By Bernard Hickey
Prime Minister John Key has rejected Labour Leader Andrew Little's accusation that the Government is being irresponsible by refusing to debate or acknowledge that the current settings for New Zealand Superannuation may not be affordable in the long term.
Key said Treasury's forecasts in Budget 2015 showed the rise in spending on New Zealand Superannuation was built into its forecasts. They showed surpluses increasing to 1.3% of GDP by 2019 and debt reducing to 22.9% despite New Zealand Superannuation costs rising from NZ$11.6 billion in 2014/15 to NZ$14.4 billion by 2018/19.
"I don't think we are being irresponsible," Key told his weekly post-cabinet news conference.
"If you have a look at our fiscal track we've built in the increases for New Zealand Super and the costs associated with an aging population. So we are pretty clear, and on our numbers actually the debt numbers for New Zealand are reducing so it's well and truly affordable," Key said.
Treasury forecast in its 2013 Long Term Fiscal Position statement that it expected Government spending on NZ Superannuation to rise from 4.3% of GDP in 2010 to 7.9% in 2060, which would require spending cuts, taxation increases or changes in the benefit's indexation or age levels to be sustainable, while other parts of Government spending continued to rise. The Retirement Commissioner also recommended changes to New Zealand Superannuation in 2010 to improve its long term affordability.
Key has previously said he would resign if the age of New Zealand Superannuation was ever shifted from the current age of 65 or the benefit for couple was changed from being 66% of the net average wage.
Earlier on Monday, Little repeated comments on Friday that the current settings were not affordable and the Government could not credibly deny that.
He was responding to comments made by Finance Minister Bill English on Q+A on Sunday that New Zealanders did not want to change the current settings.
"There doesn’t appear to be an alternative viable political path to changing national super," English said.
'Reckless and outrageous'
Little described English's comments as irresponsible.
"That is confirmation of their political recklessness," Little was quoted as saying on Monday. Little's comments followed controversy on Friday when he appeared to say Labour may consider changing the settings for NZ Super, although he later denied that meant means testing. See our earlier story here.
"So they know they've got this big fiscal issue staring them in the face. The political plan is to ignore this and make it everybody else's problem. It is totally reckless," Little said.
He later said it was "outrageous to effectively say 'not our problem, it's in the future we won't be here, it's up to somebody else'."
Little said the Government needed to resume funding the New Zealand Superannuation Fund to better pre-fund the rising costs of New Zealand Superannuation, rather than using spare cash for tax cuts from 2017.
"The longer this Government goes on without facing up to the reality of the need for pre-funding now, it's going to make it very, very difficult for a future Government," he was quoted as saying.
'Key says Little eyeing lower benefit'
Key said Little appeared to have boxed himself into corner of reducing the generosity of New Zealand Superannuation, having ruled out a later retirement age and means testing.
"So he says that the cost is unaffordable of New Zealand Super, and that's his perspective, and that something has to be done about it and that change needs to happen," Key said.
"He has ruled out an increase in the age. On Friday morning he was saying they were going to means test and by Friday afternoon he was saying that they were not. Now there is only one other alternative left. If you don't lift the age and you don't basically means test then you have to universally reduce the generosity of New Zealand Super," Key said.
"So that must be what he is saying they are going to do. Because putting money into the super fund doesn't reduce the cost of New Zealand Super. So I assume, when he says that they are giving a lot of thought to it and they intend to address that issue, Labour is going to campaign on reducing the generosity of NewZealand Super," he said.
Key said he remained confident for the long run and was comfortable with the current settings that meant wealthy people over 65 could continue to work and collect the benefit.
Key may collect it himself
He declined to say whether richer people over 65 who were still working should decline to accept New Zealand Superannuation.
He said he had not considered what he would do.
Treasury commented of the current NZ Super settings in its 2013 Long Term Fiscal Statement that: "We might be able to afford that, but we would have to either cut other government spending or increase taxes. This approach would raise intergenerational questions – is it reasonable for taxes collected from working-age people to fund the costs of NZ Super indefinitely, given the projected expansion in those costs?"
22 Comments
[Cut out the personal stuff please. Ed]
While NZ is currently a sovereign country, at least until the passing of TPPA, that's the only thing you got right.
Dear Ed: I'm serious. Is it sarcasm, or trolling , or satire? Legitimate question !!
Seriously the comment was so far from an accurate observation I needed to ask, because if it is supposed to be some sort of tongue in cheek it can't be seen through the internet.... certain such wildly "in the mirror backwards" comments can't be truthful observations.
Sounds like Treasury has other things in mind to spend money on. Super is obviously not one of its priorities.
Little is putting himself into a no-win situation here. Sounds like he hasn't thought this one through. He may be ruling his party out of power here, even before he has started.
As far as rich people not accepting super goes: there isn't really a need to do this. Just accept it and then give the money away to charity. That is a more direct way of targetting the things which you think are important rather than trusting the government to do something better with it.
Perhaps you have to realise the Labour don't seem to want to get into government. With Helen chasing the crazy electric car system with undeveloped technology and short life cycles and no supply in NZ, and certainly no way to recycle the dead batteries... right through to today, they've been playing a Clayton's (fake but tastes like real alcohol) platform. If not, then they are even less capable of leadership than we assume.
