In New Zealand we have a retirement saving scheme called Kiwisaver.
The scheme is opt in. If a consumer opts in, they must save at least 3% of their income, which they can't access until retirement. (They can also withdraw it to buy a first house).
Their employer must match up to 2% of the employee's income.
The government matches up to ~$500 a year.
My question is, what happens if the government, instead of giving a tax cut, increases its contribution to the retirement scheme?
e.g. The government cuts services, and so can afford to give taxpayers a 1% tax cut. Instead of simply giving the tax cut, they announce that they'll be instead matching an additional 1% on the saving scheme.
The effects I see are:
There is the effect of of reduced government spending.
There's also the effect that it will increase consumer participation in the scheme.
But there's also the effect that all this extra money has on the investment world. Would this simply be inflationary on existing stock prices? Or is it likely to increase new (risky?) investment?