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An ACT candidate sets out how we can afford to pay for rising heathcare costs as our population ages without reducing services

An ACT candidate sets out how we can afford to pay for rising heathcare costs as our population ages without reducing services

By David Seymour*

The number one document that New Zealanders under 30 should be reading is a PDF buried on the Treasury website.

It’s here. It is the Long-term Fiscal Outlook.

There is a summary version here.

If government policy does not change then government debt will reach 200 per cent of GDP by 2060, around when today’s under thirties will be hoping to retire.

To give an idea of what that means, every year 4.5 million of us work away and produce approximately $200 billion of value, aka our GDP or Gross Domestic Product.

Government debt at 200 per cent of GDP means the government being $400 billion in debt. Another way to look at that is that the New Zealand government would owe $100,000 for every person alive (using very rounded figures here, but you get the point).

Just to make the point that this is a big deal, here are a couple more ways of looking at it:

When Greece became the economic disaster zone of the world a couple of years ago, its government had a debt of 160 per cent of GDP, we are headed for 200.

When New Zealand was hit by the greatest financial crisis since our grandparents were children, then had its second largest city destroyed by two massive earthquakes, government debt still only went from 17 per cent to 37.

One last fact… according to the Treasury, by 2060 one dollar in ten that you earn will be required just to pay the interest on the government’s debt.

This should be the number one issue for young voters. They should be asking all politicians; how does your party plan to save the government from being 200 per cent of GDP in debt when I retire?

How indeed?

The first step to solving any problem is understanding it. Why is the Treasury forecasting 200 per cent of GDP to be debt?

They’re actually forecasting that the share of the economy spent on education, law and order and ‘other’ will go down over the next 40 years.

What will go up is healthcare and superannuation, both of which will nearly double as the baby boomers retire and start needing more trips to hospital.

Coming off those, we get into a spiral where interest on money borrowed to pay for those two areas goes from a tiny 1.5 per cent of GDP to about 11 per cent.

To make New Zealand sustainable, we need to either reduce spending or increase government revenues.

ACT supports increasing the age at which you can get NZ Super. That helps significantly. We support indexing Super to inflation (what things cost) instead of wages (what other people earn). That helps some more, but we aren’t there yet.

Controlling healthcare costs sounds like an obvious solution, but it is very hard to do. The options are either provide fewer services of provide them more efficiently. We already have a pretty efficient system by most countries’ standards. It’s easy to say you want to reduce costs but much harder to decide which procedure which patient should miss out on.

So there may be some possible improvements, but at the end of the day the population is going to age and medical technology is going to get better and more expensive.

Another obvious option is to simply raise taxes. ACT completely opposes this. Fulfilling our obligations to older generations is going to be easier if we have a bigger, faster growing economy. But in a globalised world, higher taxes will chase away people and investment, actually making the problem worse.

Trying to tackle this problem by raising taxes could lead to a death spiral, where taxes have to be raised again and again to extract enough money as people and businesses leave.

That leads us to a counterintuitive conclusion. A better option might be to lower taxes.

ACT’s alternative budget proposes that we reduce government spending on corporate welfare and middle class welfare, and reduce all taxes to less than 24 per cent.

By doing so we would actually attract more investment jobs and growth.

We could get into a positive spiral where the economy grows faster and it’s actually easier to pay for the things we need including pensions and healthcare for the retired.

Tackling this problem should be the number one thing on the minds of voters under 30, because one way or another we’ll have to deal with it.

It’s one reason why other parties who promise even more spending are dreaming.

Our plan is to control Superannuation costs and grow the economy.

It’s a reason to vote for ACT, we are thinking about these long term issues and have a plan to deal with them on your behalf.


David Seymour is the ACT Party candidate for Epsom. This piece was first published here at Limiter.

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"ACT’s alternative budget proposes that we reduce government spending on corporate welfare and middle class welfare, and reduce all taxes to less than 24 per cent."
What's Corporate welfare?
I take it that middle class welfare is "working for families"
My own opinion is that I don't think that many people would vote for a party which proposes to reduce working for families and NZ super.
Young people may not like the amount the govt spends on NZ Super now but I'm picking that they would rather like the idea of getting it themselves when they retire.

