perhaps the most terrifying bubble of all.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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#1 - I think too .." if only.." but then I reflect and know my life would have been different had I taken different choices and I am pretty happy now, so there is no use crying over spilt milk! Moooooo. 

I agree that compulsory savings for retirement would have been ( and still is) a good thing
We could add the retirement savings to the national and per capita savings , and our perosnal debt levels would not look so poorly  
The strain would be have been removed from current and future taxpayers who currently part-fund NZ Super .
It would make us responsible for our own future and old age
It would reduce the nanny-state effect , this cradle to grave handout mentality and culture of expectation is not good for any of us
The downside for the lefties is that it would widen the gaps between the haves-and the have nots , and even I agree that one of our successes as a nation  is because we are an egalitarian society

Except that it would have been just too tempting a pot to raid for populist politicians in times of crisis.

It's not at all clear that personal debt levels would reduce if we were all forced to save for our retirement.  Having less disposable income might well push people into borrowing more, and knowing that they have a pot of money waiting for them might well encourage them to brrow more.  That seems to be happening in Australia.
Your comment about NZ Superannuation implies that you expect compulsory saving to be accompanied by means testing, is that right?  Take into account the army of bureaucrats who would have to nose into everybody's affairs and spend time and resources calculating who's entitled to what, and trying to keep up with the army of highly paid tax accountants dreaming up increasingly clever and complex ways of avoiding the means test instead of doing useful and productive work, and the disincentive effect of punishing people for doing the right thing, and you have to wonder whether any fiscal savings are actually worth it.
How does "None of you is capable of looking after your own affairs so the Government will tell you how to manage your money" reduce the nanny-state effect?

I dont expect NZ Super to be means tested , but I am concerned that the actuarial obligations may be a burden on my children as future taxpayers .
Right now , we as taxpayers are part funding NZ Super which does not have enough unfunded income streams from dividends and interest  , etc,  to sustain itself

NZ Super is wholly taxpayer funded at the moment.  The Super Fund is not expected to start contributing towards the cost of NZS until about 2030, at which point it is expected to be able to cover about 8% of the cost.
If you don't propose that NZ Super should be means tested - ie, it will continue to be paid to everybody at the same rate as it is now - how do you expect compulsory saving to reduce the future cost to the taxpayer?

National Super is means tested today to  a degree through the tax system and present eligibility rules.
The difference between a single living alone on the lowest tax rate and a married individual on the top rate is about 40%.
One can argue that this is quite severe means testing for a supposedly universal benefit.
One of the great benefits of NZ Super is it is  quite a simple system to administer.

compulsory savings?  how is that different from just another tax?

where would the funds be invested, which market segment gets the easy goernment dollars (or the compost heap of bureaucracy)?  No investment = no increase.

Would those paying the compulsory savings tax, also still be expected to fund previous generations pensions/super through direct taxation as they are now?

Why should they pay twice?

What about those who don't live long enough to enjoy the earnings stolen from them?
What about those whose compulsory savings are wasted or lost by their investors...are NZ investment companies really that solid?
And Labour forced National to spend the Super nest egg back in the 70's.
It's challenging enough to get them to keep their hands off the Cullen fund, or remembering what happened to ACC's reserves when National first came back in to power, 6 years ago.....

Airlines use bigger planes to pack more people in, rather then give them more space.
Who woulda thought  !!!!

#9.  Compound interest.  We knew it was powerful but that example is incredible.
Also people need to think about this in the same way when considering what to do with their mortgage.  Early fast repayment really results.  And works just the same way as this example.

#1.  Compulsory Super.
Mr Littlewood needs to get real, quibbling about the colour of the locomotive does not diminish it's power. 
We need compulsory Kiwisaver, universal including beneficiaries, of about 15% total input.
And for those who will howl about this, and cite their own investment acumen.
a.  Kiwisaver may not be neccessary for you personally.  But universal compulsion is to protect you wise people from the people who are not saving anything, and who will cost you anyway.
b.   You don't need to have it all in Kiwisaver.  Do lots of other extra things in addition.

