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Letter: Super ball hoofed downfield

Michael Chamberlain takes a different interpretation to events in the superannuation area last year.

Thursday, January 31st 2002, 5:14PM

I refer to your article Super people in rolling maul.

To be blunt the article, and the conclusions of it, has as much relevance and accuracy to the super debate as a dead cat.

If you want to use the football analogy, all you can say is that despite having time, with no opposition breathing down his neck, and not needing to rush the next play, (Finance Minister) Michael Cullen just hoofed the ball as hard as he could and has no idea which direction the ball is going in, where the goal is and who will touch it next, though he claims he kicked it straight. Because the opposition could not or were not allowed to articulate the real issues, the only thing that is certain, is the ball is likely to bounce anywhere but near the goal - it will be in touch somewhere near halfway. You could also conclude that the Government turned up at the wrong field and bought the wrong ball, but insisted (by bribing the man in the middle (Winston Peters)) that the venue be changed and their efforts be deemed to be football.



Interestingly, there was also a big rent-a-crowd (fund managers) watching that kept quiet in the first half but started making a lot of encouraging noise when they thought that the ball might land somewhere near them!

The single most important principle in this issue, and one that most commentators don't understand and Michael Cullen refuses to acknowledge, is that the "design" of the New Zealand Superannuation benefit determines the cost. Funding (full, partial or not at all) does not impact on the cost, does not make it more affordable etc. etc. It only slightly re-arranges the incidence of that cost.

The design of the benefit relates to the level of the benefit, i.e. who gets what and when. We did not debate any of these issues in 2001 and we can't go forward until we do. This is what you as a commentator should be saying.

Whether we pre-fund NZ Super or not will not change its cost. It will still double, as a percentage of GDP, and the issue is whether in 2030 or 2050 or whenever is "are the workers of the day prepared to have that amount of the economic cake being allocated to the retired?" Pre-funding is not part of the real issue. When the fund is spent after 2020 voters of the day will still be asking "should we be spending all this money on New Zealand Superannuation?" The presence (or absence) of a fund won't change that question.

If you want to give people more certainty there are only two ways or a combination of them. Either you have to have a benefit design that workers can afford and are prepared to meet (to do this you have to have a debate on the design) or you have to grow the economy. The government should focus on creating the debate (though it is now probably too late for it to do that) or creating an environment and legislation that encourages economic growth in NZ. Unless you continue to make these points, when Cullen misleads people, we will get no where.

If the test of progress is measured by a combination of the time that the government spent helping the debate, and growing the economy over and above what was normally expected for where we are on the economic cycle, you have to conclude that we as a country went backwards in 2001, and backwards in a big way.

In terms of your article, my view is that you just continued the unhelpful commentary that has come out of much of the press all year. It is a mishmash of ideas that sound good but lack substance and are collectively wrong. It is of no relevance to NZ if any other countries pre-fund super. I don't recall ever agreeing to "65 at 65". Because I and the workers that make up the 3.8 million people in New Zealand must ultimately agree, you can guarantee that another politician at some stage will decide that they can win an election by offering something different.

Also, if the Government spends more money than it earns it must borrow to do so. If the government impliments a new initiative and at the same time borrows more money, it is reasonable to conclude that the government is borrowing money to do so. Any other conclusion lacks credibility but is believed by financially illiterate reporters. Likewise, because Michael Cullen decided not to do something that is extremely dumb (ethical investing), it is okay that he did something really dumb (the Big Cullen Fund). This is interesting logic!

I am not aware of any credible economist or financially literate person that disagrees with the views outlined above. When I discuss this matter with economists on both sides of the political divide I always find that my views and their views are 90% to 95% consistent. This is what we should be building on by getting agreement to what we all agree on and then to work on the balance. It would not take much to get the other 5% to 10% sorted and the compromises for anyone would not be great.
Finally, NZ will not solve the super issue while it is a "football"; we cannot solve it while we have one team against another team. To solve it we all have to go in the same direction. And until we do, it will be a political football with some big kicks and some little kicks but no overall strategy and no progress towards the goal! (Whatever that may currently be).

Michael Chamberlain

« Old thinking revealed in super policiesAMP & Good Returns launch superannuation website »

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