A critical point frequently overlooked in cross-country comparisons on superannuation, such as between Denmark and New Zealand, for example, is that superannuation systems can vary enormously in terms of cost, administrative efficiency, equity, benefits and overall retiree wellbeing.
Denmark and New Zealand have the same population of about five million. But Denmark is immensely wealthy. While its citizens reportedly pay the world’s highest taxes, they also enjoy very high discretionary income or take-home paycheques.
And on every metric of socio-economic performance, Denmark consistently ranks among the highest in the world.
Unlike New Zealand, Denmark’s immense national wealth is evenly distributed across its entire population. In other words, the 99% are already very well looked after – including their elderly – and are backed by a world-class social safety net. Nobody wants for anything. Not surprisingly, Denmark’s raising of its retirement age was met with little protest.
In New Zealand, all eligible pensioners under our national superannuation scheme receive a modest, hand-to-mouth fortnightly payment with few concessions. Rising levels of hardship among our elderly simply reflect our falling living standards, wrought by unchecked national economic decline.
By contrast, the Nordic nations are renowned for their extraordinarily generous superannuation packages, which enable their elderly to enjoy living standards New Zealand’s superannuitants can only dream about. The question is: how can tiny nations like Denmark enjoy such largesse?
The answer lies in the widely divergent economic profiles of Denmark and neoliberalised Aotearoa/New Zealand.
Denmark has a $700 billion, export-led mixed economy. It is an export powerhouse. Its export income exceeds a staggering $470b. And last year, its economy grew by 3.7%.
By contrast, New Zealand has a $400b “rock star economy” with $70b in export income, mostly from low-value, bulk commodity exports of rural origin. And last year, our economy contracted by 0.7%.
Let that sink in.
And, for the record, Denmark and New Zealand, both small trading nations, have had to confront exactly the same global economic and geostrategic uncertainty.
A staple argument of neoliberal economists is that high public expenditure “crowds out” or stifles private sector initiative, dynamism and growth. Hence, Prime Minister Christopher Luxon’s stated preference for reducing public expenditure through small government and greater personal responsibility as being key to prosperity. But Denmark puts paid to that argument.
Public expenditure, at $350b, accounts for 50% of Denmark’s economy. By contrast, New Zealand’s public expenditure of $160b comprises about 40% of our economy. And many want it reduced further.
Neoliberal economists deplore the fact that our world-leading national superannuation scheme, currently at 5% of GDP, is now the largest single component of government expenditure. But this should be seen in context. Our public expenditure is roughly one third of Denmark’s.
As a tiny, resource-rich nation, New Zealand should rank as one of the richest nations on the planet (in per capita income). But the enormous gulf between where we are now and where we could be simply widens year on year, regardless of whichever Government is in power.
The comparison between Denmark and New Zealand illustrates what tiny nations can achieve. Accordingly, the rising cost of our national superannuation scheme only becomes problematic with the continuation of our abysmal economic performance.
The question is whether the public and political will exists to concede failure, regroup and change direction. Other nations have done it. And spectacularly so. Singapore, for example. Or Finland. Or Norway.
The closer we can match Denmark’s economic profile, the better-off New Zealand’s 99% will become.
