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 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?