The New Zealand Government should link the age of eligibility for New Zealand superannuation to life expectancy, a report by the OECD has recommended.
The latest OECD economic survey of New Zealand has found strong Government support to protect jobs and incomes has helped New Zealand recover quickly from the impact of Covid-19 but more work needs to be done.
"The near-term economic outlook is positive. The New Zealand economy has recovered strongly from the pandemic," OECD Secretary-General Mathias Cormann said.
After surging to 4.7 per cent in 2021, New Zealand's GDP is expected to rise by 3.8 per cent this year before easing to 2.5 per cent growth in 2023.
But Cormann said the need for policy action was pressing in a number of areas to make economic growth sustainable.
"For instance, helping the digital sector to grow would help boost labour productivity.
"Linking pension eligibility to life expectancy and adopting long-term debt-to-GDP targets would help address the projected increase in government debt."
Prime Minister Jacinda Ardern has previously said she would not increase the NZ Super eligibility age, currently 65, under her leadership.
The main findings of the report also include that New Zealand's intensive care capacity is low compared to other countries and it recommends increasing ICU capacity and vaccination rates among vulnerable groups.
"Once vaccination rates a high, progressively relax border restrictions, as planned."
It notes that household mortgage debt is high.
The Reserve Bank has already brought back loan-to-value restrictions after easing them in 2020 and is consulting on debt-servicing restrictions.
The OECD report recommends either requiring banks to use minimum interest rates for assessing borrowers' debt servicing capacity or by introducing debt-to-income restrictions.
Under increasing housing affordability and better protection for displaced workers it said that New Zealand should identify and remove barriers to special purpose vehicles to give better access to infrastructure financing.
On top of that it should introduce a planned social insurance scheme to help who lose their jobs.
It also notes that productivity is low by international standards owing to muted product market competition, weak international linkages and innovation and skills and qualification mismatches.
Corporate tax rates were also high by international caparisons holding back capital investment.
The report recommends removing barriers to competition in the retail grocery sector and complement research and development tax credits with targeted grants.
On boosting productivity the report found the domestic pipeline of advanced ICT skills was weak with poor maths achievement limiting the proportion of school students who could obtain qualifications needed for a career in this area.
That has left employers preferring to recruit experienced workers with advance ICT skills rather than training them into those roles.
It recommended New Zealand improve maths and science teaching in primary schools and develop digital apprenticeships and internships while also developing programmes to help Māori and women pursue digital careers.
On top of that it found that while the New Zealand Government had improved the legal framework for reducing greenhouse gas emissions it was not on track to meet its 2050 net-zero carbon emissions target.
"The carbon price is too low and efficient complementary measures, which address market failures not corrected by carbon pricing alone, still need to be taken."
Finance Minister Grant Robertson said the survey had recognised the Government's response to the Covid-19 pandemic.
"New Zealand's strong health response to the pandemic has been our best economic response, with unemployment at record lows and wages rising. The Government's books continue to outperform forecasts and we have one of the most favourable debt positions in the world," he said.
"This has put us in a strong position to continue our balanced approach and meet the challenges ahead as the pandemic continues to disrupt the global economy while tackling long-standing issues around climate change, housing and child wellbeing."
Robertson said wellbeing remained central to its approach.
"We have considered wellbeing outcomes as part of the health response to Covid-19 and in the design of the economic support measures. The wellbeing objectives for Budget 2022 reflect an increased emphasis on the need to address housing access and affordability and the ongoing but evolving impacts of Covid-19.
"On housing, the OECD acknowledges that the Government's measures to cool the housing market and boost supply has seen record house building and consents in recent times and will help improve affordability.
"As part of the wellbeing approach, Budget 2022 will include a focus on the Government's health reforms and investing in initiatives to reduce emissions and met our climate goals.
David Clark, Minister for the Digital Economy and Communications, said while New Zealand had good infrastructure from its investments in the ultra-fast broadband initiative and rural connectivity, the OECD report highlighted the need to build a solid pipeline of digital skills, and to encourage more businesses to use digital tools.
"The OECD also reinforces the need for a national digital strategy – something we are already progressing as the Digital Strategy for Aotearoa."