web analytics


Written By: - Date published: 10:01 pm, October 7th, 2008 - 18 comments
Categories: kiwisaver, tax - Tags:

It was with wry amusement I read Bill Ralston’s revisionist history of New Zealand superannuation today. According to Bill it was Muldoon who created an “unsupportable” super scheme as an election bribe in 1975. Of course anyone who remembers the situation (as Bill certainly should) knows full well that the real story was big Norm’s compulsory super scheme and the fact that Muldoon scrapped it in order to push cash into the pockets of voters in the face of what were looking to be, and indeed became, very dark economic times.

Over a year ago AYB discussed that super scheme and the fact that it would have provided for more than $280bn in investment capital for New Zealand today if it had been kept, so I won’t go into great detail about it but Muldoon’s scrapping of it was a truly grand political error that we are still paying the price for.

Bill Ralston may have got his facts wrong but that point in New Zealand’s economic history is one that is particularly pertinent as it is tomorrow that National will announce its tax cuts which are expected to be funded by cuts to the employer contribution to Kiwisaver. That would free up the $20 a week credit the government provides to employers for every worker in the scheme. An opportunist political decision made at our expense as we head into dark economic times. Sound familiar?

As I’ve written before cutting the employer contribution to Kiwisaver would cost an average worker with forty years of work ahead of them up to $190,000.

But the loss won’t just be to New Zealanders in Kiwisaver but to the businesses now and in the future that would have been able to access that capital.

In short it would be a move that sacrificed long-term stability and wealth for short-term political gain. Exactly the mistake Muldoon made over thirty years ago and one that Bryan Gaynor has described as our worst economic decision over the past 40 years.

We know Key has claimed an admiration of Rob Muldoon in the past but I can only hope that doesn’t extend to cutting a hole in New Zealand’s economic future just so he can save face on his over-hyped tax cut promises.

Because despite Marx’s claim history repeats itself first as tragedy and second as farce, I’d prefer if this particular piece of our history didn’t repeat itself at all.

Update: after re-reading this post this morning I’ve tightened the description of the outcome of Muldoon’s cutting of Kirk’s scheme to more accurately reflect its political implications.

18 comments on “Farce ”

  1. Tane 1

    Word I heard was that the Nats were going to reduce the minimum employee contribution to 2% and halve the government contribution to a maximum of $10 a week. Of course, that’s just a rumour.

  2. randal 2

    and what about the 410,000 jobs…that pig didn,t fly.

  3. IrishBill 3

    Tane, assuming 700,000 workers in Kiwisaver, just cutting the employer contribution would free up $728m a year for National’s tax cuts and have the beneficial side-effect of letting their business support base off the hook for super payments.

    Of course workers get a 9% super contribution from employers in Aussie so a loss of all employer contributions here will make crossing the ditch an even more inviting prospect for Kiwi talent.

  4. Pascal's bookie 4

    If they are stupid enough to do this, Labour’s tv campaign ad’s pretty much write themselves.

  5. the sprout 5

    Ralston has become the new Garth George.
    It’s terrible what old age can do to a person.

  6. In Canada, the province of Alberta has charged a royalty on every barrel of oil pumped out of the ground or extracted from the tar sands. That royalty has gone into a “Heritage Fund” against the day when the oil runs out as it surely will.

    “As of June 30, 2008, the fair value of the Heritage Fund stood at $17.1 billion. Throughout its 32-year history, the Fund has generated approximately $30 billion in investment income that has improved the quality of life in the province.”

    The return on that fund allows Alberta to be the only province in Canada without a provincial sales tax. Albertans pay only the federal GST.

    There is nothing like savings to help a jurisdiction build wealth and prosperity…..which is why it is fascinating to the watch the party that would have us all believe it offers wealth and prosperity undermine saving and instead turn to borrowing.

    There is no doubt Kiwis are not savers. Most have incomes too low to allow them to save any significant amounts of capital out of cash on hand. Instead, they must rely on their homes appreciating in value as population grows over time. They don’t make land anymore, but we keep making more and more people every day.

