PM makes a case for compulsory super

Prime Minister John Key. Photo / Mark Mitchell

Prime Minister John Key is setting out a compelling case for compulsory superannuation and says public opinion has shifted since it was rejected in a 1997 referendum.

The Government hasn't made any decisions and is going to wait for recommendations from a panel of experts which will consider all the issues around retirement savings.

It would start with a blank sheet, with nothing ruled in or out, but there would be no change to existing national superannuation levels and eligibility, Mr Key said today.

He went on at his post-cabinet press conference to explain why it was "a serious issue" which had to be addressed.

"I want to see national savings rise so we are less reliant on foreign borrowing," he said.

"The global crisis showed that if you rely very heavily on foreign borrowing, as New Zealand is doing, eventually it catches up with you."

If nothing was done New Zealand would become more and more in debt and would become a riskier proposition for foreign lenders.

"Our total foreign debt is running at around 90 per cent of GDP," he said.

"That puts us up there with countries like Greece, Ireland and Iceland... the difference between them and us is that their debt is dominated by government borrowing, ours is dominated by private sector debt."

Mr Key said New Zealand's net debt to the world - government, households and businesses - had jumped from about $100 billion in 2000 to almost $180b today and was forecast to reach about $250b in 2014.

He said he thought there had been a shift in opinion since 92 per cent of voters rejected compulsory superannuation in the 1997 referendum.

"I think New Zealanders have come to realise they're going to live longer, so even with the retirement age at 65 they're going to be much more active in their retirement," he said.

"And relying solely on national super... puts them in a precarious position."

He said that was why so many people had joined KiwiSaver.

Mr Key said any decisions that came from the expert group's recommendations could become part of next year's budget, or they could be issues which National campaigned on at the next election.

"If we identify and are convinced New Zealand has a vulnerability because of its high foreign debt, and also that New Zealanders aren't as well prepared for their retirement as we might like them to be, then we need to consider our response," he said.

Labour's finance spokesman, David Cunliffe, said he didn't have a problem with the Government seeking advice from experts but he thought it surprising the Government had no plan of its own.

"Outsourcing the problem to a savings working group is tantamount to an admission that any effects from tax changes have been minimal, and National has nowhere else to go," he said.

Labour leader Phil Goff said his party was working on a superannuation policy and did not rule out a compulsory model.

"We absolutely have to increase our savings as a country," he said.

United Future leader Peter Dunne, who is Minister of Revenue, said his party had been backing a compulsory KiwiSaver scheme since 2007.

"When I raised it with Labour in the previous Parliament they weren't keen, when I raised it with the National Party earlier this term, they weren't keen," he said.

"I'm delighted to see they may be coming to the table."

- NZPA