The looming danger of NZs demographics

By   /   January 31, 2016  /   21 Comments

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Inconveniently there is one very large elephant in the room. The Minster of Finance chooses not see it, and does not want anyone, especially academics, drawing attention to it.

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Inconveniently there is one very large elephant in the room. The Minster of Finance chooses not see it, and does not want anyone, especially academics, drawing attention to it.

New Zealand hardly ever talks about the demographic shift we are currently experiencing. There is virtually no independent analysis of the economics of the rapidly ageing population except from the grossly underfunded Retirement Policy and Research Centre. The Retirement Commissioner is doing the statutory three yearly Review this year. Who knows about that? Where is the discussion of the terms of reference? It is now February and time is marching on.

There are clear fiscal pressures from the ageing of the population. Treasury’s long term fiscal forecasts makes that clear. But there is little sympathy in high places for using the metaphor of an inevitable silver tsunami of the growing aged population.  The Minister of Finance was reported in the NBR late last year

Despite indignant protests to the contrary, Finance Minister Bill English opined at a recent seminar that the “aging population doesn’t matter.” The statement was part of what he calls “doing stupid stuff,” which the current government wants to stop doing. “In the past five or six years,” he says, “we haven’t had to waste any time arguing, because there’s nothing you can do about [the aging population].”

 However English concluded: “There are only 2 two fiscal answers to the ageing population: pay fewer people, or pay them less, that’s it!”  

The pressures will make change inevitable and that if debate is shut down now, those changes are likely to be ad hoc and ill thought through. This has happened already in the decision to axe the KiwiSaver kick start. Where was the consultation and distributional analysis of that knee-jerk cost saving? Never mind, the baby boomers got the best of it.

New Zealand has lessons for the rest of the world in our retirement policies, some good and others not so good. The evolution of KiwiSaver as the world’s first auto-enrolment national programme continues to attract much international attention. Many New Zealanders don’t appreciate how clever NZ has been with this programme, but even so it is far from perfect.

Lets hope this year we can have a real debate. Baby boomers are currently retiring in large numbers swelling the relatively fit and well younger retired group. This cohort begins to turn 85 years from 2030 and will swell the ranks of those with marked need of health resources. We are just drifting, lulled into a dangerous complacency.

 

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About the author

Co-director retirement policy and Research Centre, CPAG management committee

21 Comments

  1. Cagey says:

    This is very much the ‘ accounting’ thinking: not future or wider implications just what’s on the balance sheets. The grey tsunami is not the only metaphoric disaster building but the great millennial rot. How can the millennials possibly be able to take the wheel when – instead of hiring them – we’re importing other countries workers? And our only solution to this grey tsunami is to get older workers to work longer by increasing the retirement age, which again shuts out the millenials. They will have to take over at some stage but we give them no opportunity.I have a few thoughts about how to solve the costs of the baby boomer blip but until this problem is looked at as only part of a bigger problem nothing will work.

    I don’t buy into that “70 is the new 50” crap – I work in age care, I am a gen x-er & I’m willing to eat my hat if it does work that way, but the elderly (and older baby boomers) have lived a far different life than those who follow them.

  2. Sam Sam says:

    Facepalm. Business school taught English nothing because he dosnt understand how smashing demand is actually bad for the economy.

    Here’s someone less retarded than the aposals of the Business Roundtable addressing the retirement age.

    “James K. Galbraith
    ACTUALLY, THE RETIREMENT AGE IS TOO HIGH

    The most dangerous conventional wisdom in the world today is the idea that with an older population, people must work longer and retire with less.

    This idea is being used to rationalize cuts in old-age benefits in numerous advanced countries — most recently in France, and soon in the United States. The cuts are disguised as increases in the minimum retirement age or as increases in the age at which full pensions will be paid.

    Such cuts have a perversely powerful logic: “We” are living longer. There are fewer workers to support each elderly person. Therefore “we” should work longer.

    But in the first place, “we” are not living longer. Wealthier elderly are; the non-wealthy not so much. Raising the retirement age cuts benefits for those who can’t wait to retire and who often won’t live long. Meanwhile, richer people with soft jobs work on: For them, it’s an easy call.

    Second, many workers retire because they can’t find jobs. They’re unemployed — or expect to become so. Extending the retirement age for them just means a longer job search, a futile waste of time and effort.

    Third, we don’t need the workers. Productivity gains and cheap imports mean that we can and do enjoy far more farm and factory goods than our forebears, with much less effort. Only a small fraction of today’s workers make things. Our problem is finding worthwhile work for people to do, not finding workers to produce the goods we consume.

