By Alex Tarrant
Labour Party leader David Shearer says his party would delay resuming contributions to the Super Fund until the government can afford to do so, and has indicated Labour is likely to keep its policy of raising the Super age from 65 to 67 between 2020 and 2032 by 2020.
In an economic policy speech to the Wellington Employers' Chamber of Commerce, Shearer acknowledged the party had not communicated some of its policies, like raising the Super age, as well as it could have in the run up to last year's election.
He also said until the government's books were back in surplus, any new spending by a Labour-led government would come out of existing Budget provisions, new revenue, or by re-prioritising spending.
However, he said he would allow limited borrowing to allow for spending currently set to be covered by the government's SOE partial privatisation policy, which National reckons will bring in NZ$5-7 billion over the next five years.
Shearer also indicated Labour would stick with it current monetary policy stance.
It campaigned on requiring the Reserve Bank board to include members representing exporters, requiring the Reserve Bank to invervene more frequently in currency markets - it said it believed extra risk from the policy would be modest - and changing the government's Policy Targets Agreement with the Bank to require the Bank to consider the effects of monetary policy on exports.
These policy stances come after Shearer had previously indicated Labour would stick with its capital gains tax policy, but get rid of its NZ$5,000 income tax-free band. It is also widely understood Labour is to cast aside its GST off fresh fruit and vegetables policy.
'We won't borrow to boost the Cullen Fund'
Labour went into the 2011 election with a fiscal policy that would have seen the government borrow more in the short term, return to surplus in the same year as National, then run larger surpluses and pay down debt more aggressively than National, Shearer said.
"It would have meant we entered the next decade in a much stronger position than under National. But we didn’t win," he said.
"New Zealanders told us they were uncomfortable about the rate of borrowing. We have listened," he said.
"That’s why I won’t continue with Labour’s previous policy to restore contributions to the Cullen Super Fund until I think we can afford it. It wouldn’t have increased net debt because it gave us an asset that matched the liability. However, New Zealanders saw this as borrowing to invest and they didn’t like that."
Labour had campaigned on resuming contributions to the Super Fund from 2012, starting with a NZ$750 million injection and raising that to NZ$2.4 billion by 2016.
Shearer said Labour had decided that until the government was back in surplus, any new spending would have to be paid for out of existing budget provisions, new revenue, or by re-prioritising.
"However, it goes without saying that if I was leading the Government today I would allow limited borrowing rather than selling our most productive assets. That’s because the return on the assets is more than the cost of borrowing," Shearer said.
"And we’ll get to keep them for future generations. If they’re sold now, they’re gone forever. We have to be thrifty. But we also need to look at our priorities," he said.
"We’d certainly make some different decisions from the National Government when it comes to spending taxpayers’ money. I wouldn’t have spent hundreds of millions of dollars delaying agriculture’s entry into the emissions trading scheme."
That also included spending NZ$2 billion on the Puhoi to Wellsford highway.
"It would be nice to have but we simply can’t afford it right now. I wouldn’t spend NZ$12 million on foreign consultants to restructure MFAT. And I wouldn’t spend NZ$120 million on selling our state assets," Shearer said.
Because that kind of spending won’t grow our economy. What I will do is look at what the government has been ignoring – the need for bold and fundamental changes to our economy so that it benefits everyone, not just a few," he said.
'We didn't communicate our Super policy well'
Shearer said he was the first to accept that Labour last year did not signal its intentions very well with its policy to raise the eligibility age for Superannuation to 67.
"The reality is that over the next 40 years the cost of Super will double. Any government has to come up with a credible way to pay the bill," he said.
"In 40 years, we’ll have half as many workers for each retiree - 2.4 workers for each superannuitant, compared to 5.6 today. If we don’t make changes, it could cost $100 billion over 30 years. Imagine how many zero budgets we’ll be having then!
"We don’t want to end up with a government forced to choose between young and old. I don’t want to see a country divided that way," Shearer said.
"I don’t want us to deny to our children and young people the advantages and opportunities you and I had when we were young," he said.
Labour was willing to discuss the policy openly and across all political parties, "because it’s such a tough decision and deserves the widest consensus."
(Corrects first par reference to timeframe of raising Super age)
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.