1. CHRIS TREMAIN (National—Napier) Link to this
to the Minister of Finance
What measures will the Government consider in the Budget to ensure the long-term security of New Zealand superannuation?
Hon BILL ENGLISH (Minister of Finance) Link to this
The Government has given a strong commitment to maintaining New Zealand superannuation. Entitlements will remain at 66 percent of the average wage after tax, to be paid from age 65. Future funding at this level is locked into the Government’s long-term spending projections. The best guarantee of New Zealand superannuation entitlements is sound Government finances and a healthy economy that can afford and deliver future retirement incomes. That is what the Budget will focus on.
Such investments over the next few years mean that the Government accumulates investment assets on one side of the balance sheet while increasing public debt on the other. As the Crown accounts released today show, such investments can be risky. Over recent months the New Zealand Superannuation Fund has lost many billions of dollars in value. The Government accounts are, in fact, around $5.5 billion below expectations. As entitlements are guaranteed, this loss is borne by taxpayers, and is not available to be spent elsewhere or returned via lower taxes. The Government is carefully considering how much risk it is appropriate to bear, so that it can avoid such losses in the future.
It makes sense that the cost of an ageing population be smoothed over time—and, in fact, National voted for the legislation when it came in. However, that requires the Government to run stronger Budget balances before the baby boomers retire than it otherwise would have done. Reducing debt is also an approach that can help deal with the demographics of an ageing population and provide a safe and sound guarantee that future superannuation payments will be affordable. I am a bit surprised that Labour, which used to believe in running surpluses in order to finance an ageing population, now believes that we should spend and run up debt.
Hon David ParkerWhy does the Minister hide from the reality that cutting the $2.2 billion due to the New Zealand Superannuation Fund means cuts to future superannuation entitlements; and does he think that New Zealanders are so gullible that they will believe his claims to the contrary when they know that when National was last in Government and he was the Minister of Finance, National repeatedly cut superannuation?
Any decisions about that will be announced in the Budget. The member should go back and read the legislation his own party drew up. It allowed for Governments to make decisions in each Budget about what the contribution should be, and to explain any departure from the standard formula for the contribution. That was because the fund was set up on the assumption that there would be permanent surpluses. Because of Labour’s reckless spending and a global recession, there no longer are permanent surpluses.
Why does the Minister not fess up that his tax cuts, of which one-third go to the top 3 percent of income earners, were not just unfair but a substantial cause of the structural deficit that New Zealand now faces, and are the reason he is now cutting payments to fund future superannuation?
That is a bit rich coming from Labour, whose tax cuts had exactly the same fiscal impact as ours did. [ Interruption] Ours were not less; ours were about the same. This Government is committed to a longer-term increase in economic performance, and lower taxes will increase our economic performance.
John BoscawenDoes the Minister agree that the only way to secure the future of New Zealand’s superannuation is stronger economic and productivity growth; if so, would he care to indicate to the House what progress has been made on cutting wasteful Government expenditure, freeing up the labour market, and reducing the tax burden?
I think the events of the last 6 months have shown that no amount of shifting around money in the Government accounts actually guarantees anything. I do agree with the member that high growth and high productivity are the keys to providing a decent retirement income for New Zealanders. That is why this Government is focused on lifting our growth performance and lifting our productivity—because without that, superannuation entitlements will be at risk in the future.
Hon Sir Roger Douglas Link to this
How does the Minister intend to safeguard the long-term security of New Zealand superannuation from politicians like Muldoon and Peters, who were prepared to make unaffordable promises in order to win votes from the retired?
The voters seem to have dealt with, at least, the more recent version of Mr Muldoon; he is not here any more. The Government is walking a well-judged line between maintaining entitlements in order to give people a sense of security in the shorter term, and measures to lift our economic productivity and growth in the longer term. In the longer term, it is growth and productivity that guarantee entitlements, not politicians’ wish lists.