With NZ First blocking any change on the right and the left reluctant to touch a valued benefit, does it matter how good the arguments are, asks Catherine McGregor in today’s excerpt from The Bulletin.
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The OECD puts the cat among the pigeons
The OECD’s biennial report on New Zealand, released last week, has restarted a familiar debate. The Post’s Tom Pullar-Strecker says the Paris-based agency has “perhaps outdone itself” in the breadth of its recommendations this time, including calling for the super age to be indexed to life expectancy and for partial means-testing of payments. Treasury warned last year that to keep NZ Super at 5.1% of GDP, the eligibility age would need to rise to 72 over the next 40 years.
National last week confirmed it would campaign on lifting the eligibility age, with Luxon telling Newstalk ZB he would want to implement the policy “as soon as we get back in” for a second term. “This quite likely does not mean National will campaign on lifting the super age next year,” the Herald’s Thomas Coughlan notes. “Luxon’s 2023 superannuation policy was to begin lifting the age in 2037, phasing the age increase over a period of time.”
The Peters problem
As ever, NZ First is a fly in the ointment on the super question. Winston Peters blocked an eligibility age rise in the current coalition agreement, and this week he went further, declaring that his opposition was “not a bottom line, it’s a top line” in an interview with Tova O’Brien on Breakfast – ruling out not just an age rise but means-testing too.
But as The Post’s Henry Cooke observes (paywalled), reform is likely a non-starter whoever gets in. A left-wing government “seems unlikely to touch one of the final bastions of the universal welfare state”, while National and Act need NZ First in order to hold onto power. Labour’s own position is murky – Hipkins said he was “open to a conversation” about means-testing, then his office said this wasn’t Labour policy at all.
Other options to reduce costs
Cooke’s column identifies what he calls the fix nobody is talking about: changing the way NZ Super is indexed. Currently super tracks wage inflation, while all other benefits track price inflation. Because wages typically outpace prices, switching indexation would save a huge amount of money over time. The catch is it’s “deeply regressive”, with the median earner not better off under the changes until 2050.
Means-testing would be fairer in principle but brings its own complications. University of Auckland Business School associate professor Susan St John, speaking on the Herald’s The Front Page podcast, points to the Australian model as a cautionary tale, noting that penalties kick in at surprisingly low income thresholds. “I think most New Zealanders, if they looked at how it operated… I don’t think they would have a bar of it.”
The offshore escape hatch
While the political debate about the future of the retirement benefit runs in circles, some older New Zealanders are finding their own solution to the challenge of stretching their super. A piece by Stuff’s Annemarie Quill published this week and widely shared online profiled Dianne Sharma-Winter, 67, who moved to Da Lat, Vietnam, after finding she “couldn’t afford to eat or rent a house” in New Zealand. Her monthly costs now amount to around $600. A similar story ran in Business Insider about Jill Tozer, a New Zealander who retired to Penang a decade ago and pays around $450 a month for a three-bedroom apartment with a sea view.
The appeal of an overseas retirement is particularly strong for single women, who tend to leave the workforce with lower retirement balances than men. Brittany Goodwin of the charity Good Shepherd told Quill that single people are especially vulnerable to the cost of living crisis, with many older single women spending more than half their weekly income on housing alone. NZ Super is portable to most countries, and 271 New Zealanders over 65 left to live overseas last year – but, as Sharma-Winter notes, emigrating also means leaving family and community behind.