Youngish person here.  I don't kid myself that there will be a pension when I'm at retirement age.  If there is it will be at age 75+ and be asset tested.  My personal view is a pension should be like the dole for poor old people not something everyone gets as of right.  

That was odd.  Started off with a valid concern about increasing cost of pensions leading to unsustainable debt.  Banged on a bit about ways we could fix it.  Growth of course popped up as a solution (if you find yourself in a hole dig faster).  Solution of course was to lower taxes which must lead to growth which 'fixes' the problem.  Of course it’s pretty tricky to have growth with a shrinking population so all growth does is kick the can down the road until you don't have growth.  What happens to a Ponzi scheme when you take away the growth (greater fools joining)?   When things do crash and burn people will say there is no way anyone could have predicted this ... except of course for those that did. 

What's Corporate welfare?
One guess.
Allowing large mutinational corporations to escape their NZ tax liabilities  by having profits  on the books of off shore entities.
Often at the same time paying low wages here, thereby requiring the NZ taxpayer to provide those families with some sort of welfare support.
The NZ taxpayer is aiding those company profits by not collecting the appropriate amount of company tax .

I thought the Comedy Festival had finished?

This is "if present trends continue" rubbish. If people want some good news, if present trends continue, the fastest 100m sprints will be in negative time, and I am sure we can use that time travel effect to help matters.

There is a genuine issue around retirement, and we would be much better do a small thing sooner and have it add up over time than have to do a big thing later. If ACT really wanted to do something about it, in this term they could have always gotten together with every other party in parliament other than the intransigent National to address the matter. But ACT are not really interested.

For that matter, does anyone want to do the "if present trends continue" calculation on what the ratio of Auckland house prices to average income will be in 2060?

One reason to vote Act then dh....the present trend wouldn't RMA would alter the course significantly.

Didn't you see their Epson candidate on The Nation?

No way, No how, is any development going to be allowed near Epsom. It was one of the most blatant Nimby appeals I've heard in a long time. If you want to stop any right to build in its tracks, ACT is your party based on that speech.

Act's present/ wanted "trend" cant continue either, its impossible to keep on growing when you start to run out of spare energy. 
Removing the RMA might buy you some years while a quick rape of NZ's one time resources and eco system destruction hold off the inevitable decline and line some ppls pockets.

For those asking for an explanation of corporate welfare, go to ACT's website and read their recently published alternative budget.

I agree tax cuts would be a good solution......more money in taxpayers pockets lessens the burdon on State.....the money is then able to circulate without the current limitations/confinements.......when business generates all income as the start point......and the State sucks some out for redistribution it has a spend factor limitation as the expansion capability is reduced. Any Political party serious on growing the economy has to acknowledge this highly important spend factor limitation. 
I'm not so sure that the retirement age has to be lifted. Many retirees also have business interests which will be eventually transferred to a new generation......the retirees assets etc don't disappear......they transfer at some point.  The BB private assets and earning potential will be quite significant in size and this is often a very much over-looked point. 
Health care costs have an enormous amount of inefficiency I think it is wrong to compare NZ against other countries and say NZ does it pretty well.
It is highly ineffficient to have non-medical Managers dictating who and when someone should receive surgery!.....The Surgeons are the best people to prioritise cases and they are surely the most qualified!
Theatres and equipment should not be lying idle unless of course there is no-one needing surgery.
We should be fully utilising the best equipment available. Often it is deemed to expensive to run and often other poorer diagnistic equipment is used which does not have the accuracy of the best equipment.....Patients frequently get misdiagnosed or don't get a proper diagnosis which is more expensive in the long run and often with severe consequences for the patient. 
NZ hospitals should have Osteopaths and Chinese trained Acupunturists in house. We should also be using a plethora of other treatments other than Western practices.

