In our recent discussion with Sam Stubbs, CEO of Simplicity, we explored why he believes the future of New Zealand could be far brighter than the current economic environment suggests. From a growing pool of KiwiSaver capital to entrepreneurship and infrastructure investment, Sam sees an opportunity for New Zealand to build greater prosperity with its own money.
New Zealand’s Next Wave of Entrepreneurship
Despite the difficult economic conditions of recent years, Sam remains confident about the future of New Zealand and the opportunities available to Kiwi businesses.
New Zealand has never lacked entrepreneurial talent. In Sam’s view, the bigger challenge has historically been access to capital. Businesses could develop a strong idea and grow to a certain point, only to run out of money and be forced to look overseas for further investment.
That environment is beginning to change.
Sam points to the growing amount of capital available within New Zealand and believes entrepreneurs will increasingly have access to the funding required to build larger, more export-focused businesses. KiwiSaver is an important part of that shift, creating an increasingly significant pool of domestic savings.
His message for business owners is to think bigger. Rather than allowing a historic shortage of capital to dictate what is possible, Sam believes New Zealand entrepreneurs should be prepared to significantly expand their ambitions.
More Capital Means More Opportunity
For Sam, one of the biggest reasons to be optimistic about the future of New Zealand is the amount of money becoming available for investment.
He points to Fletcher Building and Ryman Healthcare raising a combined $1.3 billion from the stock exchange in a week as an example of the capital available when investors are presented with opportunities.
Around 30% of KiwiSaver money is currently invested in New Zealand. While the absolute amount has grown, Sam says the proportion has fallen from around 38% when he started Simplicity because there have not been enough domestic opportunities to invest in.
That presents an opportunity for Kiwi businesses with strong ideas and the ability to execute them.
Sam compares New Zealand today with Australia around 1990, describing what he believes could become a rising tide of capital. However, taking advantage of that opportunity may require a shift in mindset. New Zealanders have traditionally been relatively cautious about risk, and Sam believes businesses need to start thinking on a much larger scale.
Prosperity Won’t Remove Competition
More money flowing through the economy does not necessarily mean the road ahead will become easier.
Sam expects New Zealand to become more competitive as access to capital increases. Those who are focused on becoming exceptional at what they do could benefit from an environment that increasingly rewards performance, while those who fail to adapt may find the transition more difficult.
He also challenges the tendency to romanticise the past. New Zealand may face significant economic challenges today, but Sam believes society has also become more accepting of people from different backgrounds becoming wealthy, successful and influential.
Greater opportunity also brings greater competition. For Sam, that makes individual capability, ambition and execution increasingly important.
Balancing Wealth Creation With Inequality
Economic growth alone is not enough.
Sam argues that New Zealand needs to encourage entrepreneurship and wealth creation while also addressing poverty and inequality. He wants to see more successful entrepreneurs and more billionaires created in New Zealand, but also believes wealthy New Zealanders should contribute more through the tax system, particularly when it comes to inherited wealth.
His position is that these ideas do not need to compete with each other. New Zealand can encourage people to build businesses, take risks and create wealth while also redistributing enough of that prosperity to support those who need it.
The current reality of children experiencing poverty is, in his view, something the country cannot simply accept.
Recognising What Our Taxes Already Provide
Part of the challenge is helping New Zealanders see the connection between the taxes they pay and the services they receive.
Sam points to public healthcare, schools, ACC and Pharmac as examples of institutions New Zealanders can easily take for granted. Having lived in four countries and travelled extensively, he rejects the assumption that things are simply better overseas.
The issue, he argues, is partly one of communication.
If taxpayers could more clearly see where their money was going — whether towards medicines, roads or public services — there could be a stronger understanding of the value being delivered. For Sam, asking people to pay tax also comes with an obligation to demonstrate value for money.
Can New Zealand Think Beyond Three Years?
Building long-term prosperity requires long-term decision-making, and Sam believes New Zealand’s political cycle can work against that.
Governments are responsible for assets such as roads, infrastructure and sewerage systems that may operate for generations, yet political decisions are made within relatively short election cycles. Sam describes this as a mismatch between the duration of the investment and the duration of the decision-making.
He believes longer political terms could help create more consistency, suggesting at least four years and potentially five.
The need for long-term thinking becomes particularly important when considering the potential scale of KiwiSaver.
Could KiwiSaver Build New Zealand’s Infrastructure?
Sam expects KiwiSaver to reach $1 trillion by 2050.
If 30% remained invested domestically, that would represent around $300 billion invested in New Zealand. He estimates KiwiSaver managers could have approximately $250 billion available to invest domestically between now and 2050.
Against that, Sam cites a national infrastructure deficit of $212 billion.
In his view, the numbers create a significant opportunity: New Zealand could potentially fund the infrastructure it needs using New Zealanders’ own savings.
Schools, hospitals, roads, sewerage and other major infrastructure could become investment opportunities for KiwiSaver funds. Rather than relying solely on government ownership, millions of KiwiSaver members could effectively own a stake in the infrastructure they use.
Australia provides a model for what this could look like, with pension funds owning significant infrastructure assets.
A New Model for Kiwi-Owned Infrastructure
Simplicity is already working towards this idea through a new vehicle Sam discusses in the episode, intended to be 100% New Zealand owned and available to KiwiSaver managers.
The intention is to invest in major infrastructure such as ports, airports, water and power while keeping ownership in New Zealand. Sam describes a model where these assets could be held for the long term, with New Zealanders effectively owning the infrastructure through their investments.
These are not necessarily exciting assets — and that is part of the appeal.
Power, water and other essential infrastructure can generate steady cash flow because people continue using and paying for these services regardless of what is happening in international markets.
Beyond the investment itself, Sam believes better infrastructure creates the conditions required for wider economic growth. Affordable power, reliable water and quality roads can all support businesses and economic activity.
The combination of KiwiSaver growth, infrastructure demand and entrepreneurial ambition is ultimately why Sam remains so confident about where New Zealand could be heading.
Key Takeaways
- Sam believes New Zealand’s historic shortage of investment capital is beginning to change.
- A larger pool of domestic savings could allow Kiwi entrepreneurs to build bigger, more export-focused businesses.
- Greater access to capital is likely to bring greater competition, making capability and execution increasingly important.
- Sam believes New Zealand can encourage wealth creation while doing more to address poverty and inequality.
- Better communication could help taxpayers understand the connection between the tax they pay and the public services they receive.
- Longer-term political thinking could be crucial to addressing New Zealand’s infrastructure needs.
- Sam expects KiwiSaver to reach $1 trillion by 2050, creating significant potential for domestic investment.
- KiwiSaver capital could potentially help fund roads, hospitals, schools, water, power and other major infrastructure.
- Greater Kiwi ownership of infrastructure could provide investment returns while supporting wider economic growth.
Next Steps
Explore Simplicity’s approach to KiwiSaver, investing and long-term wealth creation here
If you’d like to watch more, check out this episode below.
For a no obligation discussion to see how we can help you on the path to wealth, please contact us.
Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
