New Zealand, according to the OECD, the Organisation for Economic Cooperation and Development, needs to reform the electricity sector, expand and strengthen capital markets, speed up digitisation of the health sector, and reform the pension. The OECD joined other international agencies in calling for the age of eligibility for super to be raised by indexing it to life expectancy with measures to take account of different ethnicities and work backgrounds. A bit like in Australia, if you're in a tough job that is tough on your body and you physically cannot work any longer, then you can get the pension a bit earlier, it just won't be as much as the full pension. 

If Bill English had been able to form a coalition government when he was leading National, we would have raised the age of super by now to 67. But it doesn't, for those of you who are concerned, go from 65 to 67 overnight. You'll remember when National was looking at raising the age to 67 – it would just increase six months each year and it wouldn't have started until the 1st of July 2037. So it doesn't happen overnight, there's plenty of time for people to get used to it, it's phased in slowly, it's not a huge seismic shock. What is a huge seismic shock is the cost of super to the national economy. 

Simplicity Managing Director Sam Stubbs says super is a huge problem that needs to be addressed urgently. He says without change, by 2060 all of our income tax will only be able to pay for health and national super, there'll be no money left for anything else – unless we suddenly get incredibly wealthy. But if things stay as they are pretty much, our GDP stays the same, the increase in the number of people needing healthcare and national Super will be such that our income tax will only pay for that. There'll be nothing for roads, nothing for schools, nothing for any of the things we like to have. 

“What about the Cullen Fund?” I hear you ask, and that's a good question. The fund was never a fully funded Super scheme; it was just designed to smooth out some of the population shocks so that it wouldn't completely cripple the economy as a big cohort of the population reached superannuation age. It's expected to contribute roughly 3.3-3.5% of the total super cost by 2040. It may well get up to covering 10% of the costs by 2080, but certainly not 100% 

Finance Minister Nicola Willis was sort of trying to calm things down. She told Mike Hosking that changes don't need to be as dramatic as the OECD suggests, but do need to happen. 

“In the 1960s there were around seven New Zealanders of working age for every person aged 65 or older. Today there are four and by 2065 there will only be two. So that burden on our taxpayers is increasing significantly. Already between last year and the end of the fiscal period, the cost of New Zealand superannuation will increase by about $6 billion a year. It's rising as a proportion of what we tax you for, so it's currently just over 16%, it's going to rise to over 20%. And every dollar we're spending on superannuation is a dollar not available for education, for health, for infrastructure. So gradually over time some changes will need to be made. They don't need to be as dramatic as the OECD suggests, but some adjustments will be needed.” 

Well, it will need to be as dramatic unless political parties bite the bullet. And in this case, there would need to be, and Chris Hipkins said himself, that he was open to having cross party discussions about what to do around the super. Because without change, without sensible, orderly change, it will need to be dramatic. Independent economist Cameron Bagrie told Heather du Plessis Allan last night he's a fan of means testing the super. 

“We're on an unsustainable fiscal path. You know, the Government needs to bite the bullet in regards to making some pretty big, hard, bold decisions. We've been talking about this sort of stuff for 30 years. I can remember modelling this sort of stuff in the 1990s when I was at New Zealand Treasury 30 years ago. And all that's happened is that we've kicked the can down the road. You know, a little bit of stuff has been brought in, New Zealand Super Fund, the KiwiSaver contributions, but when push comes to shove here, we need to address the entitlement side of New Zealand Superannuation and that comes through, you know, potentially lifting the age or means testing has to come into the equation.” 

So what would you be a fan of? And this is accepting that we cannot continue with the status quo – it’s unsustainable and everybody has said that. You might not believe the media, you might not believe politicians, but independent organisations have said this, Treasury has said this, economists, as Cameron Bagrie was saying, from as far back as the 1980s, 1990s were saying there needs to be provision made, it can't go on the way it's going. The advantage for young people or younger people, I guess, is that they have KiwiSaver, which enables them to contribute a considerable amount towards a comfortable retirement. The longer you're in it, the better it is.

So many decisions we should have made many, many years ago. You look back and we'd be in a far better position, far more able to weather economic shocks than we are now had we made those hard calls 20, 30, 40, 50 years ago. We need to make a hard call now, not kick the can down the road as we have been doing, government after government, voting cohort after voting cohort.  

So what particular poison are you willing to swallow? Bringing back what Bill English proposed, raising the age of entitlement to 67 and starting from the 1st of July 2037, raising the age at which you can get it by six months? So you'll be 65 years and six months. 65 years and six months is not that burdensome, is it? There are other ways of doing it gently without a brutal overnight decision. Is means testing the way to go? I would always want to see an allowance for somebody who's had a really tough job, to be able to withdraw it or apply for it earlier but just get a little bit less. We need to have a sensible discussion. We can't just bury our heads in the sand as successive voters have done over generations, and governments are going to have to be bold enough to make the call. Should it be a cross-party decision? Yeah, I think it should be. There should be a collective agreement from all parties that this is what needs to happen for future generations. 

