John Armstrong 's Opinion

John Armstrong is the Herald's chief political commentator

John Armstrong: Shift that would turn Key into a superman

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Prime Minister John Key. Photo / Mark Mitchell
Prime Minister John Key. Photo / Mark Mitchell

Thursday's ultra-orthodox Budget was sold by Bill English as the last word in fiscal rectitude. But it lacked one rather necessary ingredient.

The Minister of Finance and the Prime Minister knew exactly what that was, because they were questioned incessantly about it all week.

Though there was fat chance of it appearing, the missing item was National dropping its opposition to any review of state-funded superannuation entitlements, in particular the raising of the age of eligibility from 65 to 67.

As was the case last year, the Budget instead tinkered with KiwiSaver.

The new provisions requiring KiwiSaver fund managers to be more transparent in reporting their performance, returns fees and costs - and in a fashion which enables investors to make direct comparisons with other funds - will be universally applauded.

The postponement of the planned auto-enrolment of workers who are not KiwiSaver members is unfortunate. The Minister of Finance says the $100 million-plus annual cost is too high and "not possible without putting the surplus at risk". And we couldn't have that, could we? That decision only underlines the short-term vision of National when it comes to superannuation policy.

John Key claims New Zealand superannuation will remain affordable despite warnings from the Treasury that trade-offs will have to be made regarding entitlements once the post-war "baby boom" generation hits retirement age.

The Treasury is not alone in thinking that.

Many people doubt the scheme will survive in its current form regardless of whatever supposedly iron-clad assurances are made by politicians to preserve it.

But it might survive as a vital back-stop for those unable to save for their retirement if the bulk of workers can draw their retirement incomes from elsewhere.

It stands to reason that the more workers there are with KiwiSaver schemes, the less the future pressure on the existing state scheme.

Key promised to resign from Parliament if he lifted the age of eligibility or watered down the formula for the payment of the state pension. He has shown no sign of reneging.

This week he went as far as saying he would not ditch his pledge even if the financial crisis in Europe required National to take a hard look at some policies which have escaped the fiscal knife.

It is fundamental that politicians - specially party leaders - keep their word.

Equally, politicians are required to be flexible to changing circumstances. And leaders are expected to lead.

Key argues that nothing needs to be done before 2020 - and cites Retirement Commissioner Diana Crossan as agreeing with him.

But what Crossan said was that the retirement age should be lifted gradually from 2020.

That requires a decision fairly soon to give people the chance to adjust their savings.

Key has the luxury of being able to wave the problem away because he is unlikely to still be around when the numbers eligible for the pension really start to explode.

But the first warning signs of what has yet to come are in the Budget. The Treasury notes the super bill will rise from $8.8 billion last year to $12.3 billion in 2016. The number of people receiving super then will be nearly 680,000 - 20 per cent above the current level.

Instead of ignoring the problem, Key could lay the groundwork for changes at a time when the political cost of doing so is comparatively small.

Above all. he needs to manoeuvre himself on to the other side of the debate, otherwise he will find himself very much in a dwindling minority.

One option would be to set up multi-party talks - as suggested by Labour leader David Shearer - to find a lasting consensus.

Key would get some kudos for grasping reality. While there would be some criticism for him breaking his word, his acting in the national interest - rather than just National's interest - would be a strong defence.

National, however, would be unwilling to hand Shearer anything which Labour might claim as a victory.

Key's fear would be that Labour would make National eat humble pie and try to take control of the talks.

But Labour would be under the same pressure from the public not to exploit a multi-party forum for political advantage.

What we have seen of Shearer suggests he is not the kind of politician who would use such an exercise as a bandwagon for pillorying his opponents.

He prefers to work behind the scenes and negotiate lasting solutions to sticky problems. That is what he tried to do during the prolonged Ports of Auckland industrial dispute, joining the picketing workers only after he had failed to make progress with management and the union.

For its part, National could enter the talks reserving its current position.

If it is truly cynical, National could use cross-Parliament talks to bury the issue. Such forums do not have a good track record and often collapse amid acrimony and a shouting match over who is to blame.

Another avenue for Key to start shifting his stance is a provision in National's confidence and supply agreement with Peter Dunne.

The United Future MP secured National's agreement to consider a more flexible approach to retirement under which people would be able to choose to get super between the age of 60 and 65 at a lower rate than the regular rate, or not accept the pension until they were older and receive higher payments.

Key seems amenable to the idea because it would be voluntary and, more crucially, would not take away anyone's existing entitlements.

Whatever, Key needs to shift his stance, even if slowly and by stages.

Even if state super will continue to be affordable at current levels into the future, the public perception is that it is won't.

Key has to deal with the perception. Voters will want to know where they stand and what they will get.

It would be some irony were National to achieve its cherished goal of a budget surplus in three years' time only to find itself on the losing side of a much bigger and far more damaging argument about superannuation.

- NZ Herald

John Armstrong

John Armstrong is the Herald's chief political commentator

Herald political correspondent John Armstrong has been covering politics at a national level for nearly 30 years. Based in the Press Gallery at Parliament in Wellington, John has worked for the Herald since 1987. John was named Best Columnist at the 2013 Canon Media Awards and was a previous winner of Qantas media awards as best political columnist. Prior to joining the Herald, John worked at Parliament for the New Zealand Press Association. A graduate of Canterbury University's journalism school, John began his career in journalism in 1981 on the Christchurch Star. John has a Masters of Arts degree in political science from Canterbury.

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