Much has been written and spoken about the proposed New Zealand Superannuation Bill currently before Parliament.
Unfortunately, there has also been a lot of disinformation and shallow analysis of a scheme which is far from perfect. It is tragic that much of the talk has been with the purpose of scoring cheap political points.
The truth is that this is too important to New Zealand to be treated in such a cynical manner.
New Zealand for some time now has been unable to finance what was once the legitimate expectations of its people in health, education, retirement and personal as well as national security. Lack of national savings has dramatically contributed to New Zealand's current economic and social predicament.
Savings are the source of both retirement funds, and of the capital necessary for economic and social advancement. Last year New Zealand adults averaged savings of $270 each or $800 million in total - less than 1% of GDP. Even worse was the fact that much of that was not long-term savings.
Every year savings are dwarfed by the growth of debt and credit- both internally and overseas. That is unsustainable for individual New Zealanders, and it is unsustainable for New Zealand's macro-economy over the long run. It is the same for an economy as it is for a household- if you put everything on the plastic, sooner or later you have to pay it back.
There is no doubt that if New Zealanders increased their level of domestic savings, then the current account deficit would be dramatically reduced. One of the reasons we have a current account deficit is the amount of profits going offshore to foreign owned companies operating in New Zealand.
The lack of any long-term savings strategy makes it critical that this issue be treated with extreme urgency by all political parties, and not simply as a triennial political football.
MMP means the public expect politicians and political parties to put their own agendas to one side and, reach common ground on issues of national importance. The fund created should be established and administered by an independent statutory authority and it should be free from political tampering.
The authority will make decisions about the investment of pension funds, and gradually build up the strong savings base that New Zealand desperately needs to reduce its dependence on foreign money.
Until our capital requirements are met, and our dependence on overseas investment is dramatically reduced, these pension funds should be invested in this country to create more exports, more growth and more jobs. And the only certain way to keep the hands of future governments off this money is to create the fund in individuals' names. Individuals would then have incentives to save for their own retirement.
Sadly we have not seen as much rational debate, as the public is entitled to.
The Greens, National and Act all are opposed to starting a retirement fund - a position which defies explanation - a destructive political game that the public have had to put up with for 26 years on this issue.
Besides which, what is National's super policy? We know a lot about what they’re against; but they don’t tell us what they are for.
MMP requires parties meeting constructively over key issues and that is exactly what Labour and New Zealand First have done over the superannuation issue. But having spit the dummy over this issue the Greens now seem to resent Labour consulting with anyone else to try and seek agreement. Well you can't have it both ways!
Unlike the Greens New Zealand First is not a political doormat. New Zealand First never approached policy from a presumed position of weakness.
But perhaps the most shameful display is from the ACT party.
Here is a party which previously supported a superannuation fund.
- Their founder Roger Douglas wrote a book about it.
- They fought two elections in support of a superannuation fund.
But when they thought that there might be some headlines in it they changed their minds and now suddenly they think it's a bad idea.
We support the Bill because, although very imperfect, it has always been New Zealand First policy to have a dedicated personalised superannuation scheme. We are unique in that we are the only party in Parliament that has not changed its policy in this regard.
There are micro economic and macro economic reasons to support the Bill, and there are also very important social reasons as well.
Under the present retirement system, those in the workforce need to provide not only for themselves and their families, but also - through their taxes - for New Zealand Superannuation for those who have already retired.
Under the current system there is no guarantee of the age of entitlement to a superannuation income. Over the last few years we have seen the age of entitlement increase. We have seen surtaxes introduced and then removed. We have seen the rate of entitlement reduced itself. We do not think that this is fair- it doesn't give confidence in the future for present baby boomers.
In 1998 the National Party took a beating when it cut the rate of superannuation. Not just retired people but many New Zealanders were outraged by their actions.
Under the changes that we propose to the New Zealand Superannuation Bill a family or individual will not lose their entitlement if someone dies before retirement age. And we do not agree with the suggestion that the individualisation of accounts is somehow unfair.
It is in fact fairer for women, Maori and Polynesians and low income earners than the present scheme. Right now if you die before retirement you get nothing for your taxes paid for that purpose over the years.
Many people, we now describe as pensioners, worked and raised their families during a time when there was an established social contract between the State and the individual. That social contract in recent years has been reduced to tatters.
We also believe that the scheme is best for the New Zealand economy as a whole.
As a nation we are $108 billion in the red. Up from $16.2 billion in 1984 - and growing $33 for every New Zealander each week.
We have an imbalance of payments crisis because we import more than we export. It is an intractable crisis for which there must be an answer. Today we are almost totally dependent on foreign money for investment.
Some opposed to this scheme say that it will increase borrowing. It will not; the national accounts will actually improve over the medium and long term- that is an empirical fact, when people save then our national indebtedness will decrease. There will be less pressure to increase taxes. You won’t hear Mr English say that.
It bears remembering that in 1975 the Labour Party passed the New Zealand Superannuation Act, which was a compulsory savings scheme in the name of individuals who had saved. The scheme was never given a fair chance. How different today would New Zealand be if we had continued with that scheme and made improvements to it?
