'Review student loans and pensions'

Treasury secretary John Whitehead. Photo / Mark Mitchell

Superannuation entitlements and student loans are among the things the Government needs to look at in the context of lifting the economy's growth rate, Treasury Secretary John Whitehead says.

So are the shortcomings of the education system, the large and growing proportion of the working age people on benefits, the company tax rate and such regulatory regimes as the Resource Management Act (RMA) and the Hazardous Substances and New Organisms Act (HSNO).

In a speech to a business audience in Auckland yesterday, Whitehead said New Zealand's per capita gross domestic product had grown by about 2 per cent a year over the past 18 years.

It would have to rise to 3 per cent a year to catch up by 2025 with the average level of GDP per capita among the OECD group of developed countries and by 4 per cent to catch up with Australia.

Whitehead also pointed to New Zealand's high level of overseas debt.

"Many countries with similar levels of external indebtedness to us are now experiencing severe fiscal and economic stress. While New Zealand's low starting level of government debt appears to be an important differentiating feature, our government debt is rising," he said.

"Increased private sector saving - which has been historically very low - together with a turnaround in Government's current fiscal deficit would help to reduce our vulnerability."

In that context "we should look at the effects of government transfers, in particular student loans and New Zealand Superannuation, on shaping the incentives to save faced by households".

There was also scope to improve the tax system to promote economic growth, he said.

The Budget had cut the company tax rate to 28 per cent, but that was by no means low by international standards.

The Treasury regards the RMA and HSNO as potential growth inhibitors. The former is begin reviewed and Whitehead said the latter should be too, citing the decline in trials of genetically modified organisms since it entered into force.

"These trials and outdoor developments are critical for innovation in biotechnology, a rapidly developing field where New Zealand has significant expertise."

Turning to the education system, he said that New Zealand compared well internationally by some measures.

But just over a quarter of those leaving high school had no upper secondary qualifications, nearly half of those entering tertiary education left without completing a qualification, and among 15 to 19-year-olds one in 10 was not in education, training or employment.

"We need to lift teacher quality in order to raise the performance of students across the whole school system," Whitehead said. "[And] target resources better to those most at risk of poor education outcomes."

The large and growing proportion the working age population on benefits had huge fiscal and social costs, he said.

The fiscal pressures of an ageing population "suggests current New Zealand Super settings may need to be revisited" including the size of the payment and the age of eligibility.

"Consideration should be given to providing greater incentives for those aged over 65 to participate in the labour force," he said.