Editorial: Bipartisan super fund welcome

Opinion

When politics makes progress it is usually because one of the alternative leading parties has quietly reconciled itself to a policy of the other. Normally it happens not by public announcement but tacit acceptance, either by the issue's absence from an election manifesto or, more often, by simply continuing the policy after a change of government. The National Party could have taken the quiet option on Labour's superannuation fund, saying nothing for the moment, promising at the next election merely to "review" the fund and then, if elected, deciding after a token review to continue the scheme.

To its credit, the National caucus has spared the country continued uncertainty. In openly reversing its opposition to the "Cullen fund", as it called it, the party has given the country reasonable certainty that at least a partial solution to the looming problem of paying for the baby boom's retirement might outlast the life of this Government. National's decision is as important as Michael Cullen's commitment, when Labour was in opposition, to the Reserve Bank's independent management of monetary policy. Just as Don Brash, then Reserve Bank Governor, was grateful for a bipartisan solution to inflation, Dr Cullen now welcomes Dr Brash's announcement, though to his discredit he cannot resist a few petty political jibes in the process.

A bipartisan approach is as essential to a long-term savings plan as it is to the containment of inflation and, indeed, a better national savings performance would in time permit inflation to be held in check with lower interest rates and less pressure on the dollar's exchange rates. In reversing its position National has essentially abandoned the argument, still heard from Act, that enforced savings are not the best way to improve the economy for the next generation of taxpayers and might in fact hinder economic growth.

That argument rests on the principle that people can make better investments with their own money than a public fund is likely to make. Therefore, says Act, the best long-term superannuation plan is to give back surplus revenue in tax cuts rather than use it to set up a public invested fund. National hopes to offer tax cuts as well as meet the projected contributions to the fund. It may not be able to have it both ways and the electorate will want a clear indication of which commitment is higher in National's priorities.

The fund, if well invested, will take a little of the pressure off the next generation of taxpayers, but only a little. Without the fund, the cost of superannuation to taxpayers would double to 8 per cent of GDP when the baby boom is fully in retirement. With contributions from the fund, the burden should drop to 6.5 per cent of GDP. That is still more than it costs today but it is less frightening and - perhaps more important - might be less resented by those who will bear the burden.

At heart, superannuation is an issue of fairness between generations. Baby boomers, the age group that has dominated governments for the past 20 years, have already imposed considerably more costs on their children. The younger generation faces tertiary education charges and debts that their parents did not, and they enter an economy more open and competitive, where business and employment are less secure. The younger generation have a right to expect that the baby boom will make some effort to save towards its own retirement while it can.

A generation ago when the baby boom was entering the workforce the National Party, supported by this newspaper, killed a funded superannuation scheme launched by a previous Labour Government. At the time, when most of the economy was under state command, there was reason to fear so large a fund, even at arm's-length from government direction. Times have changed and the economy is stronger for it. Now, with bipartisan backing, the New Zealand Superannuation Fund need not look back.