The recent prediction by the retirement commissioner that the cost of national superannuation could escalate to $35 billion by 2050 has renewed calls for change to ensure its sustainability.
The Minister of Finance, Bill English, insists that raising the retirement age is our only option. And Herald business commentator Fran O'Sullivan agrees, noting that other advanced nations are also raising their retirement ages.
All three are profoundly in error.
New Zealand's world-leading national superannuation scheme, which provides all New Zealanders with retirement income security, must be left intact. The real imperative is national wealth creation.
The claim that the projected $35b "cost" of NZ Superannuation in unamended form will become unaffordable by 2050 is implausible.
First, some history. Predictions about national superannuation's future unaffordability are nothing new. In the 1980's critics charged Sir Robert Muldoon's "generous", publicly-funded, universal National Superannuation Scheme would become totally unaffordable by 2010.
At 4 per cent of GDP (gross domestic product), or national income, however, it proved very affordable.
Where will the $35b by 2050 come from?
Quite simply, out of national income. Our superannuation scheme is simply a transfer payment or a reapportionment of a tiny percentage of national income, rather than a cost.
O'Sullivan berates those opposing English for, as she puts it, "doing the right thing by New Zealanders" by facing "hard fiscal realities". She cites other advanced nations similarly raising retirement ages in response to impending demographic pressures.
She has got it all wrong.
Nations' circumstances, like those of individuals, can vary enormously so that a particular policy response by one nation or a group of nations may not be necessary be the right fit for another nation.
That is precisely the situation here.
The nations O'Sullivan cites are large, advanced, high-income, industrial nations with mature economies which, by definition, can only grow incrementally, typically by 2-3 per cent a year.
With projected public pension costs anywhere between 12 per cent to 15 per cent of GDP they are forced to rein in public expenditure. Fortunately, we are not in that position.
Compare New Zealand with the cluster of tiny, advanced, high-income nations with similar populations. This group includes Denmark, Norway, Finland and Singapore.
New Zealand is an advanced, but not a high-income nation, as underscored by our low-wage status. This point is absolutely critical to the whole issue.
We have a $250b GDP, or national income, now shared by 4.7 million people. That puts New Zealand well below the tiny, high-income nations.
Their economies, relative to population, are all much larger than ours. This is because their productive sectors are huge. Ours, by comparison, is minuscule.
New Zealand, however, has enormous, untapped development potential. For example, even with a sustained, highly conservative 2.5 per cent economic growth rate our GDP will exceed $500b by 2050.
It should also be noted that a 2.5 per cent economic growth rate, impressive for a mature economy, is quite unexceptional for an under-developed nation such as New Zealand, given its huge development potential.
Our economic growth rate can always be ramped up.
The retirement commissioner has warned that economic growth alone will not solve the problem. She is correct on that detail.
Only the achievement of rich-nation status will.
With a stable population and a doubling of our GDP to $500b by 2050, the $35b gross "cost" of NZ Superannuation will be around 7 per cent of national income, the net "cost" considerably less.
Even a "price tag" of $40b, at 8 per cent of GDP, would not be problematic since $10b or so, depending on the rate of taxation, would immediately be clawed back as income tax.
Once over the demographic hump the cost of superannuation will sharply decline with fewer superannuitants.
This will put today's millennials in a most favourable position.
Former Reserve Bank Governor Don Brash knows what has to be done. He rightly argues that the future ability to look after our retirees depends not on the Cullen Fund or any form of "compulsory" or privatised superannuation but on our productive sector.
We must greatly increase the size of our economic cake.
In other words, think big and plug into the world.
• John Gascoigne is a Cambridge-based economic commentator.