Compulsory saving might benefit those people who could easily afford to save for their old age, but are not doing so out of absent-mindedness.  Does this description fit anybody that you personally know; and why exactly should other people be made to suffer in order to deliver this group a benefit that they could so easily give themselves?
How do other people suffer:  Those who are capable of managing their own finances in the way that best suits their own preferences and circumstances will not gain anything from compulsory saving.   They may well actually experience outcomes that are less well suited to their own preferences and circumstances if they are forced to save in the Government's way rather than in their own.   Same goes for those who are not saving because they cannot afford to.  They and their families will experience immediate hardship and they may or may not eventually come to think that the later benefit of having more savings in old age makes that hardship worthwhile.
People who don't save for their retirement don't cost taxpayers any more than people who do save for their retirement.   People in both groups receive NZ Super, costing the taxpayer exactly the same.

Compulsory kiwi means national super is terminated. Probably in steps.
A very small number of the truely indigent would have to be provided some sort of minimal benefit.

MdM. Absent minded - yes - lots. But best description is denial.

can your forced savings tax guarantee what my returns are from my own efforts?

Regardless of what it is, and how it is saved, and what it is 'invested in', the question is how much is it underwritten.
Norway's oil-derived investment 'fund' is the clearest example of the folly. They'll end up holding vast amounts of dosh, in an energy-starved world. That has to mean two things - a lack of availability of things desired, and a surfeit of said dosh. So we get inflation via a bidding-war for essentials, deflation fia a rejection of non-essentials, and a ROI in negative territory.
The Bernanke cartoon is the best piece. Very appropriate.

Good point about Norways excess , which while it is being used for social good and infrastruture development , will still result in a massive surplus of paper money  in the long run . It all seems a bit pointless really .
However , we in NZ , are told we have a big poverty issue , and maybe the Norway model on a smaller scale would work for us.  
On the other hand , I have not seen this much evidence of this grinding poverty and starvation , and indeed it seems the Benefit is aleady sufficient for package tours to Fiji and the Gold Coast as well as cigarettes , Fast food and pokies

Biggest Credit Bubble in History Flashes Warning: ‘Seek Cover’

Great piece and I agree, even more though even good companies are abse don BAU, ie lots of cheap energy.  When it dawns on ppl that those share prices are not underwritten, oh boy the pop is even bigger that this guy writes about.
"Defaults are unlikely as long as the Fed shoves nearly free money out the front door into the hands of even over-leveraged junk-rated companies that would otherwise have trouble servicing their existing debt. But the Fed is cutting back on QE and is generating a deafening cacophony about raising interest rates. Watch out for falling debris."
More like the sky...

they are cutting back?  Months ago they were cutting back, then they stopped (ie not cutting back)

Steven I thought of your frequent comments on the Baltic Dry index when reading this zerohedge article. Perhaps most interesting is the post by Yen Cross at 21:55

#9 Compound interest - Great in theory.
I graduated from university many years ago with a debt to a bank and spent a number of years with little discretionary income paying it back. I was lucky, I'm just old enough to have avoided the big fees hikes. After 9 years working I had a bit of savings in a work subsidised retirement scheme which I closed when I resigned to fund the completion of my masters degree full time. Net result after 10 years saving: $0.
Students now are saddled with much greater debts. Income may be higher in some industries, but expecting them to save hard for retirement, and a house deposit and pay off loans is a bit optimistic.
The power of compound interest is an example of the exponential function. The same function that says that infinite growth on a finite planet is a physical impossibility. The compound growth of our retiremrent savings is direclty dependent on that exponential growth in the economy.
I wouldn't put all my chickens in that basket.

Well put. You end up needing an infinite number of chickens. Just about the time they repossess the basket.

Given Oliver's position at the New Zealand Institite my immediate though when reading this was oh dear. It might be nice if he worked out exactly where the interest comes from and what might happen if the compounding were to work in reverse.

