Seymour slams Super policies

Act MP David Seymour has slammed ‘baby boomers’ (I’m one of those) that he says will “turn our country into a debt-ridden basket case”.

The Spinoff: NZ baby boomers are building a banana republic, and no one gives a shit

The Treasury has made it clear that current superannuation policies will turn our country into a debt-ridden basket case, and yet media remain largely silent and politicians in denial. Young people need to get voting in a hurry, writes David Seymour.

You could be forgiven for missing that the Treasury published its four-yearly Long-term Fiscal Outlook this week (please, please stay with me, I promise this is worth it). The gist of the report is the same as the previous two editions:

If no policy changes are made, by 2060, when current students reach retirement age, government debt will be 206 per cent of GDP.

No matter how well you prepare for retirement, you’ll be living in a banana republic.

No, it’s unlikely to be a republic, New Zealand politicians are as reluctant to deal with ditch the monarchy as they are dealing with escalating superannuation costs.

The reason? Ageing baby boomers who will be more numerous and longer-lived in retirement than any generation before them. Right now there are four working-aged taxpayers supporting every retiree, but by the time current university students retire there will be only two.

Probably – unless eating ourselves to earlier deaths reverses the improving life expectancy trends of recent decades.

The cost of pensions and healthcare as a share of the economy will double, the government will run large deficits, and the international financial community will demand higher interest rates on New Zealand government debt, leading to larger deficits.

John Key and Bill English claim the country can afford the huge increases in costs, or they don’t care about leaving the problem for future governments.

The first way of absorbing the change is to raise taxes by about a quarter, so GST becomes nearly 20 per cent and the top tax rate goes over 40 per cent, along with every other rate being increased by the same proportion. People embarking on their careers now would pay a 25 per cent extra “boomer tax” for being born at the wrong time.

There tends to be a bit of resistance to increasing tax rates, especially by this sort of amount.

Another alternative is extreme productivity growth, the private economy grows faster than ever for longer than ever, and public services become more efficient than ever. We basically trade our way out of this situation and become so rich we can afford all-you-can-eat pensions and healthcare for retiring boomers.

This is the Key/English gamble.

The problem is that pensions are tied to income so getting wealthier just increases the amount paid out.

The final option is to adjust pension entitlements. Follow Australia, the US, UK, Germany, Canada, to name a few, who have increased the retirement age so there are more workers and fewer pension recipients.

Seymour laments the lack of media coverage of the report and the predicted problems – but people have been shouting  about Super unaffordability for a long time, but politician’s ears are deaf to it.

John Key has torpedoed the debate by saying he’d rather resign than raise the pension age, effectively saying to his supporters: choose fiscal sustainability, or me. Labour and the Greens have followed suit, abandoning the policy after the last election. New Zealand First would rather serve yum cha at their party conference than debate the issue.

Almost every political leader is holding their hands up to their ears and chanting, “la la la la la.”

Peter Dunne tried to force a re-evaluation of Super in the last term of the current Government, proposing ‘flexi-super’, but English and Key looked like having no intention of  acting on the ‘discussion document’ that was done as part of their confidence and supply agreement with United Future.

If NZ First holds the balance of power after next year’s election there is now way Winston will allow any cutting back of Super payments for his primary constituency.

National under Key’s leadership is committed to kicking the Super can down the road.

Unless ACT gets a few more seats and is in a balance of power situation and forces National to do something?

That may be what Seymour is angling at.

To have any hope of success I think that Act and Seymour will have to promote Super change (not ‘discussion’) as a core election policy, and they will have to win enough seats to be able to force Key’s hand.

If Act succeeds in the election then the choice may be National+Act with Super reform, or National+NZ First with a booming Super budget with a risk of our economy blowing up (after Winston has retired or died so he won’t care).

I think Seymour has the gumption to have a go at this. Would he get enough support? Will younger people start to vote for Act to try to sort out their not so Super prospects?

Leave a comment

30 Comments

  1. I don’t know if I would go as far as voting for Act next year (I’ll consider it along with all other options) but I would certainly do what I can to help them put Super up at the top of the election agenda. It must be addressed.

    Reply
  2. Alan Wilkinson

     /  30th November 2016

    I commented on this before. Key called the Treasury 45 year projection nonsense and he is right. End of story.

    Reply
    • I agree that Treasury predictions need to be taken with a grain of salt.

      But predictions of Super cost blow outs are soundly based and need to be addressed.

      Reply
      • Alan Wilkinson

         /  30th November 2016

        Even on Treasury’s assumptions there is no cost blow out for the next two decades. You can’t tell me tweaking the retirement age now is going to make a blind bit of difference to the options in 20 years time. I never heard so much b.s.

