Was that a state of the nation speech or just a badly written National Party political broadcast?

Luxon’s speech this week chose to ignore the current pressing realities of the nation.  These include rampant homelessness, chronic unemployment and underemployment, more long term seriously injured, more mentally unwell and in jail, a meth scourge, overwhelm at foodbanks, and charities under pressure like they have never experienced before. He did not own his failed policies that have increased the depth and duration of this miserable recession and thus have enlarged rather than reduced the deficit he pledged to solve. 

Coming out of the Covid years many of the young are anxious and depressed. Our suicide rate is scandalous. Many I see have lost their ‘joi de vivre’, haunted by a fragile and narrow labour market that offers few opportunities even if they get qualifications, their student debt overhang, the shadow of dramatic climate change and global instability. Surely it would have been appropriate for some narrative from Luxon about the vital and intrinsic worth of the young (especially to society that’s aging) with a government commitment to ensure they will be supported to realise their potential. 

Then there is the hollowing out of the economy as we lose many of the brightest to Australia and beyond: The loss of New Zealand food sources and institutional know how; and the pursuit of export growth so we can import more consumer rubbish to enjoy briefly before it is sent on to the overfull tip. We see the degradation of the environment, polluted waterways, sealife and seabeds plundered, the flagrant use of ever more fossil fuels as the planet burns. Surely at least some of this might not escape a ‘leader’s’ attention as he ponders the state of the nation?

Instead Luxon chose to make his election promise of ‘KiwiSaver changes’ the centrepiece of his state of the national address. Perhaps this is how National does long-term thinking? Announce a policy that forces the private sector to save more?  In his misguided view of economics, more savings will actually materialise, and that somehow those savings will magically result in the kind of investment needed to make that darn uncooperative economy grow.

Let’s be clear, National’s first election policy announced last year on KiwiSaver has nothing to do with the state of the nation right now. If this is the best he can offer the nation, we may as well turn off the lights. 

He wants to support financial security by:

gradually increase employer and employee contributions over time, rising to 6% each by 2032, and a combined contribution of 12%, matching Australia.

But does he know about Australia’s system?  Will  he match that country’s tax incentives for superannuation.  Or, is this a Trojan horse for doing what National have wanted to do all along- take the pressure off NZ Superannuation by means-testing it like the Australians do? 

Does he know that an Australian means test is based on joint marital income and assets and is very comprehensive, intrusive  and complex? 

In reality, Luzon’s plan is not about increased financial security for you and me, his plan is to shift the risks of pension provision away from government and onto workers. That is achieved by offsetting a person’s larger KiwiSaver against their NZ Super entitlement.  

The next statement also tells us what is coming sooner than we think, regardless of advice from the Retirement Commission and others

… to support New Zealanders’ financial security, against a backdrop of an aging society and an inevitable lift in the retirement age.

New Zealanders will have to both save more and work longer regardless of health or circumstance.  That’s already decided. 

The second reason he is so keen on his KiwiSaver plan is

 to establish a spine of national capital, sheltered from the winds of financial and political change offshore, and available to invest in the businesses and infrastructure here at home that we will need to become richer as a society.

How does that work when KiwiSaver is largely invested in paper assets (shares) of other countries? Is he seriously considering commandeering private KiwiSaver contributions and forcing their investment in hospitals pipes and roads. If so, what return will be paid to a private KiwiSaver? How is that cheaper than state borrowing? Won’t KiwiSaver have to be compulsory? Ironically, doesn’t all this state control invite John Keys famous  barb that it is just ‘communism by stealth’?

And third, to improve the returns from work and make New Zealand a more attractive place to build a career and raise a family, by closing the gap with Australia on superannuation contributions.

Oh dear. This is closing the gap by making us even poorer through the forced 12% saving. Employers don’t have a magic money tree: after waiting so long for the elusive recovery, gross wages are doomed to grow much more slowly. All the while, those trying to raise a family on a limited wage face unaffordable housing and a punitive tax regime including 15% GST on everything. Is Luxon planning to ‘close the gap’ by reducing GST to the Australian 10% while taking it off the basics as they do. Will he also introduce a zero tax band like OZ does for the first $18,000 earned? 

Completely absent is any acknowledgment of the devastating impact of very high effective marginal tax rates on middle income families:   Why would a family earn more to help achieve Luxon’s cherished economic growth if it makes them little or no better off.

Luxon has made this problem worse in fact. While this year (1April) there will be a slight improvement in the Working for Families (WFF) threshold income it is to be offset by an even higher rate of clawback of 27.5%. This reduces incentives yet more and creates more crippling debt to Inland Revenue.

The threshold for repayment of student loans is frozen at an absurdly low income- imposing an extra effective 12% tax on all income over just $24,128 per annum. It is much higher at $67,000 in Australia). What about matching that Luxon?

Let’s talk about the family who earns the new WFF threshold of $44,900 but can’t survive financially.  Let’s say the wage earner tries to get ahead with a second job and earns an extra $10,000. That will be taxed at 17.5%, ACC 1.6%, student loans repayment 12%, KiwiSaver, 3%, repayment WFF 27.5% and possible 25% loss of the accommodation supplement or increase in income related rent –a tax of 86.6% leaving $1340 in the hand. If in desperation they earn another $10,000, their extra gross income pushes them into the next tax bracket of 30% and their EMTR rises to 100%. There is nothing to show for their efforts. Does Luxon understand this issue?

Now imagine the EMTR for a self-employed person or contractor who must find 12% themselves under Luxon’s plans. If KiwiSaver remains voluntary and unsubsidised- most low-income people will not be able to afford to be in it- so forcing them via compulsion is the only way. Is this how he intends matching  the Australian way?  

We have announced these changes early, so employers and employees have plenty of time to prepare, but over time we expect they will lead to much larger retirement balances.

Oh good, plenty of time to prepare to go to Australia.  Luxon’s examples below are ludicrous, pie in the sky, they ignore gender issues and grossly overstate the likely outcomes for most of the population

For a 21-year-old earning $65,000, and making default contributions in line with the changes already delivered at this year’s Budget, they could expect to retire with around $1 million in their KiwiSaver account by the time they turn 65.

Following National’s proposed changes, that same individual could expect their KiwiSaver balance to be around $400,000 larger – or around $1.4 million in total – assuming they increase their contributions to the planned higher default rates over time.

Luxon finishes with a triumphant election flourish— The magical retirement balance of $1.4 million is only if you elect National. 

That’s a big change, it’s critical to our plan to build the future, and it will only happen with a National Government after this year’s election.

If that is how he plans to build the future and threatens ‘only with National’ as if there is no alternative, we are locked into a visionless, aimless, more divided backwater.