Business opposes 65 at 65

The country’s largest business lobby group has come out firmly against the New Zealand Superannuation Fund, and also against the cross-party consensus on the ’65 at 65’ level of superannuation payments.

Representatives from Business New Zealand, appearing before Parliament’s Finance and Expenditure Select Committee on Wednesday as part of the committee’s review of the Budget Policy Statement, said that there is growing concern in the business community about the superannuation fund, particularly as the government appeared to be increasing gross crown debt to pay for contributions.

But it is particularly concerned about the decision to re-link superannuation payments to 65% of the net average wage, instead of adjusting payments for inflation.

The cost of that move in the first year was $200 million, and this is likely to increase.

"Re-linking New Zealand Superannuation to 65% of the wage was a major blow to the scheme’s sustainablity," chief executive Simon Carlaw told MPs. All parties in Parliament, except Act, are now in favour of the ’65 at 65’ regime.

Business New Zealand believes the previous regime would have been sustainable if the government had made the tax regime for savings and investment more user-friendly, and continued to reduce government debt, thus reducing debt service costs.

The declaration came as part of a wider criticism of the Labour-Alliance coalition government’s general policy direction. While the organisation conceded it could understand the wish to re-balance social policy priorities following the economic reforms of the 1980s and 1990s, there was now a need to re-focus on economic growth.

The organisation conceded that thus far the government had been a careful fiscal manager, but is concerned about projected increases over the next few years.

And the organisation reiterated its stand that the government needs to get the share to the state down to 30% of the country’s GDP.

Asked by MPs which areas should be cut to achieve this, the organisation named superannuation as the biggest priority.

"The key issue," said Business New Zealand economist Peter Crawford, "is to increase economic growth and increase the average income for New Zealanders. Linking superannuation payments to the average wage places a major drag on the economy."

The organisation also criticised the current tax regime for savings and investments, and the fact that the company tax rate had not been lowered since the 1980s.

Federated Farmers was similarly critical of the government’s approach, and particularly of the impact increased government borrowing was having on the economy.

"This borrowing has already begun to have the effect of increasing the 10 year bond rates," it said citing National Bank research.

Federated Farmers favours tax cuts for people to save for their future, with the government continuing to support those who cannot pay for their retirement.

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

Commenting is closed