By Bernard Hickey
Finance Minister Bill English has questioned whether young New Zealanders are concerned about the long term affordability of NZ Super, saying he had not heard any concerns expressed by the young and the only party he had heard of that was concerned was the Labour Party.
He said a long and bitter debate over the future of NZ Super was had in the 1980s and 1990s and was now over, English told reporters in Parliament.
The Government's position was clear and any change would be politically difficult and have to be considered and debated by other Governments, he said.
"We think it's affordable around 4 or 5 % of GDP, which is well below the OECD average at the moment, and it will rise to abour 7 or 8 % of GDP," he said.
Questioned whether it was sustainable beyond the current Treasury forecast period ot 2019, he said: "Well, it is if New Zealander's choose it. The system used to be cheaper and the country went through a pretty vigorous debate and settled on a universal pension system. We used to have means testing and the country at large decided it didn't like that."
Future Governments could change the entitlements and indexation around NZ Super, he said.
"What I think they would know from history is that getting a consensus on this issue in New Zealand is difficult, particularly as the number of people over the age of 65 grows. We've had some pretty bitter debates on it in the past and I imagine any change would be as controversial in the future as it has been before."
English said a period of stability in the public debat on NZ Super had allowed the Government to focus on other areas such as reducing welfare dependency.
"That's much more amenable to change than national super is," he said.
'Cynically relying on low voting rates among young?'
Asked if this was a cynical view based on lower voting rates among the young than the old, he said: "No it's not cynical. It's just the reality of understanding how these issues have come to be resolved in New Zealand."
"You've got to remember from the late 80s right through the mid-2000s there was often bitter controversy over national super and that was, over time, resolved by governments agreeing to a universal system plus the gold card and indexed to wages. Now, no-one's asking for more than that. I think is healthy," English said.
"I think a lot of older people think that's a pretty fair go. The young people, maybe not. There may be some differences of view - although I have to say I haven't heard them expressed publicly, other than by the Labour party," he said.
The Government's own support partner, ACT MP David Seymour, has called for a referendum on the sustainability of NZ Super. Seymour told reporters the Government was in denial on Superannuation, "and I'm not talking about the river in Egypt."
'57% increase for SuperGold Card subsidies is fair'
English was then asked about the decision in Budget 2015 to increase transport concessions to SuperGold Card users by NZ$10.2 million or 57% to NZ$28.1 million.
He agreed some of that would go to wealthy pensioners going for day trips to wineries and cafes on Waiheke Island. Petitioners have asked for the new Explore Group ferry service to Waiheke to have the same access to GoldCard concessions as the rival Fullers Group. New Zealand First Leader Winston Peters has also asked questions in Parliament on the issue.
English said the increase in the subsidy and the free trips to Waiheke were fair.
"We've continued to fund it. The alternative would be to cut it and I think that would be seen by a lot of older people as probably more significant than the financial impact, as not recognising their contribution to New Zealand," he said.
"I think you'll find quite a lot of older people, even if they don't use the gold card much, value it as an expression of the support of the community for their contribution through their working life. You know, it means more than the actual financial cost of it, and that's why we have been reluctant to change it," he said.
"The cost of the gold card is rising for various reasons and we've funded for that in the Budget rather than cut it," he said when asked if the Waiheke ferry costs were driving the scheme's costs up.
English said he had not considered yet whether he personally would apply for NZ Super. "That's a long way off," he said.
Little admits he was not clear with means testing comments
Later, Labour Leader Andrew Little told reporters he had not been clear in comments on Friday about the fairness of NZ Super being paid to those working after the age of 65 when asked about means testing. See our earlier article here.
"New Zealanders can be very clear about one thing. We want the super scheme there in its current form. We believe it can be. The government has to resume contributions to the Super Fund. We believe in universality and I don't support, and we won't have, means testing, but we want a super scheme that we can rely on," Little said.