    In the United States, the financial crisis has left the country with 11 million fewer jobs than Americans need now. No matter how aggressive the policy, we are not going to find 11 million new jobs soon. So common sense suggests we should make some decisions about who should have the first crack: older people, who have already worked three or four decades at hard jobs? Or younger people, many just out of school, with fresh skills and ambitions?

    The answer is obvious. Older people who would like to retire and would do so if they could afford it should get some help. The right step is to reduce, not increase, the full-benefits retirement age. As a rough cut, why not enact a three-year window during which the age for receiving full Social Security benefits would drop to 62 — providing a voluntary, one-time, grab-it-now bonus for leaving work? Let them go home! With a secure pension and medical care, they will be happier. Young people who need work will be happier. And there will also be more jobs. With pension security, older people will consume services until the end of their lives. They will become, each and every one, an employer.

    A proposal like this could transform a miserable jobs picture into a tolerable one, at a single stroke.”

    • Susan St John says:

      I agree that raising the age is not a panacea and has a raft of serious disadvantages. But where can we discuss alternatives? To some extent our policy on the age will be affected, or even determined ,by what is happening in other countries. This is especially so given the reluctance to look at the low residency requirements for NZSuper. As the age in Australia goes up to 67 and eventually to 70 how many ex pats will resettle in NZ? what a fiscal time bomb with NZ Super fully universal while the Age pension over there is income and asset-tested

      • Sam Sam says:

        If you look at not just New Zealand but the western world in general and all its problems.

        – 50% divorce rate
        – Mass under and/or unemployment
        – Crime
        – Salary
        – Health
        – Food security
        – National security
        – Retirement funds ect ect
        – Student loans
        – Loan sharing
        – Vulture capitalism

        The list is quite long. One should relies that you have been lied to by ones parents and teachers. That the values been taught are based on broken marriages, a retirement system broken and not able to sustain some one longer than 5 years (even though we seem to be living longer and longer), and worst of all sky rocketing costs of living. We all have a story about movies use to cost $5 ect ect. So our parents are patently wrong.

        The biggest issue is how we are taught by our teachers about money.

        – money is the root of all evil
        – money doesn’t grow on trees
        – money doesn’t buy you happiness

        Money can not communicate so it has no problems. We project our problems on to it.

        That’s not to say that I believe the system is so far gone it’s not worth saving. What I am saying is the ideas our parents told us as kids are incorrect. Ideas like

        – go to uni
        – get a good job

        The fact is half of all New Zealanders don’t have stable jobs and 30% of New Zealand’s youth are unemployable for one reason or another. That’s not just system failure. Some where along the lines we corrupted who we are as New Zealanders and got sucked in to mainstream medias ideals that it is beneficiaries fault or people of colour, or immigrants, and now it seems it is the teachers fault for our lost living standards.

        We are in a state of decay. Sure we spend billions repairing roads, hospitals, schools and all that. Yet health epidemics continue to rise, road fatalities seem to be at all time highs (I’m happy to be corrected on anything) and schools? Our schools can’t seem to keep themselves out of the headlines for doing really dumb stuff.

        Then government stooges roll out some statistics to explain it all away. The numbers seem to be revolving around some unknown force pushing statistical numbers in opposite directions like light passing through a black whole. For instance we have falling crime states, yet, we know that police just refuse to file a complaint.

        The black whole that is pushing these numbers in opposite directions is quite clearly debt. Not just any debt, an un describe force – of debt. Like a black whole that needs special goggles to see, finding where all the money is being sucked into requires specialised forensic accountants.

        You can’t see this money disappear so it’s not student loans, it’s not government spending, it’s nothing probably any one here is familiar with. This black whole of debt are derivatives. A derivative isn’t something just any one can trade. You need special licences and to turn it into a black whole you need an Investor securities and derivatives agreement (ISDA), that you can only get from a bank that demand you manage one and a half billion typically. Germany’s Deutsche bank is the largest holder of derivatives worth over $250 trillion (not a typo that’s 250 trillion of the worlds debt) but what makes it an un described force is the ISDA.

        ISDA allows banks to keep trillions of dodgy loans off there accounting books. By giving fund managers ISDA’s allows banks to send licence holders there debts and there clients so they can continue loading them, there clients and the rest of the world with debt, and with each sale the insiders collect a fee, a small fee of cents, but in the case of Deutsche if you do it a couple trillion times a couple cents add up. So yeah. We are being nickel and dime’d to death.