    Cullen was doing a not-bad job at saving for all of us who can’t….and the usual squanderers rubbished him for it.

    Sad, really…..but there it is. The parties of the left have proven to be fiscally responsible and the parties of the Right want to pillage the piggy bank….bare though it is.

  7. deemac 7

    Rod Oram on Radio NZ today was carefully balanced but made it clear that he was as baffled as the rest of us by Key’s remarks today about tax cuts. When Oram said that no politician could “repeal the laws of arithmetic” it was obvious to me at any rate who he meant…

  8. According to Bill it was Muldoon who created an “unsupportable’ super scheme as an election bribe in 1975.

    Um, that’s true.

    Of course anyone who remembers the situation (as Bill certainly should) knows full well that the real story was big Norm’s compulsory super scheme and the fact that Muldoon scrapped it in order to pay for a series of election bribes in the face of what were looking to be, and indeed became, very dark economic times.

    Not true. As the Gaynor column you linked to explains, Muldoon’s scheme removed compulsory contributions from workers and employers and loaded the entire obligation onto the taxpayer. It cost money — heaps of it.

    But your contention is otherwise right: had Labour’s scheme been retained to the present day, New Zealand would be in a vastly better position, and far more in control of its economic destiny. And screwing KiwiSaver risks a repeat performance.

    Where Ralston is completely wrong is his claim that Muldoon’s scheme was “scrapped”. It wasn’t. It’s what we have today.

    IrishBill: My reading was that he was mistakenly talking about the Kirk fund because (as you point out) he described it as being scrapped and went on to draw parallels between it and Kiwisaver (a scheme much closer in nature to the Kirk fund than Muldoon’s superannuation scheme). Having read Bill’s post again I concede you may be right but it’s sufficiently lacking in clarity that it’s hard to tell if he has mixed his schemes up or if he’s just stretching the interpretation of the situation to create a tenuous and confused comparison.

  9. sean 9

    “An opportunist political decision made at our expense as we head into dark economic times. Sound familiar?”

    No – not at all, its actually a response to Cullen screwing the pooch and not having anything left out of the billions in surpluses that Labour so proudly parroted about.

    [lprent: They were only surpluses by one of the measurements used. When calculated with forward liabilities (ie super) then they were still deficits. Of course people like yourself only read the headlines.

    Besides the government wasn’t trumpeting the surpluses – that was coming from the pathetically short-term thinkers in the opposition]

  10. Ari 10

    No – not at all, its actually a response to Cullen screwing the pooch and not having anything left out of the billions in surpluses that Labour so proudly parroted about.

    Because he already spent it all on the tax cuts you were clamouring for so loudly?

    Come on, be fair.

  11. Spider_Pig 11

    You’re kidding right? National are likely to remove the employer contribution tax credit, not the employer contributions themselves. This will save the government $750 million pa, but not at all impact the overall contributions to employees Kiwisaver accounts.

    Employers will be placated by an ongoing lowering of the company tax rate and policies to improve productivity.

    I would have thought that stopping the handout to employers would have been right down The Standards alley?

  12. Paul 12

    Yeah what Russell said – I distinctly remember that election – Muldoon not only offered a better scheme from the point of view of voters but arguably a more socialistic one (the irony of which was certainly pointed out at the time) – it was also unsustainable in the long term

  13. jcuknz 13

    While I agree that Muldoon made a seriopus mistake from the Country’s point of view I personally am damm glad he did it becuase I now have my personal superanuation to help above the barely adequate national super us older folk get.

  14. Er

    I really like the Standard and most of the comments are spot on.

    I think that Ralston was talking about National Superannuation however which the nats brought in. Piggy Muldoon destroyed the Roger Douglas superannuation scheme and promised universal superannuation. It was unsustainabile, not funded, but the elderly loved it and this helped get him elected.

    9 years later we had a 9 billion deficit. Piggy called the 1984 election early because he was unable to write a choerent budget.

    Makes you realise how lucky we are under Helen!