When it comes to state funding of medicine, I'm firmly of the opinion that the state should only fund treatments that can be proven to actually work better than a placebo in a double blind peer reviewed study. Anything else people can pay for themselves. So I think the state has no business funding Osteopathy, Acupuncture, or stockpiling Tamiflu.

I was referring more to the diagnostic tools.......e.g. it might be cheaper to put a finger up the bum but no damn good if the patient needed a camera.
Osteopaths and acupuncture are both very useful in trauma type situations and are currently not utilised efficiently and often only used when an injured person stumbles across those treaments on their own....both of these treatment types are proven safe, effective and efficient.
I agree on the stockpiling of Tamiflu and it is probably the tip of the iceberg of what goes on.....I also wonder about how good the testing of most drugs is.

If the doctor is happy with putting his finger where the sun doesnt go, well thats fine.  My experience is, if the doctor decides more is needed, you get the camera.  In fact if you had ever had a camera up where the sun dont shine, trust me a finger is prefered if only to avoid the drinking the sunstance that flushes you out almost un-controlably over 24 hours before hand.

I fail to see why more money in ppls pockets lessens the burden on the state, that frankly I cant see is linked. 
"Money circulates" um not necesarily.  If private entities dont spend it but "hoards" it,  this has a recessioanry effect.  If Govn on the other hand collects it and spends it this an expansioanry effect on the economy.  In fact in a recession that Govn spending has a multiplier and that is quite large, circa 1.5 to 1.
Re-distribution, no I dont agree.  The "rich" dont necessarily spend, so by having a progressive tax system, the poor who would spend all they have will spend more and the rich who dont spend all they have, well their spending doesnt change.
"grow", a) you cant keep growing in-definately on a finite planet, b) we have reached that limit due to energy constraints.  c) "important factor" is only one in your mind.
Healthcare, well actually we have a better life expectancy than the USA whos healthcare costs are x2 ours and yes we do do pretty well.  Surgeons pretty much do prioritize, the "pwers taht be" say we can do 1000 ppl and the surgeon picks the 1000 most urgent. At least this is my undersatnding of the system.  If ppl dont want to wait they pay for it themselves, or take out private health insurance.
The rest of your post comes across as utter rubbish.  Simple we have a restricted $ supply into the public health system and hence have to make choices on equipment, drugs and numbers.
"wierd  treatments" well simple, if you want to see a witch doctor you can pay....that is your choice outside of teh public provision.

More money in people's pockets allows for a withdrawal of WFF and other top-up benefits.
I don't agree that private entities hoard don't make money by hoarding it. That is a common mistake that many financially uneducated/illiterate people make.
The rich as you call them don't sit around on their butts they're out investing that is how they made their wealth so they are out spending on productive assets unlike other people who end up spending everything they earn on their basic needs.
Government spending might be able to measure the multiplier effect of their spending but how many of them measure the multiplier if the money stayed in the hands that were intelligent enough to earn it?  Socialists indulge in the redistribution propaganda as their whole livelihood is dependent upon it.
Many Surgeons get very little say on priortiy, they make recommendations for much of the surgery like hips, knees, ankles etc and by the time many people get the surgery done they have ruined some other joint etc from not having the surgery when it should have been done.  The surgeons do not do the scheduling!
Now you're showing your ignorance....weird treatments? I think you had better go do some more research and view the peer-reviewed studies on both Osteopathy and Acupuncture.  They are also widely recognised and approved treatments.

Dont know that it was the intention of the article but i'm now voting for mana.

A large % of people need to be able to retire at 65, totally against changing the retirement age.
To get around this Kiwi saver could be compulsory at 55, at what ever savings rate is required to cover the gap to the new NZ super age.
Health care will be interesting, there must be a lot of goverments willing to invest to lower future cost rather then extent longevity, one day you maybe visting a machine rather than a doctor for your health care needs. long as ACT deny man made climate change and suggest a way forward,  they are wasting their time chasing younger voters.  Beggars belief they haven't yet worked this out.