Labour's double dose of tough love

Labour leader Phil Goff says he will do what is right for the country's future rather than what is easy. Photo / Mark Mitchell

Trailing badly in the polls, Labour has boldly offered voters a double dose of bitter medicine in the hope they buy the message the economy is ailing and that compulsory savings and longer working lives are the cure.

Phil Goff officially launched his party's election campaign yesterday by taking the "tough" decisions to raise the age of eligibility for New Zealand Superannuation to 67 and to make KiwiSaver compulsory.

The two policies push further than was expected from Labour, and both have previously been widely regarded as electoral poison.

But as with the capital gains tax plan, Mr Goff and Labour presented them as necessary to address long-standing economic imbalances which populist Prime Minister John Key lacked the courage to tackle.

"New Zealand is facing some very big issues - our high private debt, lack of savings, and the looming costs of an ageing population," Mr Goff said.

"I will do what's right for the future rather than what's easy for today."

Labour's increase in the age of eligibility for super would be graduated over 12 years between 2020 and 2033.

It would follow similar moves in other countries, including Australia and Britain, in response to the growing cost of universal pensions given ageing populations. Labour cited research estimating it would save the Crown $100 billion over 20 years to 2054.

However, Labour has moved to defuse one of the main criticisms of such a shift - that it disadvantages those unable to continue working beyond 65. It would introduce a "transition" payment at the same level as NZ Super which could be accessed between the age of 65 and 67. Mr Goff also pledged to keep the level of NZ Super for couples at 66 per cent of the average wage.

Under Labour's savings plan, KiwiSaver would become compulsory for all workers from 2014. It would remain optional for the self-employed.

Employee contributions would remain at 2 per cent rather than increasing to 3 per cent in 2013 as National plans.

However, employer contributions would increase by 0.5 per cent a year from 3 per cent in 2014 to 7 per cent by 2022.

Labour's finance spokesman, David Cunliffe, accepted that higher employer contributions would come at the expense of wage increases but at 0.5 per cent a year, the impact would be minor given Treasury expectations of 3.8 per cent wage growth.

To make the policy more affordable for the Crown, Mr Goff said Labour would stagger the $1000 kick-start for all new members over five years.

Mr Key, who has pledged to resign rather than lift the age of super entitlement from 65, dismissed the package as "just revision to the same old Labour: more borrowing, more spending, more taxation, more costs on business, and the cruel joke is you now have to work two years longer under Labour".