Na, fear, no one who thinks he's well off wants to contemplate a self-reinforcing death spiral...

And the expotential growth of the world's economy, "ideally" at 4% per annum requires 2.5% more fossil energy per annum, it isnt there so we are not growing and in fact  its doing to decline soon, ergo pensions are bye bye. I have already written off my 35 year old pension in my mind, I'll be gob smacked if I ever see a penny. 

I follow your comments regarding dollars being energy obligations.  It got me thinking.  Which is the better investment, 300g of gold or a pellet of 20x350W solar panels from china since they cost about the same in NZ dollars?  I mean solar panels are a store of energy right! they last for 25 years at least.  Or are they just another devaluing asset?  The NZD is really high and china is producing panels at great cost to the environment by not recycling their SiCl4, certainly cheaper than is possible Germany.  Totally hypothetical, just musing. 

Boatman - in regards to super being means tested... This is what I think of the typical baby boomer.  Five Auckland rentals in a family trust.   All acquired at great expense to the tax payer through tax subsidies and accommodation supplements to the tenants.  Now the baby boomer wants to retire with NON-means tested  superannuation as a bonus to their trust’s beneficiary allocations.  The baby boomer also wants to access the residential care subsidy.  They’d really prefer the tax payer to pick up that tab.  Can you see the unfairness…?
Meanwhile Gen X and Y are struggling to buy their first house, competing with foreign buyers, and the results of global fiat currency debasement.   I can see what people mean when they say generational war.  

means testing fails moral hazard tests

Where's the moral hazard? I don't see it.  Nobody's taking risk at someone else's expense.  Are you saying people will avoid accumulating wealth because it will stop them getting a small benefit from the government?

Yes they do.
They happily spend, party, take unreasonable risk, drink to much, take too much time off, travel, pursue happiness, bid too high for property, purchase items and services they don't need with money they can't afford.... knowing that at the end of the day, if they don't have enough, someone else will provide.   

If the choice is being my G.Grandparents saving and being prudent their whole lives.  Or their drinking, buying-friends neighbour, who buys his kids cars for birthdays...yet has no retirement fund.

the socialist choice says the neighbour can't be expected to starve or face the results of his activities. guess where the funds for his support come from.... (obviously not the neighbour who doesn't have any....)

 The reason why people retire poor is irrelevant.  They could be disabled, mentally ill, or they could have spent all their money on booze and hookers.  The point is they're poor and can't take care of themselves so they MUST receive a minimal stipend from the government.  Should that same stipend also go to wealthy people like your grandparents who have scrimped and saved all their lives?  Well I'd say yes, but only within the framework of a means and asset test.  Say 1 million net worth, and income of no more that $400 per week.  If you've got, or you're getting more that that then you really don't deserve any help from the government IMHO.   

means and asset, no.  because if they one person qualifies on rights of being alive and old so must the others.

As you have just identified, there is moral hazard, they can spend money on those inappropriate things and expect support.   Those who are prudent miss out.

The one who doesn't deserve help is the boozer etc.
Therefore the only decent way is all or nothing...and for someone with 1Mil...the taxes they must have paid/pay justifies them receiving payment

pay all or pay none.
Theft by moral hazard is unacceptable.
If you've got hoards of hungry or hopeless people through moral hazard, it's not your economic system that screwed up.

Then we pay for none.  simple and saves so much on bureaucractic overhead and oversight.

Means and asset test YES; With high thresholds, because why should the tax payer shell out money for someone who clearly doesn't need it.  It's equivalent to giving everybody the unemployment benefit whether they're in paid employment or not.  The moral hazard argument  doesn't apply because people will always strive to maximize their wealth.  You only get distortions at the thresholds.  If anything, a high asset threshold will give people something to strive for.
Asset and means test's are the only alternative to raising the retirement age or substantially lowering super though inflation.      

which tax payer would that be?   The guy with or without the money.....   So why should the guy paying the taxes receive any tax benefit....

