2. CRAIG FOSS (National—Tukituki) Link to this
to the Minister of Finance
Have after-tax average weekly earnings been rising faster than inflation; if so, what are the implications for rates of New Zealand Superannuation?
Hon BILL ENGLISH (Minister of Finance) Link to this
Yes, as measured by the quarterly employment survey, after-tax weekly earnings rose 6.8 percent last year. That is significantly greater than annual inflation of 4 percent. This has implications for superannuation rates under Section 16 of the New Zealand Superannuation and Retirement Income Act, which, as I recall, was passed by the previous Government. The fact that after-tax earnings have risen significantly faster than inflation means that superannuation rates get an extra increase on 1 April this year. That extra increase was necessary to maintain the married couple rate of 66 percent of after-tax weekly earnings, which are rising significantly faster than inflation.
There are a number of different rates of superannuation, but to use the total married couple rate per fortnight, from 1 April this went up per person by $11.90 a fortnight. Over a quarter of this is due to the fact that after-tax earnings have risen significantly faster than inflation. That, of course, is not a political assertion; that is a matter of fact according to the measures agreed by this Parliament over the last 20 years and reconfirmed by the previous Government when it passed a new Act in 2001. So the increases in national superannuation prove beyond doubt that after-tax earnings in New Zealand are rising faster than inflation.
Yes, between 1 October 2010 and 1 April 2011 superannuitants received a special 6-month payment to compensate them in advance of the normal cycle for the rise in GST. From 1 April onwards the normal inflation adjustment including the GST impact has taken over, so there is no longer any need for a special payment. Superannuitants can be assured that the increase in national superannuation on 1 April fully compensates them for GST and that it is ongoing and permanent.
As I mentioned, the increase in the married couple rate per person since 1 April 2008 is actually now $83 a fortnight. This works out as a real increase of 8.5 percent in national superannuation over the last 3 years, and a significant cause of that has been the reduction in tax rates and the increase in the after-tax wage beyond the increase in inflation. Just by comparison, the superannuation rate went up by 8.5 percent in real terms under the previous Government, but it took 9 years to increase by as much as that.