Sure the KiwiSaver money released for further education may result in failure for the kiwsaver concerned. The money released for real estate purchase may result in further inflating th housing market or it may be used to buy an over priced problem house. My opinion is that Kiwisaver should only be used for retirement and not as a real estate deposit saving scheme.
The government should introduce a second tax concessionary scheme to encourage saving with the ability to withdraw savings (with a write-back of tax concessions for withdrawals over a certain amount and within a set time period) prior to retirement.