"The moral hazard argument  doesn't apply because people will always strive to maximize their wealth.  "  
  That is utter total bollocks.  Easily checked and high probability of locating individuals not "maximising their wealth"  (are we all FTH now?  Got share portfolios, collectives for those without significant individual income?)...   pop down your local pub or TAB...ask around.

And yes said unemployment benefit...actually a tax and should be paid to everybody.

And education should also be provided in a similar manner, after is a social and public good, why limit it unless necessary!

Might have to agree to disagree cowboy.  I think the moral hazard doesn't exist with a high asset threshold.  We obviously see the world in a different way.  You asked "which tax payer would that be?".  Yes you're right, means and asset testing super would result in a slight redistribution of wealth from the very wealthy to the less so .  Horrors, I hear you gasp!!  Its called a progressive (or fair) taxation system.  It makes society a better place to live for everyone.

It's called theft and moral hazard.  And it is far from fair...... or shall a broke chap like myslef turn up and start "redistributing" myself to your household goods....   Or is it like the Russian with two chickens?

[ad: in fact not only is it "not fair", it's the anti-thesis of fair! ]

Pat.   The idea of compulsory kiwisaver is that it will disappear the need for any government benefit for people at the end of their earning life.
With Compulsory Kiwisaver, National Superannuation is eliminated.  (perhaps a 30 year stepdown and phase out)
There may be a need to provide a mimimal subsistent income for the truely indigent, who somehow escape the net.  But those need to be very minor numbers.  And a community scandal every time it happens.
That removes the compulsion we now endure, with paying National Super to losers and savers both.
Maybe with universal compulsion, there could still be some outs.  Like not having to contribute once you have say a million locked in.

To me that seems like the government is de-risking it's balance sheets from the retirees.  Althougth you did say a 30 year time frame.  I have a problem wiht managed funds. 
1. The return on investment is not good enough.  Costs too high. Managed funds make great profit for fund managers.  The Cullen fund surely costs less to administer compared to all the combined kiwisaver funds. interesting discussion here.
2. Risk profile of managed funds is arguably greater than government provided scheme.  Governments are at least backed up by taxation revenue and revenue from state assets.  During the next wave of financial collapse I suspect those managed funds will get wiped out.
3.  In some ways both schemes are flawed.  The only way you can really secure your future is by doing it yourself.  Trouble is there aren't enough assets for everyone to own 5+ properties (like my friend cowboy).  Not to mention demand from foreigners who also want to buy up all or revenue generating assets.    

If that were true, then are we going to see the huge amount put into pensions rremoved from the tax charged to the public?

More likely the government are just looking for ways to pocket that money for themselves.

And currently 3 properties (maybe +1 soon, they want a mill more than productivity dictates...)
And I think thats a very important, and much ignored part of the equation.  How to escape inflative pressure, have economic stength to build wealth across the board, and have enough to go around !

Yes cowboy.  Governments like to hold on to income flow and increase it.  So that is a problem.
But as for your equation.  Having enough to go around is a problem.  But we cannot magic it into existence by bureaucratic rule and redistribution.  We have to work, invest, and put off current consumption for future benefit.  And still make it fair and eliminate disincentive.
Obviously I am a big fan of Kiwisaver, and have a very large balance by comparison.  But it's only a small part of my approach.

Many of the "solutions" are just branded products or policies which are poorly disguised power/money grabs for sig's.

to "invest it", then we need someone on the other end who is not only willing but able to consume the borrowing side of the equation, and also able to pay the higher price.  3% on a shilling/hour isn't a lot in "groceries from the garden" terms, but todays 7% on $18/hour is a bit more challenging especially when few people have spare or time for even most basic garden plot.

I only have money in Kiwisaver to achieve the extra bonuses.

An ex-employer used to have a 1-for-1 system, and the total fund would be invested at medium risk (approx 7% compounding).  The withdraw rate was basically 5% of employer contribution, per year.  So first year you only got 5% of what the employer had matched you, the rest stayed in the fund.  Two years, 10%.   Redundancy matched the top teir of 100%, which meant after 5yrs, at 8% contribution (the max cap deposit), my redundancy paid around 30k (after tax), almost ayears income.  the prorata withdraw system worked well for liquidity in the fund.

