But frankly none of this matters all that much unless the Government finally gets down to addressing the looming imposts which have long stood out like the proverbial in Treasury’s long-term fiscal forecasts and which have also been highlighted in recent speeches by Treasury economists.
My expectation is that a prudent Finance Minister would address these warnings upfront with appropriate policy responses in the May 22 Budget.
But nothing I have seen so far in the pre-Budget positioning waffle suggests this will happen.
And yet, neither Willis, nor her boss Christopher Luxon, have to reach too far back in New Zealand’s political history to find political leaders from their own party with the spine to address looming long-term fiscal issues.
It now seems unfathomable that it was a Waikato farmer-turned-politician who led a National Government that raised the qualifying age for New Zealand Superannuation from 60-65 years over a nine-year period from 1992-2001.
Yet the National Party persists in the nonsense that government should not address the age of eligibility until 2044.
The party’s policy commitment is that they will keep the NZ Super age at 65 until 2044, when it will be gradually lifted to 67.
This change won’t affect anyone born before 1979.
This is way out of sync with moves internationally to raise the age of eligibility for taxpayer-funded superannuation.
National has promised NZ Super will continue to be linked to 66% of average after-tax incomes, so it will rise every year. “It will also increase by more than usual as a result of National’s Back Pocket Boost tax relief plan, which will increase after-tax wages,” the policy says.
Yet it does not recommend sensible clawback measures for those who are still working past the current age of eligibility which is 65, or logically means testing this benefit instead of offering NZ Superannuation on a universal basis.
The Government’s finances would be in much poorer shape if Bolger’s National Government had not made the sensible call that New Zealand Superannuation would become an impossible fiscal drag if the age of eligibility was not pushed out.
Bolger was a matter-of-fact political leader. He was not given to soaring oratory. As Prime Minister he gave Ruth Richardson her head as Finance Minister – although she was later pushed out after his party lost popularity at the 1993 election.
But in his “just the facts” manner he managed to convince New Zealanders that a gradual increase in the qualifying age to reduce the overall cost of the pension scheme was “plain commonsense”, as life expectancy was increasing and more people were living well past 60 to receive the benefit for longer periods.
Clearly, NZ Superannuation is unaffordable in the medium term unless the age of eligibility is raised. All manner of advisers: Treasury, IMF, OECD, multiple private sector economists have warned it is long past time to address this with a looming requirement to ultimately raise more taxation to fund government.
It’s one thing to bribe voters with their own money. Which is essentially what National’s $14 billion tax cut package came down to. National campaigned on this at the 2023 election and it later formed the centrepiece of Willis’ first Budget.
Yet, despite boosting her credentials as a former director of the New Zealand Initiative and belonging to a government that sports more than one adviser from that think tank, Willis continues to run soothing political slogans yet avoids the tough calls when it comes to the long-term issues.
If addressing the qualifying age is politically too tough – and let’s acknowledge here New Zealand First is opposed to increases, the Government could still move to means testing and applying clawbacks to reduce the benefit to those receiving NZ Superannuation until they actually retire.
When it comes to taxation, the Labour Party is better placed on philosophical grounds to either introduce capital gains, wealth or land taxes.
So far, neither side of politics seems prepared to front up to the Treasury warnings.
How many times do governments have to be warned before they finally take action?