        Reply
        • If the age of eligibility for Super (it’s not a retirement age, we don’t have one) went from 65 to 70 it would have to make a significant difference in 20 years time.

          Reply
          • Alan Wilkinson

             /  30th November 2016

            It’s a one off change and benefit to the annual cost that can be made at any time necessary. It will make no difference to the cost in 2035 whether it is done now or then so long as we balance the budget until then.

            Reply
            • Blazer

               /  30th November 2016

              that arguement can be made for any area of govt expenditure,and it relies on current economic conditions which can and do alter .

            • Alan Wilkinson

               /  30th November 2016

              So what? Every business has to keep its expenditure in line with its income. Government is no different. That economic conditions are continuously changeable is why Treasury’s paper is a meaningless waste of time and effort. As Key said, it can’t predict the next 45 months let alone 45 years.

            • Blazer

               /  30th November 2016

              So what useful purpose does treasury perform then.And btw the govt is different from a business despite the right wing narrative.

            • Alan Wilkinson

               /  30th November 2016

              Govt is only different because it has slaves.

              Current Treasury is not very competent.

  3. David

     /  30th November 2016

    How treasury allowed such a stupid report to be released is beyond comprehension. NZ super is perfectly affordable if you run the country properly and at its peak its cost is 8% of GDP which most western countries have already surpassed.
    Why NZ is well placed on current settings is the scheme is exceptionally simple and cheap to run and Roger Douglas and Ruth Richardson sensibly got rid of gold plated super schemes for government employees which is a cost that is hammering other countries and councils.
    I do like Dunnes idea though and eventually the super age will rise probably when Winston retires or Labour next get elected and buggars the fiscal position again.

    Reply
    • Blazer

       /  30th November 2016

      Labour have a far superior record to National as far as fiscal matters go.You only need to look at the last 20 years.Nats=deficit,Lab=surplus.The Nats are great at making excuses however.

      Reply
      • David

         /  30th November 2016

        Really, so when National took over in 1990 Labour left everything in great fiscal order and Cullen didnt leave a deficit and a forecast of decades of them to look forward too.
        Labour were lucky to be in power during the boom times of the 80s and the boom time of the 2000s, timing dear boy, timing.

        Reply
        • Blazer

           /  30th November 2016

          typical…Labour were ‘lucky’ and National were ‘unlucky’….English inherited 8 bil in govt debt,has managed to increase that to about 120 bil….dear…chap!

          Reply
          • PDB

             /  30th November 2016

            Don’t know about ‘lucky’ but generally the New Zealand public have voted in a National govt when the economy needs a steady hand rather than the tax and spend the left promote.

            Reply
            • Blazer

               /  30th November 2016

              is that the much vaunted ‘safe pair ‘ of hands?Didn’t think much of Muldoons,Shipley/Richardsons!Btw hindsight speculation is …worthless.The present govt governs day to day,this we know because they have no confidence in….projections/predictions….right!

      • PDB

         /  30th November 2016

        In the early to mid 2000’s even the Green Party could have made a surplus it was that easy – even then Labour spent too much money and left the incoming National govt with much to fix. To compare those boom years for the world economy to the post-GFC/earthquake period is just being very silly.

        Reply
  4. In fact the scene was set by Labour’s misuse of the Public Service as a means to hide unemployment and the size of the Public Service ballooned to unsustainable levels. In addition they enlarged the social welfare burden to unacceptable levels that could not be sustained as the public soon discovered and threw them out. That left National to slowly but carefully winding back the public service numbers to sustainable levels, and the same is happening with the Welfare services that are being restructured into sustainable levels. Having to deal with the Global Fiscal Crisis of 2008 and the Christchurch Earthquake recovery (on going), the National Government has been able to bring back its expenditure into balance and is reducing Government debt. However, the “Gimme now” generation is plunging our country into a huge debt burden by running the highest levels of Private Debt we have ever seen. The Australian banks continued borrowing foreign currency to sustain an out of control housing sector and providing loans to farmers hit by drought and dodgy manipulation of trade barriers is not helping the country. Maybe they should be looking to encouraging more domestic investment by raising interest rates using at least half of the profits they are repatriating to Australia, this would help take pressure off senior citizens hit by low or no inflation and higher fuel and energy (electricity) costs as well as rates being raised to unsustainable levels.

    Reply
  5. Blazer

     /  30th November 2016

    this is where you go off course…

    ‘However, the “Gimme now” generation is plunging our country into a huge debt burden by running the highest levels of Private Debt we have ever seen. The Australian banks continued borrowing foreign currency to sustain an out of control housing sector and providing loans to farmers hit by drought and dodgy manipulation of trade barriers is not helping the country. Maybe they should be looking to encouraging more domestic investment by raising interest rates using at least half of the profits they are repatriating to Australia, this would help take pressure off senior citizens hit by low or no inflation and higher fuel and energy (electricity) costs as well as rates being raised to unsustainable levels.’….it is not the ‘gimme now generation’…spending=growth,debt=asset in the neo liberal world and are encouraged.Housing speculation is the culprit as it is not a productive utilisation of capital.The banks fractional reserve system means they create ‘money’=debt=asset on their books and continue on their irresponsible way.Saving is discouraged in NZ.

