Bernard Hickey replays the latest NZ Super debate car crash and finds the cause – nearly 300,000 young non-voters

By Bernard Hickey

Watching the latest episode in our current non-debate about New Zealand Superannuation over the last week was like watching a car crash in slow motion. You can see what’s going to happen next, but there’s nothing you can do to stop it.

The fiscal and electoral forces at work are enormous and the cleverest politicians and spectators with anything at stake stay well away from the crash zone.

Labour Leader Andrew Little stumbled into a right mess last week when he answered a simple question about the affordability of the current universal pension and whether means testing should be considered.

He didn’t directly endorse the idea of means testing super, but did question the affordability of the scheme and the fairness of working pensioners collecting the benefit and wages at the same time. He went on to call for the Government to restart contributions to the New Zealand Superannuation Fund.

Within minutes he was being accused of considering means testing and the backdown came from his office well before the six o’clock news. The Government could scarcely believe its luck (or its delight). Both Prime Minister John Key and Finance Minister Bill English leapt in with glee to paint Mr Little as the enemy of all hard working and/or hard retiring pensioners.

A few days later a contrite leader of the Opposition had to front up to the Press Gallery to explain that Labour had never, would never, and could never (ever) means test NZ Super. Even his views about resuming contributions to the Cullen fund had run away into the sand. He said Labour was not sure yet whether to resume them before or after the achievement of a surplus. The word ‘fair’ or even ‘unfair’ was nowhere to be seen in connection with the universal pension, or even the free ferry trips to Waiheke on the SuperGold Card for winery tourists.

It was yet another abject lesson in how New Zealand simply cannot have a sensible debate about the future of New Zealand’s most expensive and fastest-growing benefit.

Yet every initial point made by the now-chastened Mr Little was valid and has been made by all manner of number crunchers and impartial advisers repeatedly for years, including Treasury and the Retirement Commissioner.

The numbers in Budget 2015 show the growth of this universal benefit dwarf any other movements in spending elsewhere. Treasury forecast spending on NZ Super would rise NZ$5.6 billion to NZ$14.4 billion in the nine years to 2018/19. The benefit increases aimed at poor kids were worth just NZ$200 million a year in 2016/17. Only half of the increase in NZ Super was caused by the ageing of the population, Treasury pointed out. The rest was because the benefit’s indexation to average wage inflation, rather than consumer price inflation.

The cost is forecast to almost double as a percentage of GDP to 7.9% by 2060, when it will hit NZ$100 billion.

Yet this looming cost, which is amplified by the Government’s refusal to contribute to the New Zealand Superannuation Fund, has become the Voldemort of politics – ‘the problem whose name cannot be uttered out loud’.

And why is that? It is simple electoral mathematics and the details from last year’s election have further enabled those who never want to mention even a suggestion of change.

There were 864,100 New Zealanders aged over 60 in September last year and 87% of those voted in the election. There were 743,200 18-29 year olds who could have voted in the election and who will have to pay the taxes to pay for the NZ$100 billion in pensions by 2060, yet only 49% actually voted. If the young had voted at the same rates as the old then there would have been an extra 282,000 voters.

That would have easily been enough to get the attention of politicians and open up the debate to include the interests of those who will be paying taxes from 2020 to 2060 — the core of their working lives. And that, of course, doesn’t count the children who can’t vote now but will certainly be paying come 2060. Instead, the debate is frozen in time because a generation of politicians nearing retirement can rely on the indifference, inattention and laziness of a generation who will have to pay the price.  

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A version of this article also appeared in the Herald on Sunday. It is here with permission..