Parliament

Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search

 

Superannuation the Answer, Cut Taxes

Tuesday 30 Oct 2001 Richard Prebble

Speech by Hon Richard Prebble to AMP Superannuation Consultants, Duxton Hotel, Wellington, Tuesday 30 October 2001 at 7.30am

Thank you for the opportunity to speak about Superannuation.

The problem with super is clear. Too many political parties are making irresponsible promises about superannuation, in order to buy votes. They see the future financing of their promises as someone else's problem.

Broken promises in superannuation undermine confidence in the democratic process.

The Cullen superannuation fund is yet another reckless scheme to buy votes. To borrow $6 billion over the next four years to invest in the world sharemarket is very risky.

If the Cullen scheme was in place on 11 September and had the $6 billion in it, more than $2 billion dollars would have been lost.

If the Cullen scheme works, then no one else needs too. You could save for your retirement by borrowing on your credit card. Dr Cullen set up his scheme on a simple mistake. Since the passing of the Fiscal Responsibility Act, Treasury has been working to create a Crown Balance Sheet. The first balance sheet was published last December - a month after Dr Cullen announced his scheme.

Prior to the publication of the balance sheet it was impossible to separate out income from capital. Dr Cullen thought that the next four years would see huge surpluses in the Crown account, that he would then put aside for a super fund. After the publication of the Crown Accounts we realised those surpluses are capital, and the Crown's income is in the red.

Dr Cullen would never have announced: "I have this great idea, let's borrow money and gamble it all on the sharemarket." In a free vote in parliament, the Cullen scheme would be voted out tomorrow. It's reckless. It's a gamble. It is not the answer and it will not last.

Superannuation is a problem throughout the western world. Tax-based schemes like ours have been financed by the happy fact that there have been many more taxpayers than retired. But falling birth rates and longer life span are turning the population around. Many retired, too few workers.

New Zealand is now spending 6 percent of GDP on super compared to just 3 percent in Australia. New Zealand's scheme is less targeted and more generous than the Aussie scheme.

In 1995, a New Zealander aged 55 on an average or modest income, could expect to retire on 61 percent of existing earnings. This is up 32 percent since 1961.

For Australia, the comparable figures are 40.9 percent and 19 percent respectively.

With unchanged benefits, the cost of superannuation escalates rapidly as population ages.

As it's estimated every dollar of tax spent costs the taxpayer $1.50, this is a huge burden. Having said that, we must be careful not to overstate the problem.

New Zealand superannuation arrangements are basically sound and with a few changes, well-signalled, the issued can be managed.

One of the policy problems in this area is that people on fixed incomes can't change their circumstances - by definition.

If you are 30 and the government changes the tax regime, you may be hurt financially but you can adjust. You can take a second job, change jobs, save more, do all manner of things.

But If you are retired and your income is the state pension, you have to bear the cost of the change. This makes the elderly vulnerable and able to be manipulated by reckless promises and fear-mongering.

So ACT says we should try to get a consensus on superannuation. I don't pretend my party has the only wisdom. On behalf of ACT, I'm willing to try to reach a lasting consensus.

Certainty is better than perfection.

It's useless to say, as Dr Cullen and Jim Anderton do - "we will agree to consensus but only if you agree with us."

No, let's sit down and agree to negotiate sincerely and be prepared to compromise.

The political parties are not as far apart as we pretend. Let me set out some things that even Jim Anderton and I agree on.

First, we should guarantee the present income of those who have already retired. The government is promising to increase their incomes, so they must agree that, in real terms, the income of the already retired must not decrease.

Second, any changes should fall on those who have not yet retired, or who are too close to retirement to be able to make a real difference - so those under, say, 55 years old.

Third, any changes should be phased in over a long period.

Fourth, there must always be a safety net retirement scheme.

I believe all parties can agree on these four minimum principles for superannuation. It is then a relatively easy problem to solve.

There are two steps that will make superannuation affordable. First, index superannuation to inflation, not to incomes - just like the invalid's benefit. That's fair.

Second, over time, lift the age of entitlement to super to 68. In some countries, it's 70. If we phased in a lift in the age over 10 years, starting in 10 years time - a total of 20 years - that would only fully affect people who are now under the age of 45.

Then super is affordable. It's nothing like as tough an issue as healthcare.

ACT says we should then turn our attention to the real answer to a prosperous retirement - savings-based superannuation. The biggest reason why working New Zealanders don't save enough for retirement, is the high level of taxation.

The state takes 40 percent of everything the country produces. And the state takes 50 percent of the income of the average household.

Tax makes saving unaffordable. A low flat tax rate would see the country's savings rate improve, investment increase, more jobs, more growth and a secure, prosperous retirement.

That's ACT's policy.

ENDS


© Scoop Media

 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On National’s Less Than Stellar Choices


Amid all the jostling in the National caucus ranks, spare a thought for Andrew Bayly. Who? Well might you ask. Plucked from obscurity by Judith Collin, elevated from number 18 to number 3 in the caucus rankings and given the Finance portfolio - a role in which he has been invisible ever since – Bayly seems destined for a future as a trivia quiz question. That’s because as the National leadership contest comes down to a choice between Simon Bridges and Christopher Luxon, the only decisions to be made on Tuesday are over who gets to be leader, and who gets the Finance job... More>>




 
 


Government: Workplace Vaccination Requirements Extended To Cover Police And NZ Defence Force

Workplace Relations and Safety Minister Michael Wood announced today that workplace vaccination requirements will be extended to include the New Zealand Police and Defence Force in preparation for the transition to the new COVID-19 Protection Framework on 3 December 2021... More>>


RNZ: Judith Collins removed as National Party leader
Dr Shane Reti is interim leader of the National Party after Judith Collins lost a no-confidence vote. Simon Bridges was demoted and stripped of all portfolios over allegations of an inappropriate comment made five years ago at a party function. Judith Collins was voted out as National's leader today after the party was locked in a caucus for more than three hours... More>>


Government: Supporting New Zealanders To Recover From COVID-19 In The Community
The Government is increasing the support for New Zealanders who test positive for COVID-19 through the rollout of the COVID Care in the Community model and a $300 million funding boost to Pharmac to purchase new medicines to treat the virus, Health Minister Andrew Little announced today... More>>

ALSO:


National: Launches First Step To World-class Tech Sector

Leader of the Opposition Judith Collins says technology will create exciting careers and higher paying jobs and has the potential to transform the New Zealand economy... More>>

Council For Civil Liberties: Disgraceful Government Secrecy On Vaccination Certificates As Legislation Rushed Through
On the eve of legislation to enable vaccination passes being rushed through Parliament under urgency, the Minister has said it will not publish the relevant policy papers until ‘late January 2022... More>>


Government: Providing Business The Tools To Vaccinate Workforces

The Government is building on measures to protect businesses and workers from COVID-19 as the country gets ready to transition to the new COVID-19 Protection Framework on December 3, Workplace Relations and Safety Minister Michael Wood announced today... More>>


 
 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

InfoPages News Channels