        This isn’t just make believe money the banks are gambling with. It is

        – pension money
        – life savings
        -company profits
        -people’s wages

        Totalling well over one and a half quadrillion or a fifteen thousand trillion dollars. The quadrillion derivatives trade is the black whole of death that blights the world, and costs us all our future. We have borrowed over one hundred years of future GDP growth and you guys didn’t even know.

        So what now for future growth in

        – renewables
        -good health outcomes
        – poverty prevention
        – dignity in retirement
        -a future worth living

        When we have already spent the money. With out our knowledge. The solutions are many and varied which include but is not limited to

        -A Tax on the derivatives trade
        -Universal Basic Income
        -Permaculture
        -Alternative currencies
        -political revolution
        -criminal proceedings or all of the above
        -all of the above

        My generation and generations before me have totally failed to accurately manage the affairs of our future. So it falls on the youth to go out and do what no other shmuck has done before, and look. That means not relying on the system to manage your affairs, especially in retirement. Instead of handing over your hard earned money every week to some shyster retirement fund manager you should be thinking about managing your own funds, and valuing your own time and money instead of valuing some other shyster by handing over your time and money.

        Ultimately the private sector has no solutions to the problems of the western world. Until a generation of children emerge that is less retarded than the last, we will continue to be blighted, and our future remains uncertain.

        Encourage the youth to be inclusive, to not mock ideas, and generate good ideas so they are spoiled for choice.

  3. johnt says:

    It would help if employers were less ageist. Over 50s who have been left without work have little chance of getting a new job so are reduced to digging into savings years before they actually retire. By the time they’re in their 60s they will have little if anything left in the kitty…

  4. Helena says:

    It is my opinion that when we finally get rid of the Cabal, which, until now, has controlled and in many cases poisoned EVERYTHING in our lives, the condition of all New Zealanders will improve. The Cabal is crumbling and the world is changing rapidly, This year will see financially beneficial changes in everyone’s life. Just imagine what it will be like to have the bag taken off our head and the ball and chain around our ankle removed. Hidden remedies for all ailments will be disclosed. I rather fancy we’ll have to insist on speed limits for all senior pedestrians.

  5. countryboy says:

    One or two things at a time I say.

    Firstly.
    Lets get rid of that pompous , linear thinking, fool bill english, then lets re nationalise our assets AFTER we asset strip those responsible for selling off those same assets the retiring population have already paid for, for, ya know, their retirement.

    Secondly.
    Purge Aotearoa / NZ of the foreign owned banks , close our borders and use our farmers and other agrarian enterprise types to trade our way out of this nightmare that the likes of bill, the Double Dipping Dipton Dribbler english has lured us into.
    Staring closely at the whiskers on the elephants testicles won’t allow you to see the full elephant necessarily but you might cop a lot of shit.

    We have a rich country and we should have no fear of growing older. We should have no fear of much of anything actually.

    What you high falooten intelectshuls must come to terms with is that our economy is earned by half wit farmers , too dumb to see they themselves are in fact to blame for the mess they’ve been coerced into. Aided and abetted by a bias media and a debt entombed urban population living beyond their means Dahling.

    You all can fuck with the figures all you want. You can snivel and wring your hands about this or that . But until you bite the bullet then swallow the rat that is the uncomfortable truth that our economy is driven by agriculture you will achieve NOTHING !
    The answer to the Left Wing prayer is in the economy that is owned and enslaved by the Right. What, about that, is not yet obvious to you?

    And even here. In these hallowed grounds, caves and citadels you have the very editor of The Daily Blog calling Southern people banjo playing rednecks ‘ down south’ while claiming Auckland is essential to NZ’s GDP. Martyn Bradbury is either eye wateringly naive or deeply , deep-state and working away at a level of skulduggery and Machiavellian head fuckery almost beyond imagination.

    And before you blow your tea and biscuits out over your computer screen in high indignation of my scorn of righteous Martyn Bradbury? Stop and think!
    Auckland does not earn our GDP. That shouldn’t be regarded as an attack on Auckland, it’s just a fact. And Martyn Bradbury using such language re us ( In a previous Post ) Southern people is dangerously divisive and exclusive and sets this writers alarm bells clanging.
    NZ Billionaires and millionaires worth billions and millions are not going to go quietly. More over, they know they have your money by virtue of their cunning manipulations afforded then by free tertiary educations and world class experience all bought and paid for by retiring workers.
    And ALL that NZ money has agricultural roots.

    It’s my view @ Susan St John, that you are missing the point. But it’s not just you who miss the point however. Almost all politicians are missing the point that is that our Agrarian enterprises are our money earners. Except ….

