Shearer: Superannuation 'status quo is unsustainable'

David Shearer says austerity is not the answer. File photo / Mark Mitchell

Labour leader David Shearer is calling for a cross-party agreement on superannuation saying the status quo is unsustainable.

He made the call in notes for a pre-Budget speech in Christchurch tonight.

He said that National has failed to provide the economic leadership needed to take New Zealand forward.

"I am willing to face up to the looming crunch over the future cost of superannuation," he said.

National's economic plan - to be spelled out in Thursday's Budget - would be missing any thought around how New Zealand would meet the future costs of superannuation as more people reached retirement, he said.

"Labour will be straight - the status quo is unsustainable.

"We need a genuine cross-party solution that ensures a fair outcome for everyone, especially those who need to retire earlier and as we move to a gradual rise in retirement age."

Shortly before last November's election Labour introduced a policy of gradually raising the age of entitlement to superannuation from 65 to 67.

Shearer now acknowledges that the party gave itself too little time to sell its policy but it will keep it.

National, Labour and the Alliance signed a cross-party accord on superannuation in 1993, which

- agreed to the phase in of the age of entitlement (from 61) to 65 by 2001.

- setting a floor and a ceiling for the rate: 65 per cent to 72 per cent of the average weekly ordinary time earnings after tax.

- Cost of living adjustments in April each year.

Shearer said in the speech that National lacks a plan to build New Zealand's savings in the way that Australia did.

Australia already saved nine per cent of its income in a superannuation scheme and over the next few years that would rise to 12 per cent.

"That's one of the reasons Australia is racing ahead of us.

"New Zealand needed to do more to increase because it was far too dependent on savings from other countries."

He said that last week he went to visit a large foreign-owned forestry company that wanted more New Zealand equity in their business.

"But they pointed out to me there is a shortage of large New Zealand investment funds that can make long term investments in the hundreds of millions of dollars in a cyclical asset like forests.

"Our capital pools are too shallow because we are not saving enough. At the same time an entire generation of New Zealanders is struggling to afford their first home."

Shearer said there were 5.6 working people for every retired person but in less than 30 years that would be about 2.5 people.

Labour went into the last election with a policy to make the Kiwisaver workplace savings scheme compulsory by 2014 and to increase the employers' contribution from 3 per cent to 7 per cent by 2022.