by Rob Hosking
The National Party’s decision, if elected, to kill the government’s pre-funded superannuation scheme and use the money for social spending is based on the conviction that the meeting the retirement costs of the baby-boomer generation will not put the strain on public finances that many are predicting.
"I'm more an optimist than most people about the costs of retirement," English says.
"We’ve been through major demographic changes before and we’ve coped. But there are more pressing problems to do with demographic changes – the main one is health costs, which are going to rise faster and less predictably than superannuation."
The other demographic pressure relates to the diminishing numbers coming into the workforc and the fact that a higher proportion of them are now coming from a background of social and educational disadvantages.
"That, and health, are larger problems. I'm relatively relaxed about super."
Politically, the move means National has to drop its attack on the government for borrowing to put funds into the superannuation scheme, and National now explicitly proposes to spend the same amount of money, but on what it sees as more pressing health and education problems.
The government’s gross debt rose slightly over the current financial year, accompanied by long debates in Parliament over whether the borrowing was to fund the superannuation scheme, or the Air New Zealand bail-out, or whether it would have happened anyway.
In actual fact the Air New Zealand issue has been something of a face-saver on this one – the rise in gross debt was projected in the Budget in June, well before the bail-out – but it is scheduled to drop back again after this year. Debt is still running at around 17% of the government’s total economic value – well below the highs of around 50% in the 1980s, and at a level which is not seen as being a problem.
Some government debt, as Finance Minister Michael Cullen has pointed out, is useful, not only for the state’s capital spending but also because the government bond programme is an important part of the financial market’s operations.
After more than decade of concerted debt reduction, National now appears to accept that the era of paying off government debt is over.
As for the more immediate politics of superannuation, English says the pre-funded scheme would not be as attractive to voters as the government believed.
"The people the Cullen fund is aiming at are now around 40 years old. Their strong preference, by and large, is for growth and opportunity, not the government taking care of everything."
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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