Why Labour and National are both Super-wrong
There is wide divergence between National and Labour over New Zealand Superannuation. National is committed to raising the age of eligibility from 65 to 67 from 2037 while Labour believes simply growing the economy will ensure NZS’s sustainability in its present form. Both arguments are totally flawed.
Achieving rich-nation status (very high per capita income) by 2050 is our best option rather than raising the qualifying age or simply relying on economic growth to solve the problem. That goal will only be achieved by a solid, bi-partisan commitment to an economic development strategy to vastly increase our productive sector. New Zealand will only prosper as an export powerhouse. In other words, think big and plug into the world.
The striking feature of all the tiny, highincome nations is the sheer immensity of their productive sectors compared to ours. They are all super-exporters. Hence their very high living standards. They can afford the best of everything; world-class healthcare, education and social safety nets. We cannot. New Zealand, despite its enormous potential, remains a low wage, cash-strapped agricultural nation in relative economic decline and societal disintegration.
New Zealand Superannuation (NZS) will always be sustainable, even in reduced form. The real issue is the standard of living NZS will provide in the future, particularly around 2050, the peak of the demographic bulge. Will future retirees enjoy a comfortable retirement? That will entirely depend on our future living standards.
New Zealand’s living standards in 2050 will be determined by our national income (GDP or economy) and the number of people sharing the national income. For example, the projected $40 billion gross cost (net cost around $35 billion) of NZS by 2050 would be small change for a nation of five million with a $500 billion economy.
There is absolutely no prospect of New Zealand ever achieving rich-nation status under the present economic and social policy setting. A combination of low economic growth and strong population growth fuelled by immigration cancels out all future prospect of higher living standards.
High economic growth requires high domestic savings productively invested, chiefly in high-return export industries, research and development (R&D ) and infrastructure (for the resident population). For example, through R&D it is imperative we develop entirely new areas of dynamic comparative advantage; dairying and tourism will never make us rich.
There is no easy route to rich-nation status. Economic development is a hard business; it is not an effortless, exhilarating climb from achievement to achievement. Development takes time and is invariably incremental and uneven. For example, with a development strategy for New Zealand, progress might initially occur across a broad front then become restricted to a few narrow salients and only with renewed effort could further advance be achieved toward the stated goal: New Zealand’s transformation from a low-wage to a high-income nation.
Successful transformational development requires the sustained, determined and energetic support and guidance of strong government — the developmental state — or the very antithesis of the neoliberal ideal of small government and the conviction that unregulated, untrammelled market forces are inherently conducive to prosperity.
The specific components of an effective transformational development strategy would include a permanent immigration stop, national savings mobilisation and the channelling of those savings directly to the productive sector, vastly increased R&D expenditure and a frontal assault on inequality through tax relief for low-income workers and national service to build strong social cohesion, community and an unassailable sense of national purpose without which no national development strategy can ever succeed.
An entirely new, comprehensive and readily accessible set of economic metrics to gauge our progress along this new axis of economic advance would be critical; an informed, broadly supportive public is foundational to the success of any economic development strategy.
A stable population and a doubling of our national income by 2050 would put us right up there with Singapore and the Nordic nations. As one of the cleanest, safest and richest nations on the planet, all New Zealanders could be assured a secure and very comfortable retirement.