"If I was unclear about what Labour stands for and what I stand for. let me be very clear now. We stand for a universal scheme, we don't support means testing, I don't support means testing, we want Super to be there but we need the government to resume contributions to the New Zealand Super Fund as quickly as possible," he said.
"I clearly didn't communicate very clearly, I accept that. I take responsibility for that but what I am saying now, in case there is any confusion at all is what Labour stands for now, what I stand and in fact have always stood for, universal superannuation, no means testing, a scheme that people can look to now as they go through their working life that is going to be there in its current form."
Little would not commit to resuming contributions to the NZ Super Fund before the Budget was in surplus, only saying that Labour was reviewing the policy and would make it clear before the 2017 election.
"We've got two years to go yet," he said.
Little noted, however, that if the Government had resumed contributions by borrowing to fund them it would be about NZ$5 billion better off.
"I am saying in 2017 we willl be very clear about how we will make it sustainable, but I am not going to pre-empt that work and we will consider all those options when we get to our preparations for 2017."
Little also supported the SuperGold Card.
(Updated with comments from David Seymour and Andrew Little)
52 Comments
A lot of young people I talk to believe Super will not exist by the time they reach retirement. They are completely cynical about it.
In fact many of them are completely cynical about government, democracy, NZ......
It is all part of the gradual "Loss of Hope" that the young have in many countries.
Many of the young people I talk to do not think about superannuation and are not cynical about it (or about anything else for that matter). Instead, they think about getting better educated, about getting better at what they do professionally, about many interesting and wonderful things that life is full of and about achieving something good in their life.
I agree that they are cynical... that you're right that also they believe it won't exist by the time they get to the table.
Also many of the young have much higher priorities than having to instruct government in how to do got governance. With the cost of travel, food, rent, rates, basic amenities, need to keep up training, paying kiwisaver, keeping their job/career development (and heaven forbid having a live worth living), that teaching government to run a Super scheme that won't exist in 40 yrs time doesn't make the priority list. After all that _is_ the governments job and why all those people get the big money.
I would be more concerned about during this time of minuscule inflation (inflation was supposed to be good for the economy, yes?), and all the cost reducing ability and projects (fraction of energy, lower staffing numbers, green technology available, better training, several decades of infrastructure improvement, technological advances in process and communications)... why those gold Card and other costs are rising.
It's like the people who say good education saves healthcare money. I see the money getting shorter in the hands-on departments and the overloading of tasks onto less staff, but the actual healthcare cost doesn't appear to be going down ! Reminds me when they were complaining about doctors not being able to get jobs in NZ public healthcare, yet the ones working were being paid extra for (and complaining about ) hugely long shifts and the use expensive locums (with wage rate over $70/hr ).
That's a common misconception. The baby boomer generation haven't paid for their superannuation. The governments of that period spent every cent on things like a generous welfare state, free tertiary education, healthcare, universal student allowances etc. None of that money was put aside to fund future superannuation costs. Given that we are now cutting or have cut many of these things wholesale as they are unaffordable, young people have good reason to ask why we are not also cutting superannuation.
Superannuitants are beneficiaries like any other. We should treat their benefits in the same manner as we treat the rest. Why is National Super indexed to the average wage when other benefits are not? That's an immediate cut we should make.
Yes those governments did spend. And worse borrowed big to do so. And the Keynesian effect of going from horse-n-cart, to gravel roads, to sealed highways. Putting in place a national grid so people didn't have to rely on gas or coal. Heavily subsidised tertiary education which piggybacked onto the desparate need to bootstrap technological research (universities are research centers, not work training providers). And to give the poor population access to rudimentary health needs rather than having them die, young and adult, from simple diseases and avoid crippling pandemics (whopping cough, polio, measles, tuberculosis, influenza).
But there were large gains from modest investments. One properly trained doctor and nursing team, can take care of a -lot- basic needs patients and vaccinations. But once that threshold is done it becomes a diminishing return.