    IrishBill: I think you might mean “Kirk’s” superfund.

    IrishBill: Actually, scratch that, I’d forgotten Douglas designed it! Probably the only decent thing he ever did in his life.

  15. Janet 15

    I had just started contributing to Norm Kirk and Labour’s compulsory NZ Super Scheme as a new worker when Muldoon came in and scrapped that NZ Super Scheme and just promised everyone super without having to pay for it in advance. So I got my contributions back. I put them in the PSIS which soon collapsed (although it was rescued and survived strongly).

    Those who don’t learn from history are really doomed to repeat it.

    I predict Key will have a go at the Cullen Fund, the ACC fund and Kiwisaver to pay for short term tax cuts.

    The other thing I remember about the 1975 election was the day after the election and the shock of Muldoon’s landslide win everyone was jolted into action and there was a huge revival and rejuvenation in the Labour Party and the left in the following years, so by 1978 Labour won more votes than National (but not more seats in the unfair FPP era). Also some huge political demonstrations were common place after Muldoon cut the public service and did other short sighted and dangerous things.

  16. Dom 16

    I wonder if National have underestimated how the public feel about Kiwisaver being tampered with – the same underestimation of how they felt about Kiwibank being sold…

  17. Oh it’s a farce alright… But one of those cruel and dark ones like something by Beckett…

Links to post

Recent Comments

Recent Posts

  • Twenty highlights of 2020
    As we welcome in the new year, our focus is on continuing to keep New Zealanders safe and moving forward with our economic recovery. There’s a lot to get on with, but before we say a final goodbye to 2020, here’s a quick look back at some of the milestones ...
    3 weeks ago

