Protesters clash with police officers during a demonstration in Lyon, central France, after President Emmanuel Macron forced a higher retirement age through parliament without a vote. Photo / AP
Protesters clash with police officers during a demonstration in Lyon, central France, after President Emmanuel Macron forced a higher retirement age through parliament without a vote. Photo / AP
OPINION
The violent strikes roiling France over raising the retirement age from 62 to 64 have reignited the debate about the qualifying age for our own National Superannuation Scheme.
Those who advocate raising our eligibility age from 65 to 67 insist that, left unchanged, escalating fiscal pressures from our ageingpopulation will ensure our superannuation scheme will become unaffordable by 2050.
Claims about the unsustainability of our world-leading superannuation scheme are nothing new. In the 1970s, economists argued that Robert Muldoon’s “generous, unsustainable superannuation scheme” was projected to cost between $12 to $15 billion by 2010 and was demonstrably unaffordable.
How would the country stump up with that sort of money? Muldoon’s critics cynically asked. Then 2010 came and went. And the gross cost of the superannuation scheme was $10b or 4 per cent of national income.
Throughout the developed world, ageing populations are set to impose enormous strains on public finances. This trend explains the move by many countries towards raising their retirement ages.
A protester kicks a tear gas canister in front of the Opera at the end of a rally in Paris after President Emmanuel Macron enflamed public anger by forcing a higher retirement age through parliament without a vote. Photo / AP
Because France has had to face this politically unpalatable fact, New Zealand, the argument goes, must also.
But those who conflate the situation in France and other fully developed nations with our own situation could not be more completely wrong. New Zealand is not France.
Nations’ circumstances, like those of individuals, can vary enormously. Accordingly, what might appear to be an intractable problem for one country may not necessarily be an issue for another. The sustainability of public pensions across countries in the developed world is no exception to the rule.
The pension system in France is extraordinarily complex, honeycombed with inequities, particularly for women. It is costly to administer and at 14 per cent of GDP and rising, hugely expensive.
By contrast, Sir Robert Muldoon’s world-leading superannuation scheme, gloriously uncomplicated, paid out of national income, does not disadvantage women (unlike KiwiSaver and compulsory superannuation), is very inexpensive to administer and presently costs around 5 per cent of GDP. And because our superannuation scheme is taxed as income, its net cost is even lower.
Recent Treasury projections confirm the cost of the National Superannuation Scheme will rise to around 8 per cent of GDP by 2060. But even if the cost at the peak of the demographic bulge were to reach 10 per cent of GDP for example, that future expenditure would still be substantially below the present cost of public pensions across the developed world.
But there is another factor to all this - one inexcusably overlooked by the commentariat. And it is critical.
New Zealand, ravaged by several decades of neoliberalism (albeit neoliberal-lite in more recent years), languishes as a down-at-heel, low-wage agricultural export nation in long-term economic decline and societal disintegration.
But economic decline is not irreversible. If the political will exists (and that is questionable) we could change direction.
John Gascoigne. Photo / Supplied
Specifically, that would involve economic regime change from neoliberal-lite to an export-led, developmental mixed economy based on a solid, bi-partisan commitment to our transformation into an export powerhouse. In other words, think big and plug into the world.
Our goal as a nation should be to double our national income by 2050.
Ideally, if we reach 2050 with a population of 5 million and a $500b economy (comparable to Denmark or Argentina) the projected $35b cost of the National Superannuation Scheme would be around 7 per cent of GDP. Once over the demographic bulge, the cost of the superannuation scheme would progressively fall away with fewer superannuitants.
Our entire focus should be on raising our living standards, not our retirement age. Christopher Luxon, please take note.
- John Gascoigne is a Cambridge-based economic commentator.