And the money is not put aside for future annuties (well they did but the socialist government of the day declared it marketing manipulation and force the government to spend it or be charged with criminal charges). The concept, which IS well documented, is that the funding for each generation old people was to come from the taxes of the current working generation. Your investment while working was deemed to be what is known known as social investment; you invested in the young peoples' development, and they paid for it by giving a portion of their working bonus to the elderly.
the reason we're not cutting the superannuation, is because today's old people have paid the price that was contracted. that and clear, significant and very real moral hazard.
Ask instead; why the prices keep getting pushed up. (if the services are being cut)
Government superannuation comes out of the current account, paid for by current taxpayers. The money has not been set aside. When payments do reach 8% of GDP as the main cohort of baby boomers retire, the government of the day will be forced to means test. There will be no Goverment Super when subsequent generations retire.
SimonP..... if you withdraw that Superannuation after promising the generations it will be there what will happen to the Government of the day??? Class action?!?! Have we not learnt from the Treaty issues or even the recent case of one Saudi businessman????
The fact is most people are on wages and their tax is paid for them so they don't have to directly fork out the money so there is no pain attached to the tax payment.
It is people in SME businesses who feel the pain of the tax payments as they are the ones doing the paying and all the collecting, filing and every thing else that goes with the crappy system we have all had enforced upon us.......
You cannot do a class action, but you can vote them out. ie It just takes WP to say "i'll replace it if you vote me into power" and WP will be the new PM come election day.
"tax payment" well its the same really just PAYE's dont really see it so forceably every time they do it. Unless say you are a OAP on a foreign pension in which case you have to pay the IRD the right amount for the future period based on a best guess case what the exchange rate will be. If you get it wrong? well you get penalised by the IRD I believe for your error so I guess you over pay not to get stung. Now things like that I see as unjustified but there you go.
I think you can take a Government to Court......
http://www.communitylaw.org.nz/community-law-manual/chapter-4-human-rig…
It could be considered extremely cruel treatment to tax the crap out of people while making promises that you will be financially taken care of during your retirement years....just one angle!!
9 Right not to be subjected to torture or cruel treatment
Everyone has the right not to be subjected to torture or to cruel, degrading, or disproportionately severe treatment or punishment.
OAP's with foreign pension funds are treated similarly to SME's and the stupid provisional tax....so don't go thinking it is only foreign pensioners that face the stupid IRD rules.....At least your OAP's don't have the plethora of other taxes to comply with as well.
You would have to have a court that would hear the case (courts are given jurisdiction by government decree) and likely have to put a large pile of case into escrow to prove you can cover the large court fees if you lost.
Generally government trains/conditions people to be experts in bureaucratic arsecovering. You just don't last long in that environment if you don't have the mind for such things, as other people don't want such a risk on their team's budget.
In the court you would have to prove, not that you were mistreated, but that the government agent was not following legal instructions -"I'm just doing my job (with paper trail)" is valid defense in law IF you're working for the government. This is because the courts don't have the jurisdiction to try the government itself, that appoints them and makes their rules - they certainly don't have the discretion to try the law itself to see if it's legitimate. It's legitimate because it says it is, and that's considered solid and unchallengable in court.
Alex, show me the numbers that say we can afford this. Treasury's own report on this says we cant. Super to rise from 13% to 24% of govt expenses, to double as a % of GDP by 2060. Even English himself admits as much above "Well, it is if New Zealander's choose it.... Future Governments could change the entitlements and indexation around NZ Super"..... Just kicking the can down the road. There is no justifiable reason that Super is linked to the average wage rather than CPI like all other benefits. Just blatant short term and gutless thinking that sets up the future generations for serious pain
Boatman claims the recipients have 'paid for it'. That is false, they have paid for the previous (much smaller) generation to have super, they have paid for past policing, past healthcare. They have not paid any future expenses whatsoever, apart from the Cullen fund, which National has chosen to discontinue.
