National’s proposal to raise the Super age from 65 to 67 between 2037 and 2040 received a strong airing in Parliament on Tuesday, with Prime Minister Bill English and Finance Minister Steven Joyce receiving questions from all corners during Question Time.
New Zealand First leader Winston Peters asked how National could be trusted, claiming it had gone back on its word over superannuation eight times in recent memory.
ACT’s David Seymour asked why the government would not start raising the eligibility age now, in gradual steps. He pointed out that countries referenced by the government in a supporting document to its policy proposal would all start raising their eligibility ages during the 2020s.
The Maori Party’s Marama Fox sought guidance on how the government would treat workers who could not work through to 67 (the response was this would be reviewed in 2030). Green Party co-leader Metiria Turei asked Prime Minister Bill English why ‘generation X’ would bear the cost of the super policy.
And Labour’s Grant Robertson attacked Finance Minister Steven Joyce for not making contributions to the ‘Cullen’ superannuation fund during the past eight years, when the fund’s returns had exceeded the government’s cost of debt since 2009.
Unfair to raise age now
Joyce was first to respond. The age was not being raised now because it would be unfair to do so, he said. People affected would not have had long enough to plan for such a change, he said.
Meanwhile, he and English revealed that the proposal would mean that someone aged 67 once the changes took effect in over 20 years’ time, would actually spend a longer proportion of their life receiving super than someone at 65 now.
The government also did not need to rush into the age rise, Joyce said. New Zealand super costs were significantly lower as a percentage of GDP than other developed nations he said – 4.5% versus an OECD average of 9%.
Labour Party leader Andrew Little accused English of “kicking the can down the road for the next 20 years” on the issue. Little and Labour are against raising the age.
English invited Little to reconsider his stance – even pointing out previous comments made by the Labour leader a few years back on how superannuation cost increases were “scaring the bejesus” out of him.
Another reference from English was of new Labour Party co-leader Jacinda Ardern saying how soon superannuation costs would surpass the government’s education budget due to the setting of the universal age.
Gen-X to foot the bill?
It was up to English to defend the government against claims from the Green Party that Generation X would foot the bill for raising the age, having also had student loan debt and high house prices imposed on them.
English agreed that today’s 30-35 year olds did face pressures that required support. However, the government’s policies meant they faced a future with supportive lower taxes, economic growth and incomes that were rising moderately but consistently. He disagreed that the policy would fuel an inter-generational struggle.
Olive branch to NZ First
Winston Peters raised various policy “betrayals” by the National Party since the 1990s on super, including it replacing a 20-year timeframe for raising the age from 60 to 65 with an eight year timeframe in 1990, and cutting super payments from 65% of the average wage to 60% in 1996.
“How can New Zealanders trust National when they promised not to change superannuation settings in 2008, then stopped government contributions into the Cullen Fund, and then started taxing it?” he said.
English responded that Peters was probably better placed to remember policies of the 1990s than he was, to which he received the retort that “it’s a trust factor, son,” and a reminder that English too had been a cabinet minister during the decade.
However, English also sought to hold out an olive branch to Peters, perhaps with one eye on post-election coalition negotiations. He asked Peters to reconsider his stance, saying he believed the policy was one Peters could potentially support, partially if not fully.
Super fund returns vs govt debt costs
Labour Party finance spokesman Grant Robertson took on Joyce on a different aspect of the debate – the resumption of contributions to the Cullen Fund. The government has proposed only resuming payments into the fund when its net debt to GDP hits 20% - still a few years away.
Would the fund not be up $20bn if the government had not stopped contributions in 2009, Robertson asked, pointing out that its average return of 8% over that time was higher than the cost of government borrowing.
Joyce accepted the fund’s returns have been higher than the rates paid on government debt. However, he warned against making the comparison as global equity markets could have performed worse, and that the government would have had to borrow an extra $13bn to make the contributions (and add an extra $0.5bn in interest costs). Either that or raise taxes or cut spending.
The response didn’t sit well with Labour: “Where did the tax cut money come from,” they shouted back.