Unaffordability of NZ Super looming disaster
THE accepted wisdom concerning New Zealand Superannuation is that it will become unsustainable if nothing is done to make it more affordable. I agree. But what the acceptably wise believe needs to be done, and what actually needs to be done, are two very different things.
There is no institution more acceptably wise than the New Zealand Treasury — and its prescription for NZ Super is harsh. Not only does it favour the age of eligibility being pushed out beyond 65, but it also wants that to happen a lot sooner than 2040.
And that’s by no means all. To rein in the longterm cost of the scheme, Treasury also favours changing the way NZ Super payments are calculated.
As is so often the case with Treasury, however, there is more to these gnomic prognostications than meets the eye.
In politicaleconomic terms, Treasury is as dry as the Atacama Desert. As both the fountainhead and champion of neoliberalism in New Zealand, it operates according to a remorseless set of rightwing ideological assumptions. None of these are compatible with the principle of universal entitlement which lies at the heart of the NZ Superannuation scheme, as configured at present.
Indeed, Treasury’s recommendations have very little to do with NZ Superannuation, per se. Rather, they are based on what it considers to be an ‘‘acceptable’’ level of longterm government debt. This it has set at 20% of GDP.
Possible policy pathways to this ideologically arrivedat figure include: quietly enhancing the revenuegathering effects of fiscal drag; increasing the rate of GST; and significantly reducing government spending on health.
It’s easy to see why the Prime Minister chose the option of ‘‘reforming’’ superannuation!
Equally easy to see is Bill English’s determination to lead an ‘‘austerity government’’. Reducing longterm Crown indebtedness to 20% of GDP is simply not achievable without savage cuts in public spending.
The biggest public spenders, by far, NZ Superannuation, Social Welfare, Health and Education, will be first to feel Mr English’s austerity lash. If the Nationalled Government is returned for a fourth term, then New Zealanders should brace themselves for the same sort of harrowing headlines currently besetting the UK and Europe.
None of the Right’s nostrums, however, adequately addresses the devastating impact which the rising trend of young people renting, rather than owning, their dwellingplaces is bound to have on the affordability of NZ Superannuation.
The key assumption of the present scheme’s defenders is that a very large proportion of New Zealanders aged 65 and over will continue to enjoy freehold possession of their own home. NZ Super simply isn’t configured to provide an income large enough to cover not only the over65s’ basic living expenses, but their accommodation costs as well.
Those Generation Xers who airily opine that ‘‘superannuation probably won’t be there for me’’, really need to think this through. Are they truly that confident of their ability to save a capital sum large enough to carry them through their old age unaided by the state? And if not, how do they see themselves surviving on a pension currently set at a figure well below their weekly accommodation costs?
A Treasury less obsessed with leading us further into the arid wilderness of free market economics would already be grappling with this looming social disaster. A government genuinely concerned with the future welfare of its younger citizens would be demanding answers — right here, right now.
Politicians of the Left, in particular, should be looking at the interlinkages between housing unaffordability and the increasingly insupportable burden NZ Super is predicted to become in 3040 years’ time.
This is not a babyboomer crisis: it is a crisis which, if a radical revision of New Zealand’s entire system of economic management is not undertaken more or less immediately, is going to engulf the boomers’ children and grandchildren.
The redesign of our welfare state must begin now, not on the basis of meeting the arbitrarily determined targets of ideologically driven fanatics but on the basis of meeting the measurable and predictable needs of the entire population. Everything must be thrown into the mix: taxation policy, housing policy, health policy, education policy and, most importantly, how to guarantee a living income to young and old alike.
The alternative to systemic change is systemic collapse, and old age becoming, once again, a looming spectre of misery, loneliness and despair.