JesseP....they may not have directly contributed as in the Government put away a certain percentage of the tax take for them but they sure as heck have left an enormous amount of infrastructure for the future generations.......NZ could always value that infrastructure and work out the future payments the next generation would need to make to use the roads, schools, hospitals etc....accusing them of not paying enough when subsequent generations receive billions upon billions of assets is obnoxious.
Rubbish. The cost of that infrastructure has already been passed on in the form of debt. in the 30 odd years between 1984 and 2006, net foreign debt in this country increased 11-fold! We also have a massive infrastructure shortage.... why else would the Auckland council be having to resort to rate increases and motorway taxes to pay for it. Christchurch council are forced to sell off assets as has the NZ government. You want obnoxious.... no sir, obnoxious is a generation that has presided over the largest boom in personal wealth ever experienced, who has then granted themselves a non means tested, unaffordable superannuation scheme, whilst selling off our assets and houses to offshore investors and refused to put aside money in the NZ super fund to pay for it. I look forward to the day the younger generation get off their apathetic backsides and outvote their short term, greedy parents.
You are ranting on about Government performance in handling debt and taxes...If you actually stopped and took a breath you'd realise that BB'ers have been paying huge amounts in taxes....you'd also realise that around 75% of them have some personal savings/investments for their retirement.
Council infrastructure debt is not Government infrastructure debt so you had better isolate the two from each other......
You appear angry with the BB'ers for even existing well you wouldn't be here if it weren't for a BB!! And you seem to despise them as a group and think they are greedy....what.... they got to the other end of their working lives and you're jealous as hell that they have something....so what you want is to have it all now including their retirement.....well I know who is being greedy!! And worse you appear to want to put all BB'er on the street without a brass razoo......
If you valued the infrastructural assets now you will find you are being left with a legacy but you're so blind and ungrateful that you cannot see it!! You seem to think you should have those assets at the cost at the time they were built. Maybe if you took replacement value into consideration you'd get a little surprise.
Maybe you should think about what the role and purpose of Government is? because I can tell you that politicians do what they like when the like......and they have always been this way....even for the BB'ers........so don't go thinking they had anymore control over the economic direction than any other generation.
Christchurch Council is selling off assets as those who were looking after those assets completely mismanaged their responsibility.....you obviously think they should be keeping those assets.....so what your saying in your reply is that you want assets owned by an authority which is Socialism but then you don't want Socialism providing BBers with a NZ super payment........so you're pretty much advocating communism!!!
Crickey, nice rant. Can't understand a word of your logic as to why I'm a communist so won't try. However I'm not angry towards bb'ers or want to turf any of them out on the street. I totally agree that those that don't have the means should get super. What I do feel strongly about is 1. That super should be means tested and 2. It should be linked to cpi not wages. I see many of my parents generation talk openly that it as their travel fund / fun money / golf membership. When our unviersities are struggling and kids are in poverty. Give me one valid reason why a multi property owning Auckland millionaire should get a govt benefit? It's a joke. I can't understand
Maybe you need to read some of the history - political and otherwise of this country you call home.....there is plenty written about the superannuation debates that took place and on tax rates.....somehow I don't think you'd be happy unless the IRD was collecting 90% of all people's earnings and then redistributing it........
You got to have the right attitude......think Henry Ford...."Whether you think you can or you think you can't...either way you are right"......it is better for everyone to think they can on this issue...so head down, bum up, stop watching other countries and get on with it!!!
Arguably, Super was 'paid' for' by earlier generations in a tax rate at 66% etc - personal income foregone then, to develop the country that would be 'repaid' by a more prosperous country that would be able to afford a later-life entitlement to see many though their older years. That the money was subsequently squandered, or otherwise, isn't much compensation for anyone who believed that their tax was going to deliver them an old age free of financial worry.
I think the whole issue is that an age of 65 start date is now too young - people are living a lot longer than they used to when the scheme was first developed. A gradual and well telegraphed increase in the age of eligibility to reflect increasing longevity is required to make the scheme affordable and fair. I can't understand Key's opposition to this since the baby boomers won't be affected by it.