Ooooh cowboy .. it's nothing to do with leadership - it's power and distribution of the trappings that go with the sleight of hand - the wave of the hand - the misdirection
and
missionaries and fanatics
In the deep south a revivalist meeting is in progress. A charismatic evangelist fires up the congregation with fire and brimstone. Many see the "light" and become immediate devotees. In a state of heightened fervour, the congregation contribute generously as the collection plate is passed around.
orators and fanatics
In the far north, a seminar is in progress. A charismatic orator fires up the congregation with promises of untold wealth and riches. Novices learn charm is the "light and the way". Convinced they have found salvation and the holy grail. In a state of heightened expectation the congregation contribute generously. Signing on for the never-ending journey to "el-dorado" and "valhalla".
How dare Labour consider denying me my birthright to Naional super. How else do they expect me and the wife to fund our annual three month European tour? What with the golf club subs and her in laws' weekly coiffure we can hardly rub two pennies together at the end of the fortnight. We'll only be claiming for 20 odd years anyway if the actuaries have their sums right. Hardly long enough to make up for all those years we paid our taxes. Meanwhile the bleating younger generation are off to the shops to buy their latest smartphones and flatscreen TVs, blah blah...
If you blindly look at things in this way you are frankly a partisan fool IMHO. 12months ago no one really predicted the collapse in oil prices, hence the Govn's revenure substantially collapsed. If Labour had been in power it would have been the same result. Ditto "recovery" both parties are wedded to a growth for ever and expectation that a "low" OCR would hugely stimulate the economy and see Govn revenue rebound. Didnt happen.
4 years out? well if you look at the energy input into the world's economy and indeed NZ's then the ever increasing cost of oil in the longer term signals shrinkage not growth. Not one Political party is saying that, not one and very few economists (since they missed 2008 its hardly surprising).
However Labour would have done no better and arguably worse.
Me, I go back 40+ years of political history and read how UK Labour for instance wanted to "pick winners" (actually more like whinners) like Leyland in propping up industry. Or in NZ here Govn putting Govn departments in towns like Wanganui in order to create jobs, not really much in the way of success now was it.
7 years btw of a GFC and it isnt over yet by a long way.
Labour's plans to get out of it? zero.
I think with todays tech putting the back office functions of govt departments in towns like Wanganui, and the like is a good idea on two fronts, it feeds the income into those economies creating spin off jobs, and the govt can pay less than they pay for them to be in Auckland or wellington as the living expenses are lower,
However you miss the age old problem of specialisation, ie they have to import ppl to work in them. As some examples.
a) I have a mate who once he had finished his accountancy degree went to work in Invercargill on $45k while his Girlfriend went to work in Auckland on $26k. b) The hospital down there tried to get me to work there permanently after I went down for a few months to tie them over. Basically as the facilities manager as they had decided to outsource the works function. Trouble is the now out-sourced ex-hospital works department was the only tender, oopsie higher cost. Napier, their IT department at one stage was run by a HR manager from Auckland who wouldnt know an operating system if she fell over it. Wanganui I ran a project there for 9months, no locals available/capable to do it. Palmerston North I ran several contracts there remotely from Wellington, no local skill sets. Greymouth, rinse and repeat. Now un-skilled labour is un-skilled labour but the second you need qualified and capable professionals you have a big and expensive problem.
Plenty of people called it Steven including Rodney Dickens - "clueless" I think you called him. This from May last year:
"$75 oil. Nice. Article sums up current state of play."currently projecting an imminent plunge in the oil price to the $70 region. His bearish outlook is based on the recent peak in the net short position of businesses involved with oil.""A barrel of oil contains the energy-equivalent of some 5.55 million BTUs. At the current natural-gas spot price of $4.30 per million BTUs, a barrel at $75 buys nearly 17.5 million BTUs-worth of natural gas -- more than three times as much."
Quote context pls. I dont "think" cuts it, so quote me exactly please with a URL, ie provide some proof because you are notorious for doing such out of context things.
Certainly in context RD has not got the odd call right, but he isnt alone and seems to be doing better than many. His data mining is however excellent, just not the conclusions.
Lets use some logic and deduction on "calling it".
Lets be clear here, many oil players and talking heads in the USA etc expected the Saudis/OPEC to cut back production and maintain $100 oil, as the US shale plays ramped up. Oopsie Saudi did not and Saudi got villified for that, mostly by ppl losing shed loads of money and being made to look fools. So in calling a price drop somehow the few that did "get it right" somehow second guessed OPEC and in particular Saudi, yeah right. Did they do it based on sound reasoning? Lets see "everyone knows" that historically Saudi has been the swing producer, instead of dropping output Saudi have actually ramped up production this time around.
What else have the talking heads got wrong btw? the drop in price was expected to cause a US recovery, instead 9 months or so in, um no. So really what we are seeing is a lot of ppl widely guessing on the future of the oil price. Longer term it will go up again for sure unless we are all too poor to buy it but for instance right now that improvement in oil price it rolling over, http://www.oil-price.net/
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.