The reality is that there is no political consensus around establishing such a fund. While the Government may be able to claim mandates on all sorts of things, this isn’t one of them. Only one party, Labour, went to the country on a platform of trying to pre-fund future superannuation. To convince Labour’s allies will be hard enough, let alone an Opposition that is deeply sceptical about whether the country can save its way out of a demographic phenomenon – and even more sceptical about the wisdom of entrusting a government fund with billions of dollars.
Michael Cullen was probably pleasantly surprised by the editorial comment his plans attracted. But much of it was of the 'better to do something than nothing' variety. In reality, there has to be a cross party consensus if 'something' is to be done, and there isn’t one on a super fund.
A more modest approach might yield a more fruitful outcome. It’s interesting to note that both the Alliance and National are firmly committed to some sort of Accord process – if only to get the facts out in the open and regular, independent reviews bedded down. Jim Anderton has always had a constructive approach to this issue.
Even more interesting is the fact that both parties see considerable advantages in the simplicity of a universal, taxpayer-funded pension. It has been overlooked by all commentators that National’s 1990 policy committed National to just that. Where we differed with others was our assessment of what guarantees could be given about its long-run level.
What we can afford to pay out in 2030 depends on how productive our economy is then. It doesn’t matter how much we save. It’s a question of the quality of our investments and the productivity of our economy. That’s where the Government’s focus should be (and higher taxes and rigid labour laws are not a good start).
Paying back debt is what most citizens do as they approach retirement. The same logic applies to the government facing the retirement bulge. One estimate puts the cost of saving up surplus taxes instead of paying back debt at about $11 billion over the period.
A more detailed analysis of my views can be found at www.arcadia.co.nz under the Articles heading.
Where will we all end up? If the Government has any sense it will quietly back off the fund and convene a multi-party process backed by independent analysis. The $600 million ear-marked for the fund can be allocated to debt retirement in the meantime. I think the prospects for a multi-party agreement are quite good. After nearly 30 years of knee jerk decisions I’m almost prepared to believe that there’s an outbreak of sanity in the offing.
Much will depend on the Government’s ability to make a graceful exit from its plans. But it was surely significant that Dr Cullen answered questions from Bill English in the House today in the conditional tense. Dr Cullen is a careful wordsmith. It was no accident.
Simon Upton is National's spokesman on superannuation.
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