Yes it is a fact. Referring to the NZ statistics website: If you were born in 1940 you are expected to live, at 65, a further 20.7 years as a male, on average. If you were born in 1915 it was 14.5 years. If you were born in 1876 it was 12.7 years. Intuitively we all know this anyway, better nutrition and healthcare when we are young and when we're old means longer life expectancy at any age, and might I add, a general ability to work longer too (if we need to). I should add though there is a view that the teenagers of today might actually live shorter lives than their parents because of the diabetes and obesity epidemics.
People may be living longer, but that doesn't stop the body from ageing at the same rate! At 18 a male is 'at their peak' and progressively deteriorates ( that's why Wars are fought by men under 30!) - the strength starts going in the late 30's; the eyes in the 40's and hearing in the 50's etc; and females from 30. By 65 today, most people are as ready to keep working as they were in recent generations gone past ie: not very!
I think that line or argument is only applicable to manual labour and even then my guess is builders and the like use a lot more power tools than they used to so to prolong their useful working lives. And so many jobs these days require little strenous physical effort, so I don't buy that argument much. And there are part time jobs too - you don't need to work a full week. At the end of the day if people live longer then they need to for work longer too to support themselves, otherwise it is by definition unaffordable.
Maybe. But Dynamic Flow Analysis will show you that if you put a blockage at one end of a flow ( say keeping older people working longer) then there are magnified impacts at the beginning of that flow. Think, older people staying at work and 'displacing' all the younger people below them who all want to move up the career ladder. They can't, if the older crowd 'stay on'. If an economy is expanding, then added capacity though old age is able to be absorbed. But do you see many Western economies expanding at the moment? Whatever you are told, New Zealand's isn't. So increase the retirement age by all means, but expect that younger people will be denied a job and their unemployment rate incase as a consequence.
Yes in a closed form system that is true but economies are not closed form so when more people work in them and thereby increase productivity per capita, they will tend to grow, ultimately creating more jobs and opportunities for everyone, notwithstanding lowering the burden on the taxpayer.
a) More ppl does not necessarily improve productivity per capita. In fact it could be worse.
b) You cannot grow for ever.
c) More ppl = more demand on public services like health, ergo the tax/rates burden can get worse.
d) We are on a finite planet so in effect it is probably a closed system.
e) As we create more specialisation and less need for manual labour then actually a bigger and bigger % of ppl will not be able to participate productively.
Weird. Why attempt to use something that is pretty complex and specific to an engineering problem out of context ie economics? Why not construct an economics model right off?
In terms of "blockages" the economy however isnt necessarily like a pipe, valve or heat exchanger in fact nothing like it that I can fathom. In fact if you put a restriction in in you might get better heat transfer say if you break up laminar flow and make things (more) turbulent.
So lets just look at this, the BBs are a bulge generation being more of them than later generations, agree? and not all of them will want to work into / past retirement age, some will have to as they lack the private pension not to. So actually if all the BBs retired we might have a shortage of Labour and experienced labour at that. now in terms of raising the age to 67 I wonder how many of the experienced ppl this will impact? I'd suggest that ppl are already working past 67 anyway so its only the un-skilled/physical job type workers how will be impacted the most, hardly jobs the young are rushing to fill.
There is no difference to the days and the days before the Mafia, the mafia one may have paid his or her profit share with a life or a blown up business.
Today the money is stolen quietly as tax = PROFIT SHARE.
The game has not changed what has changed is the Govt is the economy.
50% of NZ'ders on some form of social welfare.
Super should be means tested and only apply to the poor.
I would continue with kiwi saver and completely delet nz super asap.
Set up a system where super is funded from birth and the money release equalivent to 60% of the wages now.
Will save the taxpayer shareholder $30 million a year then we can feed our hungry children.
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