In 1997, as an initiative from New Zealand First, the surtax was repealed from 1 April 1998 and we proposed a referendum on a long-term savings strategy. There was an immediate stampede by politicians to politicise the issue.
New Zealanders voted down the referendum, but the problem remained.
That is why personalised accounts, like Prime Minister Kirk's scheme are critical.
One of the biggest flaws in the rhetoric of those who do not support the scheme is they say that the scheme would "gamble" with funds. They make it sound as if we intend to take the money to Las Vegas.
This makes for cheap 3 second sound-bites, but it is simply not the case. It is not the way that investment works, and it is not the way that retirement schemes are run anywhere in the world.
Right now retirement savings schemes make up the largest share of outright investment capital in the world economy. That is a fact. The stockmarket, property market, and futures market are at this moment held together by retirement savings schemes. That is how the world economy runs, and is why fund managers are conservative in their investment portfolios. And I do not see the world economy being gambled away.
Recently the New Zealand Council of Social Services in their submission to the McLeod Committee, reviewing the tax system, argued for a reduction of GST to 10% on food, power and local public transport - ostensibly to support lower income working families battling current food inflation at its highest for ten years.
That submission runs headlong into the Government's superannuation plan of building fiscal surpluses now to fund superannuation demands later.
What the Council is arguing against is charging today's low incomed to build tomorrow's superannuation payments. They want re-distribution of income now.
The Government argues that unless there is a savings pool now, to be drawn on later, policy alternatives fiscally will include slower growth in super payments, a real rise in taxation or a budget blow out - or a mixture of all of the above.
Under such a scheme the total stock of capital will rise significantly and the liquidity of that stock will fall. Long term infrastructural and futures investment will increase as this money comes into the capital market. That is also an empirical fact.
This will in turn make this country's balance sheet more attractive and more secure for investment.
That stock of wealth will not be able to be misused by inefficient government programmes- it will be in the capital market where it can do the most good.
The Greens have shown their true colours on this issue- they are opposed to the scheme because they are socialists- like a watermelon, they are green on the outside and deepest red on the inside. They do not believe in the capitalist system.
But the media seem to have conveniently overlooked this fact because the Greens are their latest fad. The Greens have had a very easy run lately- they have enjoyed all the baubles of office, with none of the accountability. None of their figures have to add up because they have never been in government.
I would urge you to take a good honest look at what they are proposing instead of the super-fund and who is talking the most sense. I am absolutely-positively certain you will find that their figures don't add up. In fact most of the time they don't even bother with figures.
Their so-called plans require creating full employment, stronger communities, preventative health and combating climate change. In other words, if anyone is ever sick, is ever out of work, and if it ever rains their scheme won’t work.
What would they in fact do?
One or all of the following:
- They would have to raise taxes progressively and regularly.
- They would have to print money at enormous rates and bankrupt the currency.
- Heavily borrow from either overseas or domestically.
- Cut rates for superannuation to below 50% of the average wage.
In short, they have no alternative that is feasible. But the media has been woeful in giving the Greens any critical evaluation.
There are strong demographic reasons for this scheme.
In a strange way, we can find someone to blame for getting us into this position.
The world would be a very different place if the second world war hadn't broken out. We would not have had our men killed, and we would not have had the largest population boom in history after the war. In an odd way we could say that it's Hitler's fault.
Those who were born in the 1940s, 50s and 60s, are now getting older. We will require more health care. We will require retirement income at almost the same time, and because of medical science we will be retired longer than any previous generation because we will live longer.
New Zealanders are also living longer and having fewer children. As a greater percentage of the population retires, the ratio of workers to retired people will grow smaller and smaller. That is a fact. Someone please tell Mr English.
Later this century it will be harder to provide an adequate retirement income from taxation.
Today, just under 12 %, or one in every eight New Zealanders, is aged 65 years and over. In 50 years time around 25% of New Zealanders will be 65 year and over - one in four people.
To put this another way:
There are today around 5 people of working age for each person over 65 years. By the middle of the next century there will be just over two people of working age per retiree.
Today Superannuation takes just about 4% of GDP. By the year 2050, it will take over 9%.
In short, there will be less and less workers paying more and more taxes for a greater number of retired people. That is an indisputable fact.
It could be argued, in obtuse terms, that we can still afford to fund superannuation. But there are far too many 'ifs'. I want to put certainty back into retirement and into investment.
Remember there are only three ways of paying for super given the changes in this country's population dynamics:
- You can either cut the amount raise taxes to very high levels in the future when the current baby-boom generation retire, which is what the Greens want, but aren't telling you.
- You can drastically cut the rate of payment for retirement, which National want, but won't tell you, or,
- You can save the money now and have security in the knowledge that the fund is available
All of which is a political question. New Zealand First wants the question of retirement out of the hands of politicians, and taken away from the fashionable whims of Wellington.
We want to eliminate those options for government and put the control of retirement back into the hands of those who are least likely to waste it- the people.
As the American Humourist PJ O'Rourke said: " Giving money to politicians is like giving liquor and car-keys to teenage boys."
New Zealanders need to take responsibility for their retirement and their future and save and invest wisely.
That is why I am supporting the Superfund. It is not perfect. But it is much better than nothing and can in time be perfected along the lines of internationally successful retirement schemes.
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