Bill English made the wrong decision to cut contributions to the New Zealand Superannuation Fund (commonly referred to as the Cullen Fund). He had an opportunity to fix that mistake in this year’s Budget. He didn’t take it. In fact he’s even gone back on his promise to resume contributions once the Crown accounts move back into surplus. He’d rather leave the cupboard bare for future generations.
The latest population projections released by Statistics New Zealand clearly show just how short-sighted that decision is. The share of workers aged 65 and over is projected to grow from 12 percent in 2006 to 21 percent in 2061. More than double the number of people will be claiming NZ Super, not to mention the extra costs in healthcare. Instead of preparing for that huge demographic shift, John Key and Bill English have prioritised tax cuts that disproportionately go to those on the highest incomes.
English claims that he would be borrowing to make contributions to the fund. But he seems very happy to borrow to pay for tax cuts. In fact had he continued to contribute to the fund over the past year, he’d have made the Crown a tidy little profit. Since Budget 2009 the Super Fund has increased by $3.6 billion, and in the nine months to 31 March it gained $891 million more than Treasury forecast on its investment portfolio.
We all need to face some cold hard realities here. The ‘retirement boom’ will really start to kick in over the next 10-15 years. Absent significant changes, we can’t afford it. Those enjoying tax cuts today may get a rude shock in another decade when the then government has to make a tough decision between cutting entitlements or significantly increasing taxes to pay for them. No doubt by then our smiling and waving PM will have skipped off to Hawaii leaving that particular mess for someone else to sort out…