Scare stories are starting to reappear about the alleged unaffordability of national superannuation.
Right-wing commentators and big business advocates want to see government spending on any welfare that goes to the people as of right slashed.
It doesn’t matter that New Zealand’s scheme is actually one of the cheapest in the advanced capitalist countries in terms of net cost as a percentage of GDP and will remain so for the foreseeable future.
The resignation of the previous Prime Minister John Key has seen the attack dogs unleashed. He had sworn never to raise the age of eligibility. His replacement Bill English promptly abandoned that policy within days of his appointment.
One of the critics of current eligibility rules is the recently appointed Retirement Commissioner Diane Maxwell. She wants an increase in the age of eligibility to 67 and an increase in the residency requirement from 10 to 25 years. This may seem a bit surprising but she came from the banking and financial services sector. She had a senior role at the BNZ at the time it was found to have deliberately avoided taxes to the tune of $645 million dollars.
It is a bit rich for tax cheat to lecture us on affordability!
She claimed the number of people on national super would double over the next 30 years and net annual cost would triple from $11 billion to $36 billion in the next 20 years.
This is completely misleading. It is using devalued 2036 dollars against 2016 dollars. The real cost can be measured more accurately as a percentage of GDP.
The current net costs of national superannuation are about 4.2% of GDP. The average for the OECD group of countries is 9%. New Zealand’s costs will reach 5.8% in 2036 and 6.1% in 2050 and 6.7% by 2060. It is affordable and will remain affordable forever.
By 2060 New Zealanders will also be producing two to three times as much per person as we do currently if current average productivity improvements continue.
The problem we have is that the benefits of that productivity increase are being captured by the wealthy elite.
Max Rashbrooke , editor of Inequality: A New Zealand crisis, calculated that “In 1986, the top 10 per cent took home 26.5 per cent of New Zealand’s income. In 1999, it was 37.8 per cent and in 2004, it was 33.2 per cent.”
Big business just wants to cut any government expenditure that isn’t going to directly subsidise their profit making activities. This has led to a slashing of the number of people receiving a benefit as a percentage of the working age population from 13% to 8 % when unemployment only fell on average from 8 to 6%.
The bosses would like to achieve similar cost cutting from old age pensions but because it is a universal entitlement it has been harder to cut without provoking a political storm. We should continue to fight to protect national superannuation. It is effective. New Zealand has one of the lowest rates of old age poverty in the world. That is a good thing and worth defending.