As global political tragics, we talk to people who work on political campaigns around the world. They often say ‘across the democratic world, the names are different, but the themes are the same.’
One theme is this. ‘Anyone who can read a balance sheet knows [insert country here]’s Government is going broke, but nobody can win an election doing anything about it.’
It’s always easier, they say, to get votes by kicking the can down the road. Who’d vote for the people whose rhetoric imports pain from the future?
That is the pollster’s view, but here is the patriot’s view: We love this country and we don’t want to see it suffer far worse pain because we let the fiscal catastrophe happen to us.
We’ve studied its history, as well as the history of other countries. We’ve learned any country that fails to define its future gets that future defined for it by outside forces.
New Zealand Treasury Bonds are trading at over five per cent right now. Besides a brief peak in October 2023, that is the highest in over a decade. Rising interest rates could tip New Zealand into a debt spiral and force sudden changes including pension reform.
[Yesterday] morning Chris Hipkins gave us a perfect example of political cowardice sending a democracy broke. He said we don’t need to look at superannuation. The government just has to make “the right choices.”
Of course, he didn’t say what those choices are, but it’s worth running through them.
NZ Super costs $24.7 billion this year. That’s already more than the government spends on all of education ($21.2 billion), and about three-quarters of what it spends on health.
On Treasury’s numbers, superannuation goes up by $1.6 billion a year. That’s more than the $1.37 billion this year’s Budget found to cover every cost pressure in the health system. It would pay about 17,000 nurses or teachers.
If he doesn’t think we need to look at that, here are the choices:
Cut. Hospitals, schools and police compete for whatever’s left after super takes its increase first, every year.
Tax. The annual cost increases for super are $1.6 billion. Labour’s new capital gains tax raises $700 million at best. So new taxes? Working Kiwis pay more so the age never moves.
Spending freeze. Labour wouldn’t do this. But they could cancel the $2.4 billion per year allowance for new spending. Almost nothing new for health, education or law and order, because it’s almost all sucked up by rising Super costs.
Borrow. Put it on the credit card and send the bill to the next generation. Labour has done this before — now taxpayers are paying $10 billion a year in interest on their debt.
There is another choice. ACT would lift the age by three months a year, from 65 today to 67 by 2035. Besides the gradual, planned rise, there would be three conditions:
- Compassionate access for people who worked more than 20 years in a physical job.
- Keep KiwiSaver access at 65 so people can still access that regardless of the Super age.
- Take tax off KiwiSaver earnings so that, thanks to the miracle of compound interest, people have more to retire on, and keep getting greater gains in retirement.
By the time the age reaches 67, we will be saving $4.3 billion a year. That is real money that won’t become debt for those currently too young to vote. There is another moral dimension to this:
The age has been stuck at 65 for 25 years. In that time, the age people actually stop working has grown 2.5 years, and life expectancy has grown by three years. Moving to 67 by 2035 will still leave people retired and on Super longer than people could have expected 25 years ago.
Perhaps our foreign friends are right. Perhaps no voter will thank a politician for saying the emperor has no clothes, and will instead vote for those promising to kick the can down the road.
Perhaps, perhaps, perhaps. But perhaps New Zealand really is an exception. Perhaps the exception is having a political party with the sheer courage to say the emperor has no clothes and take a stand.
New Zealand can choose to balance the books with no new taxes, but it requires courage to make hard choices now instead of kicking the can down the road to feather a politicians’ own nest while the country goes broke.
If you believe New Zealand needs honesty, courage and leadership on responsible spending, we ask you to stand with the only Party standing for it right now, the Association of Consumers and Taxpayers.