KEY POINTS:
The baby-boomers were still in their twenties in 1975 when that most regulation-happy of finance ministers, Robert Muldoon, abolished the state-subsidised retirement savings plan. Many of them cashed up the few thousand dollars they had accumulated, bought a vaguely decent car - an expensive item in those days
- and thought no more of it. But the decision meant that the issue of retirement savings had been placed on the halfway line of a political-football field and the kick-off whistle had been blown.
It is sobering to contemplate how much a dollar, wisely invested in 1975, would be worth now. The post-war population bulge, creeping slowly towards retirement age, is a daunting sight to the generation which will have to pay for its needs in retirement. Inevitably, the fiscal seesaw will tip.
So whatever else might be said about the KiwiSaver scheme announced in Finance Minister Michael Cullen's eighth Budget, he cannot be accused of moving too precipitately. Faced with a massively overheated housing market, which is putting home ownership out of the reach of an entire generation; with raging consumer spending - at last count, we were spending $1.13 for every dollar we earned; and with a low savings record getting lower by international standards, he wants to increase New Zealanders' wealth without inflaming their spending and, at the same time, to offer an incentive to break our addiction to investment in real estate as the only form of retirement savings.
The extent to which KiwiSaver will succeed in doing that is a matter for debate and there has already been plenty of it. Spirited discussion has focused on the relative merits of the tax cuts that National says it will implement, and the increase in wealth, albeit delayed, promised by KiwiSaver. The Cullen plan puts more money in people's pockets - though of course it makes it impossible to take any of it out until you retire or buy a first home. Critics say that KiwiSaver benefits the rich more than those on low incomes but the increase is arithmetical, not exponential, which is to say that it does not disproportionately favour the rich. They earn more so they can save more; nothing new there.
It is the case that the tax-cut benefit rises most sharply for those on incomes between $35,000 and $50,000 but ultimately it is misleading to compare the two regimes because they have different aims: Cullen wants us to be wealthier later and spend less now, and the Nats have failed to refute the argument that tax cuts would stimulate spending and fuel inflation.
The crushing irony for the Opposition is that it has been politically outmanoeuvred by the Government at a time when the Finance Minister was vulnerable. Before the Budget, the public appetite was strong for more money in the pocket, but the KiwiSaver plan has moved the goalposts in the debate. National is keeping its powder dry about whether it will dilute or dismantle KiwiSaver, a tactic that allows it to sneer from the sidelines while it gauges the scheme's popularity. It wants to see whether KiwiSaver is a vote-winner next year before deciding what it thinks about it.
Such pragmatism, while politically understandable, is transparently opportunistic. It is also misleading: NZ First and United Future, two of National's likely allies in any coalition arrangement, will not allow the scheme to be abolished.
In any case, the public could do with some certainty in the form of a cross-party agreement to make a sustainable retirement savings scheme inviolable. The least either major party owes us, 30 years after this game of political football began, is a decision to blow the fulltime whistle.