At the moment I have several properties and a business to run.  Every penny I don't put in a retirement fund is penny I can de-leverage (or not borrow) at 16-20% interest....compounding.

I agree that a nest egg should be built...but I'm more of the opinion it should be a "Kahuna" and available to all tax paying citizens (from birth!).

Yes Cowboy.  While I do love that kiwisaver dearly.  but getting rid of debt has been even more exciting.  (Thats deleveraging - for the initiated).
As the debt goes down, it goes down faster. The Exponential thingee applies and it's just a great ride.
But while you and I might not need Kiwisaver for ourselves, my view on universal compulsion applies, to protect us from those who won't do anything at all, if given the chance.

your compulsion costs me more than it saves me!   It actively penalises those who are in tight spots or who are trying to do the right thing.

And isn't there right not to do anything?  What makes you think you get to say otherwise? (and penalise decent people whle you're doing it!)


We are penalised right now, and under compulsion as well already, by having to have a universal super system.  All compulsion has it's faults, but we can do better than the current one.

Yes it is bad now, but we should have a proper working system, not something used to pacify the mob (a mob created by laziness or poor education (theirs or others))

Having recently retired from  practice I can vouch that it is not that easy any more for retiring baby boomers with assets  in trusts to obtain rest home subsidies and it shouldn't be easy. The lights have flicked on at WINZ as in other government departments to start reducing expenditure. Clients are telling me just how hard it has become to get such subsidies. Couples who have gifted $54000 a year are considered to have over gifted and that is taken into account by WINZ. The Courts  have backed up this approach on appeal . It is no longer as easy to obtain such subsidies as in the past . Not many people get them in fact . If you  have capital of $1,000,000 the income off it will pay for your care . My own mother has only $500k of assets and her capital is only slowly reducing to pay for her care. Why do so many expect the taxpayer to pay for their care when they can afford it themselves.

# 5 : Why is the value of the housing stock in Melbourne City , Australia ... being compared to the GDP of Greece ?
... I've been known to stretch a point , or to see patterns where none really exist , but this has me quite cumfuddled ... it's about as bizarre a connection as Tubs Dotcom and Homey Harawira . ...
As it happens , the entire housing stock of New Zealand is worth 13 days of the USA's annual GDP ...
... draw you own conclusions than that equally irrelevant bit of space filler ..

#9 Compound interest is an illusion created by the financial elites.  When compound interest meets compound inflation, the net result is zero, before tax.
Just like those formulas that tells you to save $1k per year between age 18 and 21, and how much that $1k will worth, compounded, by the time you retire.  Let's go back 40 years ago in the 1970s, having $1k then will probably buy you half a section in Auckland, and compounded today, I doubt you'll get your half a section worth of purchasing power back, and that's before the Government doesn't tax you on interest.
Inflation is a fleeceing scheme on the public, not 1 in 100 can fully understood its cause and resultant redistribution of wealth, but those that do, have gotten themselves very rich and is encouraging all the sheeps to save and believe in compound interest.

great point.  Why would you save money when it is so very vulnerable to being vaporised by inflation or spiking house prices?  
All your hard work, turned to dust...
And Bill English wonders why kiwis dont save?  It's bleating obvious...    If you save, you get interest, which is then taxed, which results in barely keeping up with inflation.

Save, one day soon cash will be king

mmm...  I used to think so.  I waited for a price correction, but it never came...  I own a house now and would benefit from continued price rises.  But, I welcome a massive price correction to housing.

I remember waiting for the Kiwifriut industry to collapse in the 80's took 8-10 years longer than I thought. Then the Deer industry did the same thing,defied logic for years and years.
  The bad news is the good times don't last forever, the good news is the bad times don't either. The thing to remember is they both end.