Labour policies' air of inevitability

Phil Goff. Photo / Dean Purcell

While they aren't proving to be the "game changer" the party might have hoped for in terms of its chances at the polls, Labour's policies of raising the NZ Super eligibility age to 67 and of making KiwiSaver compulsory are unlikely to disappear after November 26.

Raising the NZ Super age is widely seen as necessary to ensure the long-term sustainability of the pension scheme and Labour has an unlikely ally on the policy in the shape of Act, whose leader Don Brash has long called for such a move.

But the fact that the proposed increase is virtually received economic wisdom has not prompted Prime Minister John Key to reverse his pledge to keep it at 65. That's in spite of his willingness to change his mind on other issues such as raising GST when he believes the economic case demands it.

Apart from Mr Key's promise, Finance Minister Bill English says National does not believe the increase is necessary because the economy will be vibrant enough to support the current age for many years to come - a view apparently at odds with much of the expert advice.

Those experts include Treasury, the Retirement Commissioner and ratings agency Standard & Poor's, whose recent downgrade was partly driven by the longer term fiscal challenges of our ageing population.

In the face of such pressure, it is likely a matter of when not if the age increases.

Meanwhile, other parties who oppose the policy do so for less optimistic reasons than National.

Mana and the Maori Party say it is unfair on those groups, such as Maori whose life expectancy is lower than the norm and who therefore won't enjoy as long a taxpayer-funded retirement as others. The Maori Party wants a lower entitlement age for some New Zealanders "to allow more equitable uptake of New Zealand superannuation for all citizens".

The Greens oppose it because it is unfair to those unable to work beyond 65. However, co-leader Russel Norman has indicated Labour's proposal for a "transitional payment" largely addresses their concern.

The case for making KiwiSaver compulsory is less clear cut. New Zealand undeniably has a savings shortage.

Australia is often held up as an example of how compulsory savings can generate a large pool of investment funds that boost economic performance, but the research on this is not unanimously positive.

National's policy for "soft compulsion" via auto-enrolment addresses concerns that a compulsory scheme would put an additional squeeze on the low paid by preserving the right to opt out.

Both major parties acknowledge compulsion and soft compulsion would impact on wages as employers offset their higher contribution obligations under both policies when negotiating pay increases.

Labour's compulsory KiwiSaver policy is far more costly than National's auto enrolment at $1.9 billion over five years compared to $550 million over four years but Labour's would result in a larger pool of savings.

National argues that as the funding for Labour's savings policy will come from debt, it does little for overall savings. That is also its argument against Labour's policy to resume contributions to the NZ Super Fund before the Government's books return to surplus.