Economists are warning that KiwiSaver could pump up the already soaring housing market when employees start withdrawing money for their first home.
From July 2010, KiwiSaver members will be able to put their and their employers' contributions toward a first-home deposit. At the same time, they will be eligible for a Government subsidy of $1000 a year, capped at $5000.
Experts are warning that the scheme could cause a flood of money into the property market, boosting already high prices.
BNZ chief economist Tony Alexander said any subsidy such as KiwiSaver would put upward pressure on house prices, though the extent of this was impossible to predict.
Westpac economist Donna Purdue agreed. "Any kind of subsidy to housing is obviously going to push up house prices."
Mr Alexander said there was a school of thought that once people saw their savings grow, the desire to own a house would subside - but warned that had not happened in Australia, which had compulsory superannuation.
Finance Minister Michael Cullen said Inland Revenue would get $14.6 million to get tough on property speculators, ensuring they are paying tax in a bid to dampen their effect on the property market.