    Except…. ? Who ? C’mon ? You can do it? Which politicians do not miss that point?

    Labour ? No.
    The Green Party ? No.
    NZ First ? No.
    Alliance ? No.

    The answer is National. The National Party know full well who earns our export currency. Further more, they know that the other parties just can’t lower themselves to court the cocky. They’re far too busy sipping lattes and wearing stupid trousers as they flounce through Wellington and Auckland dahlings.

    And Sweeties, you’re in for a very rude shock if you don’t start to show some respect to your rural bro’s and ho’s. Ask any French person or Russian what happens when the elite start looking down their noses at the peasants.

  6. Mike in Auckland says:

    Are we not told that is why we need more immigration, and is that not why we have the government let in so many immigrants?

    Immigration NZ does favour the ones that score certain numbers of points, that is unless they may be “desired” business investors, or allowed in to join family and what other options there may be. Most that are allowed in on the points system tend to be young to middle aged, so that increases the population and is meant to serve as the tax paying income base to keep things rolling.

    That is of course, if it all works according to some unwritten and unspoken plan, and works out for society.

    The major challenge is that our society has become extremely divided, individualised and consumerist. People are encouraged to look at number one and your immediate family first, and to work, do business, and save for their retirement. Hence Kiwisaver was brought in.

    The old collective approach now still maintained with the guaranteed retirement income or superannuation or whatever we call it, is thus being undermined. It is possible that in future taxes may only pay a bare minimum for people to “survive”, that may be in a boarding house or rest home, if you have not managed to save and acquire your own home (“nest egg”).

    We have already a massive divide between the better off and those that are at the bottom of the income ladder. We also have retirement home companies that make a business out of selling homes, now often town houses, apartments or units in serviced or unserviced villages for the elderly.

    Many will not be able to afford a “decent” retirement with the living and especially housing costs (also high rents for those not owning) we have, certainly not in Auckland.

    Are we not being prepared for a society that exists in many other places on this planet, where you are ok if you earn, save and can afford, but are “stuffed” and will live in abject poverty if you cannot do so, or not for much of your life?

    The fair solution would be a social system, where rents are affordable, where social or state housing is offered and guaranteed to those in need, and where benefits and retirement incomes are of a decent level, so nobody needs to freeze or starve.

    I fear though, also with the mass migration from different cultures, of many who only know “dog eat dog” societies, we will have a less caring society, where some will simply be left to suffer, in isolation, and will be shut away, so as to not “bother” those that do well.

    We are at present at high speed heading right towards this, with no provisions for a u-turn.

    Hence we also have no discussion. John Key and his government are not interested, they rather leave it to the future generations to fight over. And we can already guess who will be the loser, in a “dog eat dog” future society. There is little sympathy now coming from young generations for the “baby boomers”, it will only get worse I fear, as nobody does seem to care much, apart from those who face a dire future.

  7. Mike the Lefty says:

    Previous Labour governments saw the problem as long ago as the early 70s.
    National governments still haven’t acknowledged it. Whenever there is a call to work on a cross-party policy to tackle superannuation and retirement problems National wimps out of it.
    It was a Labour led government that set up the superannuation fund known today as the Cullen fund and Kiwisaver.
    National were all ready to scrap both until Treasury officials quietly suggested to them that both policies were actually good and fiscally very prudent.
    National thrives on short term boom and bust strategies and policies. It can’t think ahead of the next three-year electoral cycle.
    Yet the myth still endures that somehow National is more financially responsible and prudent than Labour.
    History has shown repeatedly that they are not and this situation seems unlikely to change soon.

  8. CLEANGREEN says:

    At 72 I live frugally as no one can live on a superannuation today.

    Don’t be fooled, this Government are quietly screwing down the benefits to us all too, so now most cant afford dental treatments at $250 a filling and dental COSTS HAVE RISEN DRAMATICALLY SINCE NATIOAL TOOK OVER.

    If you think it’s heaven on a pension try it sometime, as with age comes more medical costs and we have to shoulder them as national are reducing all benefits there.

    Why they think baby boomers are living off the pigs back is beyond me, probably just another myth made by national’s spin doctors to make them look better and us worse?

    If national have left us alone it is because they are quietly cutting back all benefits we had and trying not to offend us for loosing their vote I guess.

    Only way out is income testing as we don’t make squat now.

  9. Generally the sensible moves in social wellbeing and safety nets have always been put in place by Labour govts both here and elsewhere in the western world. Is the Key/English combination going to be the first to smash this completely and how will today’s senior citizens cope with reduced income, or carry on working after a life of hard physical work?

