Goff: Saving For Our Future
Thursday, 27 October 2011, 2pm SPEECH
Saving For Our Future
Today I’m officially launching Labour’s election campaign by releasing a package that will provide a lasting solution to the major weakness in our economy – our high debt and low savings.
Our current path is unsustainable. We can’t keep borrowing and hope things come right. John Key is not telling you the truth when he says that nothing needs to change.
Labour is ready to make the right decisions that are necessary for the future, not what’s easy today.
The rating agencies have made it clear: we owe too much. We don’t save enough. Our population is ageing and we are not prepared for that.
Every New Zealander knows we have to make the hard decisions for this country to do better.
The PREFU shows National has failed to make the hard decisions and is content to just muddle through. That’s not good enough.
This election is about achieving a better future for our children.
My plan for New Zealand starts right now and unlike National’s it doesn’t end on Election Day.
I’ve already announced significant policy to help deal with these issues.
We will introduce a Capital Gains Tax – excluding the family home – to pay off our debt, keep our assets and make sure everyone pays their fair share.
A CGT will grow our economy – not someone else’s. It gives us a stronger and more enduring way to pay off our debt than National’s asset sales.
We will convert dole payments to subsidies for apprenticeships. Our young people get the skills they need and businesses get the skilled people they need. Letting youth do nothing and go nowhere isn’t an option. They should be earning or learning.
We have also committed to a package that will speed up the recovery of Canterbury, getting our second largest economy back on its feet again.
We have to do more.
New Zealand is facing some very big issues - our high private debt, lack of savings, and the looming costs of an ageing population.
The world economy is in turmoil and we are not immune. Muddling through is not an option.
The past three years have shown us just how quickly our fortunes can change. We’ve gone from a healthy surplus to an $18 billion deficit this year. Our private debt is now over $140 billion.
We can’t anticipate every disaster or challenge that we will face in the future. But we can prepare for what we know is coming.
We know that by 2050 the number of people aged 65 and over doubles to 1.35 million. We know the number of people over 85 will grow five-fold.
John Key is refusing to take the tough decisions to solve these problems. This failure of leadership leaves our children and grandchildren to pick up the tab.
We need to show courage now so we can live within our means and set New Zealand on an affordable path - where we own our future, rather than selling it. Where we clear the debt without selling our assets.
Today I’m announcing a package of three major policies to make saving simpler, guarantee superannuation entitlements into the future, improve our savings rates, and grow our economy.
I will deal with savings first.
Labour will make KiwiSaver universal by making it compulsory for all workers from 2014.
Employee contributions will remain at 2% because we know families are finding it hard to make ends meet right now, let alone save.
But we will gradually increase the employer contribution by 0.5 per cent a year from 3 per cent in 2014 to 7 per cent by 2022.
Making KiwiSaver universal will make it simpler for Kiwis to save and build a retirement nest egg.
Universal KiwiSaver also reduces our reliance on foreign lending. It builds up our own pool of savings which can be invested in New Zealand businesses and create jobs for Kiwis.
We will be able to grow our economy – not someone else’s.
To make this more affordable for the country, we will phase in the $1000 kick-start for all members at $200 a year for the first five years.
Labour’s plan will set KiwiSaver on a long-term path. It will give New Zealanders the certainty and security they need to plan for their retirement.
If National hadn’t abolished the Kirk scheme in the 1970s we could have saved hundreds of billions more.
New Zealand lost an opportunity because of short-sighted decisions by National. We can’t afford to let that happen again.
Labour will restart contributions to the New Zealand Super Fund starting with $750 million a year, rising to around $2.4 billion.
The Super Fund prepares for the future and makes money for New Zealand.
National’s short-sighted decision to suspend contributions will leave a $30 billion hole in the fund by 2050. This reduces the Fund’s ability to contribute to the future cost of NZ Super by 25 per cent.
Third, I’m going to do what John Key doesn’t have the courage to do.
I will gradually increase the age of eligibility for New Zealand Super from 65 to 67 years.
This will be done over 12 years between 2020 and 2033, giving people time to plan.
Nothing will change for those currently receiving NZ Super or within 9 years of retirement.
For those currently aged 46 to 56 the age will of eligibility will rise by two months a year starting in 2020. Kiwis born in 1966 or later will be eligible for NZ Super at 67.
With life expectancy increasing, more people over 65 are already continuing in the workforce. The Retirement Commissioner estimates one in three New Zealanders aged between 65 and 69 are still in the workforce.
However, for some New Zealanders we recognise that it will not be possible to keep working for an extra 2 years, for example some of those doing physically demanding work.
We will look after them by introducing a NZ Super Transition payment. This payment will be at the same level of NZ Super and cover the 2 years until they turn 67.
I want to make it crystal clear – I will not change the rate of NZ Super. It is a vital safety net and the current levels must be protected.
I am today guaranteeing that New Zealand Super payments will remain at 66% of the average wage. KiwiSaver is not a substitute for New Zealand Super.
We’re being honest with New Zealanders by acknowledging what they already know: keeping the age of New Zealand Super at 65 is simply unaffordable.
The $9 billion we spent on NZ Super last year will double as a share of GDP in less than 40 years.
We aren’t alone in confronting the challenges of an ageing population. Over 11 OECD countries including Australia, the United Kingdom and the United States are lifting their pension ages.
And it is what the Retirement Commission recommended as the fairest way to tackle the challenge.
John Key recently said he was too busy to worry about what happens in 2020, well I’m not.
If we don’t confront this issue now, it will be forced upon New Zealanders when it is a much bigger problem.
We only need to look at Europe to see what happens when politicians constantly duck the tough issues and don’t look far enough into the future.
We can’t afford to keep doing what we’re doing.
Anyone who tells New Zealanders things can go on as they are is pulling the wool over your eyes.
We need to do more than keep our heads above water today. We need to ensure our kids aren’t drowning in debt tomorrow.
This package guarantees New Zealand Super for future generations even as our population gets older and the cost of looking after the elderly balloons.
I won’t make promises that I cannot afford to keep.
The Canterbury Earthquakes and the Global Financial Crises have shown us how quickly things can change and how we can’t afford to take things for granted.
I will do what John Key won’t.
I will do what is right for the future not what’s easy today.