    Reply
    • as part of the gimme now generation, I want retirement pushed back to 68 ASAP, and a return of a top tax bracket nearer 40% including trusts.. and a CGT on houses not occupied by the owner….

      My pet hate is 50+ folk saying they have paid their fair share of taxes for retirement, if everyone was paying their fair share, and werent voting with their wallets, the cullen/super funds would be enormous by now.

      Reply
      • Kitty Catkin

         /  30th November 2016

        People who say that they have paid their retirement money are talking nonsense, they can’t have unless they’ve been earning a massive income all through their working life. Ordinary workers can’t possibly have, as they forget that their taxes have gone on roading, education, health…people of all ages feel entitled, of course. There was a woman in her 90s who was on the news when her cleaner was no longer being paid for and she claimed that she couldn’t afford to pay for the 1 1/2 hours herself. I found this hard to believe-don’t her family make any contribution at all ? Other old people I know pay their cleaners themselves.

        I can honestly say that I DON’T feel entitled-my health costs alone must have cost the unlucky taxpayer who knows how much in subsidies. Living with someone who was very involved with politics was a real revelation !

        Reply
      • Alan Wilkinson

         /  30th November 2016

        @Shane, as soon as you lot cough up the student loans you owe there’ll be plenty of money for super.

        Reply
      • PDB

         /  30th November 2016

        Shane: “and a return of a top tax bracket nearer 40% including trusts”

        That’ll work – not. There were very good reasons to lower tax rates when the GFC set in, the same one’s that have meant New Zealand has recovered far quicker than the majority of countries. Labour, if they remained in power post-2008, would have tried to tax their way to prosperity and would have failed the country miserably.

        “I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” Winston Churchill.

        The problem isn’t people at the top ‘paying their fair share’ (statistically they do, and more) it’s the growing cost of the welfare state, student loan debt etc, that the taxpayer is lumped with.

        Further reading: http://www.forbes.com/sites/thomasdelbeccaro/2016/09/27/no-hillary-its-impossible-for-tax-cuts-to-cause-a-downturn/#7c175f3f1423

        Reply
        • Blazer

           /  30th November 2016

          ‘There were very good reasons to lower tax rates when the GFC set in, the same one’s that have meant New Zealand has recovered far quicker than the majority of countries.’….and they were what …exactly?

          Reply
          • PDB

             /  30th November 2016

            Considering you have difficulties in seeing the difference between 2% and 50% of Chinese buyers of Auckland homes I’m afraid any detailed explanation would be wasted on you…..maybe you could go and talk to Zedd instead?

            Reply
            • Blazer

               /  30th November 2016

              you should be embarrassed by being such an empty vessel …..never any substance.

            • Blazer

               /  1st December 2016

              ‘ I’m afraid any detailed explanation would be wasted on you…..’…well just for everyone elses benefit ..provide one…you can’t though ..can you?

      • Shane and Kitty. I started paying 1 shilling and sixpence for social services, back when we had pounds and recall the family celebrating the rise in my fathers pay to two thousand pounds per annum. Mum got her first washing machine thoughI still had to chop the wood on Sundays to fire up the copper. These days I drive slowly around parts of New Zealand and silently thank my predecessors for their foresight and contributions towards building the roads and bridges that allow me to travel on bitumen roads instead of dirt and gravel. Ialso enjoy being able to drink water from the tap, a luxury I never had in any of the 20 plus countries I eventually lived in (including Australia!). And you disparage those who paid for it all (capital cost) and you be moan those of us over 50 who remind you of the sacrifices made in the past. Sorry I am part of your pet hate, but you obviously believe these sorts of things are created by a sort of magic. Life is not like that, so suss up to paying your share.

        Reply
        • Gezza

           /  30th November 2016

          Come to think of it … who built all those roads and bridges?

          Reply
          • I know Jack Brown built a number of the bridges over the Maungamukas and it was mainly Maori labourers with Pakeha supervisors who upgraded the roads. Most of the plant drivers and truckies were 2nd World War veterans either RNZASC or RNZE veterans. The US Engineers had a hand in a lot of construction as well, but Kiwi pride stopped them building real roads for the Wellington region. Ministry of Works NZ did a huge amount of the work during the Depression and after WW2. Hard yakker, but rewarding – built by the sweat of their brows.

            Reply

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