We need to ask:
My view is that over time it would change the negative attitudes and perceptions of more than one million New Zealanders into positive attitudes and perceptions of New Zealand and their role in it.
In addition, the majority of the 400,000 New Zealanders of working age not currently employed and their families costing working New Zealanders well over $12 billion a year ($6,000 a year for each working person) would become contributing members of society.
Only ACT is free enough in its thought process to do it. I say let's do it - I know there is debate within the Parliamentary party about the merits of such a proposal - I understand the economic arguments made by some, but given where New Zealand is today, the social and economic advantages of such a proposal far outweigh any negative aspects. The following facts remain relevant:
One million New Zealanders who have no savings could retire, in time, with $500,000 plus.
The social benefits flowing from this fact in terms of lower crime and the way people behave and feel about themselves would be enormous.
These benefits, on their own are huge, and merit making the changes suggested for their own sake, but of even more importance is the fact that they hold the key to successfully changing the negative incentives of New Zealand's current welfare system.
What then do we do to bring these changes about?
1. We finance the current and future cost of superannuation out of the forecast surplus and Government contingency allowance. That is forecast to be $5.5 billion in 2004. To the extent this is not available, we do it from new income and expenditure savings as follows:
2. This would then allow us to allocate the present cost of superannuation among the 2 million New Zealanders between the age of 18 and 60 (ie: $2500 each).
$2500 saved for 47 (number of working years between 18-65) at 6% real = $665,000 available in retirement. This amount would increase over time as current retirees start to meet some of the costs of their own retirement. This would result in individual savings per year rising from $2,500 to well over $3,000.
3. Having solved the superannuation issue we could move to choice in health and welfare by way of a 100% tax rebates (or tax reduction) for those aged 18+.
4. From their superannuation/welfare account, New Zealanders would be required to take out private insurance to cover sickness, unemployment, ACC and health problems of a catastrophic nature.
5. They would self-insure for minor costs e.g. day to day health costs and short-term periods off work for sickness, accidents or unemployment, self-insurance would start at 2 weeks a year and moving to 26 weeks over 12 years.
6. Government would become insurer of last resort i.e. where an individual could not get cover.
This is an edited extract from Sir Roger Douglas's speech to the Act party conference in Christchurch.
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