  10. Helena says:

    I look forward to being able to type in I TOLD YOU SO in say six months, seven at the most.

  11. Tiger Mountain says:

    maybe the Nats are secretly planning for “retirement” as per replicants in the ’82 “Bladerunner” movie?

  12. Words says:

    Since when was a “superannuation pension” which those 65 and over are entitled to, classed as a “benefit” to be removed for exercising democratic rights?

    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11582508

    What this National government are doing is elder abuse.

  13. Mike in Auckland says:

    Watch out – the down voting trolls are out tonight. Key’s gang of saboteurs are working in overdrive, as they want to annihilate the remnants of opposition to the TPPA and Key’s aspired fourth term.

  14. Afewknowthetruth says:

    ‘Inconveniently there is one very large elephant in the room’

    If only that were true!

    There actually at least 4 very large elephants in the room very much bigger than the demographic elephant highlighted here.

    1. Abrupt Climate Change.
    2. Declining net energy.
    3. The Sixth Great Extinction Event
    4. Collapse of Ponzi economics and Ponzi finance: negative interest rates are already being imposed in a futile attempt to extend the life of ‘the system’.

    ‘The pressures will make change inevitable and that if debate is shut down now, those changes are likely to be ad hoc and ill thought through.’

    Inevitable change is already underway (e.g. the local economy is collapsing), but most people choose not to notice and refuse to become informed about anything of significance.

    It is government policy to shut down debate: the government cannot permit frank discussion about the awful predicament politicians have created. Needless to say, everything the government does is ad hoc and ill thought through. Hence, everything that matters gets made rapidly worse.

    The latest data indicate we have ONLY 13 YEARS LEFT before atmospheric CO2 breaks through 450ppm and Abrupt Climate Change renders much of the world uninhabitable.

    We will know in just 7 months whether the Arctic Sea will be ice-free this year. If it is not this year then inevitably it will be very soon. Once the ice melts, ‘all hell will break lose’.

    ‘The evolution of KiwiSaver as the world’s first auto-enrolment national programme continues to attract much international attention. Many New Zealanders don’t appreciate how clever NZ has been with this programme’

    KiwiSaver was only ever a huge confidence trick on the road to economic collapse which will be followed by extinction of the human species.

  15. Rae says:

    This article sort of touches on the dilemma that the human race is facing, or at least as long as we go on thinking as we do now, will indeed, be a dilemma.
    The planet is at peak human, we have to think very seriously about how we are going to have a future. It will be a future without growth (which in reality is population growth).
    There is this airy-fairy idea that in a few decades human population will peak somewhere around 10-11 million then it will begin to decrease. The implication is that this will happen in a peaceful, happy clappy way. Cue, Tui billboard.
    The idea of kicking this can down the road a bit further and a bit further so you don’t have to address this now, can no longer wash, it must no longer wash.
    There is much considered view that in order for all to live the rough equivalent of a European lifestyle, there is only enough resource for about 2-3 billion of us. We are 2, 3, more times that already.
    Our problem now is to figure out how we prosper without growing our population, something we have never really been able to get our heads around and the closest thing we come to in acting this out is war. We kill off a generation, then we set to re-building everything.
    If we get to 10-11 billion, I see nothing more than total catastrophe, the environment will be wrecked, most people will be dirt poor, barely able to feed themselves, forget housing.
    We are also living in an age of increasing technology and jobs being replaced by machinery. This I can see making things a lot worse if handled one way and being our saviour if handled another.
    If we carry on with the system as it is, it will be catastrophic.
    What is required is a complete rework of how we do things, we will, in future need a Universal Basic Income. But to provide a UBI ownership of the means of production is going to have to change.
    The current capitalist system in this day and age is now showing itself not to be fit for purpose any longer and under it technology is far too capable of delivering far too much to far too few.
    I don’t think I need to elaborate as to how the ownership of the means of production is going to have to change in the future. (I also put it to you that corporations have an idea that this is the case as well, and are using things like TPP and TTIP as a means to cement their positions in a changing world, but that is another story).
    If it goes to plan, the UBI would give people the freedom to pursue other things to supplement their incomes and much of it will be based on the exchange of ideas, art and music.
    People will be less fixated on accumulating stuff (that is already beginning to happen as people weary of being expected to be fodder to feed the machine) and more focused on living their lives, doing rather than having.



Authorised by Martyn Bradbury, The Editor, TheDailyBlog, 5 Victoria St East/Queen St, CBD, Auckland, New Zealand.