New Zealand, according to the OECD, the Organisation for Economic Cooperation and Development, needs to reform the electricity sector, expand and strengthen capital markets, speed up digitisation of the health sector, and reform the pension. The OECD joined other international agencies in calling for the age of eligibility for super to be raised by indexing it to life expectancy with measures to take account of different ethnicities and work backgrounds. A bit like in Australia, if you're in a tough job that is tough on your body and you physically cannot work any longer, then you can get the pension a bit earlier, it just won't be as much as the full pension.&nbsp;
If Bill English had been able to form a coalition government when he was leading National, we would have raised the age of super by now to 67. But it doesn't, for those of you who are concerned, go from 65 to 67 overnight. You'll remember when National was looking at raising the age to 67 – it would just increase six months each year and it wouldn't have started until the 1st of July 2037. So it doesn't happen overnight, there's plenty of time for people to get used to it, it's phased in slowly, it's not a huge seismic shock. What is a huge seismic shock is the cost of super to the national economy.&nbsp;
Simplicity Managing Director Sam Stubbs says super is a huge problem that needs to be addressed urgently. He says without change, by 2060 all of our income tax will only be able to pay for health and national super, there'll be no money left for anything else – unless we suddenly get incredibly wealthy. But if things stay as they are pretty much, our GDP stays the same, the increase in the number of people needing healthcare and national Super will be such that our income tax will only pay for that. There'll be nothing for roads, nothing for schools, nothing for any of the things we like to have.&nbsp;
“What about the Cullen Fund?” I hear you ask, and that's a good question. The fund was never a fully funded Super scheme; it was just designed to smooth out some of the population shocks so that it wouldn't completely cripple the economy as a big cohort of the population reached superannuation age. It's expected to contribute roughly 3.3-3.5% of the total super cost by 2040. It may well get up to covering 10% of the costs by 2080, but certainly not 100%&nbsp;
Finance Minister Nicola Willis was sort of trying to calm things down. She told Mike Hosking that changes don't need to be as dramatic as the OECD suggests, but do need to happen.&nbsp;
“In the 1960s there were around seven New Zealanders of working age for every person aged 65 or older. Today there are four and by 2065 there will only be two. So that burden on our taxpayers is increasing significantly. Already between last year and the end of the fiscal period, the cost of New Zealand superannuation will increase by about $6 billion a year. It's rising as a proportion of what we tax you for, so it's currently just over 16%, it's going to rise to over 20%. And every dollar we're spending on superannuation is a dollar not available for education, for health, for infrastructure. So gradually over time some changes will need to be made. They don't need to be as dramatic as the OECD suggests, but some adjustments will be needed.”&nbsp;
Well, it will need to be as dramatic unless political parties bite the bullet. And in this case, there would need to be, and Chris Hipkins said himself, that he was open to having cross party discussions about what to do around the super. Because without change, without sensible, orderly change, it will need to be dramatic. Independent economist Cameron Bagrie told Heather du Plessis Allan last night he's a fan of means testing the super.&nbsp;
“We're on an unsustainable fiscal path. You know, the Government needs to bite the bullet in regards to making some pretty big, hard, bold decisions. We've been talking about this sort of stuff for 30 years. I can remember modelling this sort of stuff in the 1990s when I was at New Zealand Treasury 30 years ago. And all that's happened is that we've kicked the can down the road. You know, a little bit of stuff has been brought in, New Zealand Super Fund, the KiwiSaver contributions, but when push comes to shove here, we need to address the entitlement side of New Zealand Superannuation and that comes through, you know, potentially lifting the age or means testing has to come into the equation.”&nbsp;
So what would you be a fan of? And this is accepting that we cannot continue with the status quo – it’s unsustainable and everybody has said that. You might not believe the media, you might not believe politicians, but independent organisations have said this, Treasury has said this, economists, as Cameron Bagrie was saying, from as far back as the 1980s, 1990s were saying there needs to be provision made, it can't go on the way it's going. The advantage for young people or younger people, I guess, is that they have KiwiSaver, which enables them to contribute a considerable amount towards a comfortable retirement. The longer you're in it, the better it is.
So many decisions we should have made many, many years ago. You look back and we'd be in a far better position, far more able to weather economic shocks than we are now had we made those hard calls 20, 30, 40, 50 years ago. We need to make a hard call now, not kick the can down the road as we have been doing, government after government, voting cohort after voting cohort. &nbsp;
So what particular poison are you willing to swallow? Bringing back what Bill English proposed, raising the age of entitlement to 67 and starting from the 1st of July 2037, raising the age at which you can get it by six months? So you'll be 65 years and six months. 65 years and six months is not that burdensome, is it? There are other ways of doing it gently without a brutal overnight decision. Is means testing the way to go? I would always want to see an allowance for somebody who's had a really tough job, to be able to withdraw it or apply for it earlier but just get a little bit less. We need to have a sensible discussion. We can't just bury our heads in the sand as successive voters have done over generations, and governments are going to have to be bold enough to make the call. Should it be a cross-party decision? Yeah, I think it should be. There should be a collective agreement from all parties that this is what needs to happen for future generations.&nbsp;

Join Kerre Woodham one of New Zealand’s best loved personalities as she dishes up a bold, sharp and energetic show Monday to Friday 9am-12md on Newstalk ZB. News, opinion, analysis, lifestyle and entertainment – we’ve got your morning listening covered.

Kerre Woodham Mornings Podcast

Kerre Woodham: The super situation - what poison are you willing to swallow?

https://api.omny.fm/orgs/7784f840-c291-422a-924b-ad9000bbad71/clips/352bac75-6599-4797-b1cb-b44400156d99/transcript