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Photo: Getty Images
Photo: Getty Images

SocietyJuly 4, 2018

The richest group of New Zealanders just got some more government money

Photo: Getty Images
Photo: Getty Images

The winter warmer package came in on Sunday, an extra $20-$30 a week to help pay power bills. Only, a big part of it is going to those who need it least.

On Sunday, a whole bunch of New Zealanders who really need the help started receiving a little extra to help pay their power bills. They didn’t have to apply for it – just by virtue of being on a range of benefits or allowances, a little extra money started appearing in their accounts.

It’s called the ‘winter energy payment’, a government initiative to take the edge of what feels like an unseasonably cold winter (as of writing, the current temperature in the three main centres averages a balmy 5 degrees).

This will directly impact the children, parents, unemployed and young people who statistics show us are amongst the most materially deprived New Zealanders. Which is to say that the rhetoric Labour deployed in opposition – about putting a hand out to help those who need it most – is being realised.

Yet at the same time, another group of New Zealanders will also start receiving the payment. And while some amongst that group really will need the help, many, probably the majority, do not. In fact, taken in aggregate, this group is easily the most wealthy of us all.

I’m talking about those aged 65 and over, which statistics suggest are the most wealthy demographic cohort in New Zealand. This is thanks to the twin phenomena of universal pensions and rampant house price inflation. The universalism of NZ Super means that everyone over a certain age gets a payment which should be enough to live on each week. House price inflation means that homes bought for five figures in the 70s or 80s are now worth several multiples more – and thus the wealthiest cohort is also the least indebted:

Indeed, as tax expert Deborah Russell put it at a seminar I attended in 2017, prior to her election as MP for New Lynn, ‘we have essentially eliminated the old age poverty in New Zealand’.

This is a beautiful thing. The spectre of our elderly ending their lives in deprivation is one we rightly abhor. Since 1938 we have paid a pension to all those 65 and over, and the right to it has become politically untouchable.

(In a bleak irony, a recent survey suggested that just 30% of 25-34 year olds expect NZ Super to still exist when they reach retirement. Given the way free tertiary education and cheap housing have been removed once Boomers have benefitted from them, younger New Zealanders can be forgiven the pessimism.)

Yet it begs the question, why not target the payment according to need? We used to do this with Super, and the winter warmer targets younger New Zealanders on that basis – it doesn’t apply to those receiving Working for Families, for example, as the government has clearly judged that they are well enough off to survive without the payment.

One argument goes that superannuitants worked their whole lives, so are entitled to the pension no questions asked. Well, the pension is not pre-funded, so today’s workers are paying for today’s pensions. More importantly, this is about the payment, not about superannuation.

It’s also worth noting that 65 is not nearly so old as it once was. When super was first introduced relatively few made it to that ripe old age. Now advances in healthcare mean you’ll live for decades after reaching 65 – and less manual labour means you arrive their in better shape.

Indeed, more over 65s are working than ever before. My barber is in his seventies, and has been cutting hair in Auckland city for a half century. He joked that the payment would buy him a couple of cases of very nice wine. I didn’t find it that funny. And while some will spend it on power, for thousands of people, it’s also the reality of where this money will go.

Another argument in favour of the payment says there is a clear difference between wealth and income. Over 65s might be wealthy, but much of that wealth is tied up in property. Still, your wealth being tied up in property doesn’t mean it doesn’t exist, or that it’s inaccessible. Reverse mortgages, for example, can help provide income from properties, and given the enormous house price inflation we’ve seen over the past 30 years, a small reverse mortgage need not have a hugely material impact on the home owners wealth.

The idea that you ask older people who’ve paid off their mortgages to go back to the bank to fund a heating bill might strike some as abhorrent. Particularly given that many older people rely on their houses as a nest egg that will ultimately pass on to their children.

Only, let’s think about that, and what it really means. We know that older people are, by cohort, the wealthiest New Zealanders. We also know that, by cohort, they’re the whitest New Zealanders:

See where the bulges sit above? European New Zealanders are older and thus far more likely to own their own homes (and, increasingly, the homes of others as property investors). Europeans far outpace all other ethnic groups when it comes to home ownership, being around twice as likely to own their home as Māori, and more again than Pasifika.

Non-white New Zealanders tend to be young New Zealanders, which is to say that they’re more likely to be of working age. Pākehā New Zealanders are already the wealthiest and oldest group of us. And inheritance goes entirely untaxed in New Zealand.

So what we’re really saying is that the passing down of wealth from one group of Pākehā New Zealanders to another is such a sacred act that current taxpayers should protect it, rather than those who benefit from it.

There are arguments in favour of universalism. It’s very popular in the Scandinavian countries to which we often look for policy inspiration. Yet this payment really isn’t universal at all. It’s not for everyone – it’s for a specific group. Or rather, two specific groups. One set has been selected on the basis of real need. Another because we have chosen them to be immune from poverty. And, not content with having removed them from poverty, we now seem to compete amongst parties to see who can lavish yet more bonuses on them.

If we lived in Scandinavia, that would perhaps make sense. Those nations are old, established and rich nations, often with large sovereign wealth funds to help make things happen. They are picking what to fund as the next step, having plugged many of the most egregious gaps.

That doesn’t describe us. We are a young nation, and still have many awful social problems and inequities.

At least, some of us do. Look around for pictures of older New Zealanders in advertising. See how they look (happy), see what’s being sold to them (houses, cruises), see what ethnicity they are (Pākehā).

And then ask yourself, does that group really need an even warmer winter?

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