Standard and Poor's has warned that an aging of New Zealand's population and a decline in the working age population could increase age-related spending on pensions and healthcare to 20.9% of GDP by 2050 from 14.4% now if significant reforms are not made.
Standard and Poor's made the claims in a report on global trendsd titled "Global Aging 2010: An Irreversible Truth."
"Without further reforms to address these mounting spending pressures, increasing net general government debt over the period may weaken New Zealand’s long-term credit quality," Standard and Poor's credit analyst Kyran Curry said, adding New Zealand faced similar problems as in other developed economies with aging populations.
"We project that the government debt burdens of most advanced economies could reach unsustainable levels of over 300% of GDP in the next 40 years, without fresh measures to address long-term age-related spending trends," Curry said.
"In our view, population aging will lead to profound changes in economic growth prospects for countries around the world, and lead to heightened budgetary pressures from greater age-related spending needs. Without appropriate budgetary adjustments, further pension and health-care systems reforms, or structural measures to improve sovereigns' economic growth potential, our projections--which are based on national government estimates, as well as those of the European Union, the OECD, and the IMF--suggest that the future debt burden of the majority of sovereigns would increase to historically unprecedented levels," he said.
"Nevertheless, New Zealand is ahead of many peers in responding to the aging population challenges because of its fiscal flexibility, which is underpinned by low public debt and fiscal discipline. It has either introduced or announced policies directed at raising productivity and savings, promoting greater health-care system efficiency; pre-funding pension entitlements; and providing incentives for the long-term self-provision of retirement incomes."
Treasury Deputy Chief Executive Gabs Makhlouf told the Retirement Income Policy and Intergenerational Equity conference in Wellington in July Treasury has forecast net public debt would rise from around 20% now to over 100% by 2050 without changes to government policy. See more here.
See a Double Shot interview with Gabs Makhlouf below.
14 Comments
No worries Bernard....expect the govts to open the floodgates and for a pop rise from 5 to 10 mill by 2050....all young and keen immigrants wanting to escape the filth and decay up top....think of the boost to the banking profits to be had housing that lot....oh we is in for a hum dinger wave of migrants....all spun as the best thing since the invention of credit. Get in now and secure your urban fringe property. Them migrants gotta live somewhere.
Uh no...it looks like pretty solid statistics...
The population over 65 almost doubles...so there will be (roughly) twice the pension costs, twice the healthcare costs.....PAYE will drop significantly as they retire....pensioners will move from saving to spending, but it will be more for essentials...soless GST per person...
All this adds up to a significant problem...and thats just the direct aspect, thinsg like peak oil etc are not in their calculations.
Why do you think it wont be?
Please justify...I am interested.
regards
Wolly, you could be right on the immigration mate and leading the charge will those returning from Aussy or even Aussies themselves because within a couple of decades one of the most valuabe resources will be water. Not only will NZ have water but economic bouyancy as a result. So you oldies don't need to get all concerned.
Hard to see lots of Australians wanting to emigrate to Aotearoa, but the water issue for their agriculture could create a premium on NZ land. Obviously the likes of Gareth Morgan thinks so. But remember according to the Risk Analysis guys in the main banks, we do have a subprime situation with farms and they see a big fall in prices in the immediate term, which will then make agricultural land even more sought after at that point and prices will probably head north again. In the meanwhile residential property prices will stagnate around where they are at present (the Risk Analysis guys assessment) unless there is another wave of immigration
And Wolly, don't speak without your teeth in.
Everyone needs to put something away for retirement. There's going to be little hand outs in the future. My mates and I are as we know this, and we are in our early 30's. But retirement does seem so far away though. (That boat or something looks really good instead of saving for retirement!)
Tell you what it is that looks so much better than a boat , or something shiny and plastic from China ; and that is a flow of cash into your bank account , which you didn't have to work for . A tidy stream of income from investments , which comes irregardless of whether you work / sleep / or play .....
........ Friend , that gladdens the heart no end , if warms the coldest of winter nights , it gives you a sense of personally being in control of your future ........ The word " pension " slips from your lexicon . You have responsibilty for your future ............ The government and it's bureaucratic largesse , can take a running jump ; you don't need them .................
[ the golden day that your investment stream of income exceeds that you get from your employment income .......... shout your cobbers a slap up party , on one of their boats , 'cos you don't want a boat anymore ]
Standard and Poor's warns aging population will increase pension and healthcare costs to 20.9% of GDP by 2050 from 14.4% now Oh really?
On current projections, from 2026 the growth rate in the number of New Zealanders who are aged 75+ will begin to level off and then decline as the baby boomers start to die off in ever increasing numbers with each passing year. By 2050, around 90% of today’s baby boomers will be dead already. So who are all these old people suppose to be in 2050 that are sucking on the States tit? Corpses?
What is happening in other countries when it comes to population demographics is largely irrelevant as each country is unique and what may or may not apply in Europe for example or Japan does not mean that that applies here.
It looks like Standard and Poors has forgotten that old people die.
The problem is the debt that could be taken on to pay for them until they die...then of course the debt remains, for their grandchildren to pay.
There are demographics for NZ, so we can see the bulge of 45 to 65 year olds who right now are at their maximum income earnings and then drop off to a lot less when they retire, thats simply obvious.
Please explain why its morally justified to leave your children debt they didnt ask for...or benefit from.
regards
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