Written By: - Date published: 9:31 am, May 25th, 2015 - 197 comments
Categories: benefits, bill english, budget 2015, Economy, john key, kiwisaver, national, national/act government, Politics, same old national, slippery, superannuation, tax - Tags:
The media recently became excited after Andrew Little talked about how there should be a discussion about the future of superannuation. In my personal view the discussion is perfectly appropriate and is becoming urgent. National is playing political games with the issue and is boxing New Zealand long term into less and less palatable choices. Our government is going to have to grapple with this issue sooner or later.
These two charts show the extent of the problem. The first is from this Statistics New Zealand Paper and shows how the number of kiwis aged over 65 is accelerating.
The second shows a graph of the spend from 2005 to 2015 on National Superannuation (click on it for a legible copy). Note the regular and gradually accelerating spend on superannuation. The current budget alone allows for an increase of $668 million above last year’s spend. I have not attempted to summarise other increasing costs such as Health and the Gold card but the cost of Health alone will also increase by significant amounts as the needs of an ageing population grows.
National’s response to superannuation policy continues to be disappointing. Bill English was questioned in a gentle way on Q&A last weekend about the budget. He showed surprising numerical illiteracy by confusing averages with medians. He acknowledges that the $25 per week payable to beneficiary families will be abated. He also claimed that under the forecasts the Government is running National Superannuation remains affordable.
I presume that by “the forecasts” English is referring to Treasury’s Budget Economic and Fiscal Update which runs forecasts out to 2019. 2020 would appear to be not within Bill’s contemplation. Way to plan ahead Bill.
There needs to be a discussion about the future of Superannuation and the sooner this discussion occurs the better. To ready itself for the baby boomer bulge Government can do three things, it can pay down crown debt to give it headroom to borrow more in the future, it can set up a dedicated superannuation fund to make the current scheme more affordable and it could set up a further scheme to persuade individuals to establish a nest egg to augment their retirement income.
Labour did all these things, paying off debt until we became a net creditor nation, establishing the Cullen Fund and setting up Kiwisaver.
What has National done? Not only has it refused to even countenance any policy to make superannuation more affordable long term but it has run up significant debt, frozen grants to the Cullen Fund and made eight distinct cuts to Kiwisaver.
But we are in the strange situation where any discussion about changing superannuation attracts political opprobrium but refusal to do anything about the future is regarded as a political virtue.
It looks like the next Labour Government is going to have to do what past Labour Governments have always done, cleaned up the mess left by the outgoing National administration and plan for the future.