  • Jobs for Nature funding will create training and employment opportunities
    A major investment to tackle wilding pines in Mt Richmond will create jobs and help protect the area’s unique ecosystems, Biosecurity Minister Damien O’Connor says. The Mt Richmond Forest Park has unique ecosystems developed on mineral-rich geology, including taonga plant species found nowhere else in the country. “These special plant ...
    BeehiveBy beehive.govt.nz
    2 hours ago
  • Pre-departure testing extended to all passengers to New Zealand
    To further protect New Zealand from COVID-19, the Government is extending pre-departure testing to all passengers to New Zealand except from Australia, Antarctica and most Pacific Islands, COVID-19 Response Minister Chris Hipkins said today. “The change will come into force for all flights arriving in New Zealand after 11:59pm (NZT) on Monday ...
    BeehiveBy beehive.govt.nz
    8 hours ago
  • Bay Cadets learn skills to protect environment
    Bay Conservation Cadets launched with first intake Supported with $3.5 million grant Part of $1.245b Jobs for Nature programme to accelerate recover from Covid Cadets will learn skills to protect and enhance environment Environment Minister David Parker today welcomed the first intake of cadets at the launch of the Bay ...
    BeehiveBy beehive.govt.nz
    1 day ago
  • Cook Islanders to resume travel to New Zealand
    The Prime Minister of New Zealand Jacinda Ardern and the Prime Minister of the Cook Islands Mark Brown have announced passengers from the Cook Islands can resume quarantine-free travel into New Zealand from 21 January, enabling access to essential services such as health. “Following confirmation of the Cook Islands’ COVID ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Supporting communities and landowners to grow employment opportunities
    Jobs for Nature funding is being made available to conservation groups and landowners to employ staff and contractors in a move aimed at boosting local biodiversity-focused projects, Conservation Minister Kiritapu Allan has announced. It is estimated some 400-plus jobs will be created with employment opportunities in ecology, restoration, trapping, ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Border exception for some returning international tertiary students
    The Government has approved an exception class for 1000 international tertiary students, degree level and above, who began their study in New Zealand but were caught offshore when border restrictions began. The exception will allow students to return to New Zealand in stages from April 2021. “Our top priority continues ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Tiwai deal gives time for managed transition
    Today’s deal between Meridian and Rio Tinto for the Tiwai smelter to remain open another four years provides time for a managed transition for Southland. “The deal provides welcome certainty to the Southland community by protecting jobs and incomes as the region plans for the future. The Government is committed ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • New member for APEC Business Advisory Council
    Prime Minister Jacinda Ardern has appointed Anna Curzon to the APEC Business Advisory Council (ABAC). The leader of each APEC economy appoints three private sector representatives to ABAC. ABAC provides advice to leaders annually on business priorities. “ABAC helps ensure that APEC’s work programme is informed by business community perspectives ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Govt’s careful economic management recognised
    The Government’s prudent fiscal management and strong policy programme in the face of the COVID-19 global pandemic have been acknowledged by the credit rating agency Fitch. Fitch has today affirmed New Zealand’s local currency rating at AA+ with a stable outlook and foreign currency rating at AA with a positive ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Additional actions to keep COVID-19 out of NZ
    The Government is putting in place a suite of additional actions to protect New Zealand from COVID-19, including new emerging variants, COVID-19 Response Minister Chris Hipkins said today. “Given the high rates of infection in many countries and evidence of the global spread of more transmissible variants, it’s clear that ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • 19 projects will clean up and protect waterways
    $36 million of Government funding alongside councils and others for 19 projects Investment will clean up and protect waterways and create local jobs Boots on the ground expected in Q2 of 2021 Funding part of the Jobs for Nature policy package A package of 19 projects will help clean up ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • New Zealand Government acknowledges 175th anniversary of Battle of Ruapekapeka
    The commemoration of the 175th anniversary of the Battle of Ruapekapeka represents an opportunity for all New Zealanders to reflect on the role these conflicts have had in creating our modern nation, says Associate Minister for Arts, Culture and Heritage Kiri Allan. “The Battle at Te Ruapekapeka Pā, which took ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Better care for babies with tongue-tie
    Babies born with tongue-tie will be assessed and treated consistently under new guidelines released by the Ministry of Health, Associate Minister of Health Dr Ayesha Verrall announced today. Around 5% to 10% of babies are born with a tongue-tie, or ankyloglossia, in New Zealand each year. At least half can ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Prisoner disorder event at Waikeria Prison over
    The prisoner disorder event at Waikeria Prison is over, with all remaining prisoners now safely and securely detained, Corrections Minister Kelvin Davis says. The majority of those involved in the event are members of the Mongols and Comancheros. Five of the men are deportees from Australia, with three subject to ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Pre-departure COVID-19 test for travellers from the UK and the US from 15 January
    Travellers from the United Kingdom or the United States bound for New Zealand will be required to get a negative test result for COVID-19 before departing, and work is underway to extend the requirement to other long haul flights to New Zealand, COVID-19 Response Minister Chris Hipkins confirmed today. “The new PCR test requirement, foreshadowed last ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • PM congratulates New Year Honour recipients
    Prime Minister Jacinda Ardern has added her warm congratulations to the New Zealanders recognised for their contributions to their communities and the country in the New Year 2021 Honours List. “The past year has been one that few of us could have imagined. In spite of all the things that ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • David Parker congratulates New Year 2021 Honours recipients
    Attorney-General and Minister for the Environment David Parker has congratulated two retired judges who have had their contributions to the country and their communities recognised in the New Year 2021 Honours list. The Hon Tony Randerson QC has been appointed a Companion of the New Zealand Order of Merit for ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • New Year’s Honours highlights outstanding Pacific leadership through challenging year
    Minister for Pacific Peoples Aupito William Sio says the New Year’s Honours List 2021 highlights again the outstanding contribution made by Pacific people across Aotearoa. “We are acknowledging the work of 13 Pacific leaders in the New Year’s Honours, representing a number of sectors including health, education, community, sports, the ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Supporting seniors to embrace technology
    The Government’s investment in digital literacy training for seniors has led to more than 250 people participating so far, helping them stay connected. “COVID-19 has meant older New Zealanders are showing more interest in learning how to use technology like Zoom and Skype so they can to keep in touch ...
    BeehiveBy beehive.govt.nz
    3 weeks ago