Spare Room Be our guest…

By Kirk MacGibbon

So here’s what I reckon about Bill English’s ‘Bill-ya-later’ budget. If nothing else, and make no mistake about this, the budget was a spineless and simpering effort that drove a stake through the heart of New Zealand Superannuation as a universal benefit available to everyone from age of 65.

John Key’s pledge to resign from Parliament if changes are made to entitlements or the value of the pension is worthless. He will not be around to reap the opprobrium that he will deserve from this gutless kowtowing to international capital.

We have had Rogernomics. We have had Ruthanasia. Maybe we should refer to Bill’s effort as the beginning of ‘Insulationism’? The only decent initiative to come out of the budget was a subsidy to enable people to insulate their houses properly. And even this wasn’t National party policy, but co-opted from the Greens.

Murray McCully’s contribution to New Zealand’s reputation as an active participant in a multilateral world was to slash our foreign aid by some $160 million. An awesome effort and consistent with his completely unimaginative ‘teach a man to fish’ foreign policy.

We don’t care if you’re poor and unable to feed yourself any more. Giving money to these types is clearly money down the drain and only prolongs their miserable efforts at survival. But if you’ve got an idea for a business that might lead to employment for some of these wastrels, then New Zealand’s got some help for you. If you live in the Pacific, because that’s where we can pretend we’re big boys.

There was nothing significant in the budget to address New Zealand’s extremely poor productivity levels, which languish somewhere around those of Greece, Spain, and Portugal – I mean these countries are great places to visit, but not the sort of company you really want to spend all your time with. Our productivity rates on a relative basis haven’t changed for the past 20 years – and we’re not in any danger of moving up any time soon.

There was nothing about continuing along the winding road to ‘economic transformation’. There was an interesting comment made by one economist pointing to the fact that if last year’s dairy payout of $7.90kg/milk solids was removed from the equation, this year’s $4.60 is only five cents higher than the ten year average.

So our ‘star exporter’ the Dairy Board, or Fonterra, with its million plus dollar CEO has done nothing to address the fact that much of our dairy exports are still commodities – butter and milk powder – the prices of which are highly sensitive to any changes in other countries’ domestic dairy policies. So the U.S announces the resumption of subsidies to its feedlot-driven dairy industry and we’re buggered. Again. Just like we were in the 70s, the 80s, the 90s…

But let’s return to superannuation, because what the National party has done has far-reaching consequences for retirement income provision in this country. For a start, let’s dispel any notion that the so-called ‘Cullen Fund’ was ever going to come close to making NZ Superannuation any more affordable over the long term. It was only ever a mechanism to ‘insulate’ the economy against the extreme ‘expense spike’ that will occur from around 2025, when the number of people of working age to retirement age will drop from around 1:8 to 1:4. In other words it is a big fund to insulate the baby boomers against having ‘their’ pension taken away, when the cost of providing that pension will rise from around 3.5% of GDP (over $7.7 billion in 08/09 according to Vote: MSD Estimates) to around 6% in 2030 and 9% in 2050.

In reality the baby boomer numbers are just too huge for the fund to make a universal pension affordable into the long term. It was only ever going to meet around 11 per cent of the total cost of NZ Super. And let’s not forget that the performance of the NZ Super Fund has been, well, pathetic. It’s achieved a rate of return since 2003 of just over three per cent. Just how pathetic is that?
That return is about half of the rate you or I could have achieved, knowing absolutely nothing about financial markets, if we’d simply put the whole lot into NZ Treasury bonds and forgot about it. But of course that wouldn’t have earned the managers any fees….

There is a rich irony here that I hope is not lost on the baby boomers. As a generation they’ve done precious little except spend money and expected the rest of us to save for them. Now, it looks like they’ve killed the golden goose and the golden eggs have been hocked off to pay the bills. Well, all I can say is hahaha…

The recent house price boom gifted this ‘selfish generation’ huge sums of money that they spent on everything from holiday homes to overseas holidays, new cars, expensive renovations, anything that caught their fancy. This is the same generation, remember, that reaped the rewards of free university education, largely free healthcare, free bloody everything in fact. And now they’ve blown it, they mortgaged themselves to fund a decade long spending spree while Gen X dutifully paid taxes some of which were used to set up a fund to look after them in retirement. Well, their little security blanket has been rudely ripped away by the cold winds of economic recession and many of them are starting to realise, too late, that maybe the rest of us aren’t going to be prepared to continue to bankroll their flights of fancy.

National has thrown them to the wolves. There will be no universal retirement income benefit at aged 65. It will have to be means-tested. There will be no retirement at age 65 either. The qualifying age will have to be lifted to at least 67 (just as they’ve done in Australia – and they have a massive fund built up via a compulsory savings scheme).

For us Generation Xers, sadly, the situation is the ‘same as it ever was’. We will have to make provision for our own retirement, and pay for the education of our kids and meet rising healthcare costs, and cope with a recession and cope with a house price slump that has put many of us into negative equity territory, and many of us will have to at least partially support our profligate parents in their dotage. I guess the good news is that our houses will be warm and toasty.

Read more posts by The Outlaw:
The Age of Insulationism
Budget 09
Super Cities and Charles Dickens
Giving Credit Where it’s Due
Independent Foreign Policy and Jetpacks
Of CEO Styles and Pedalling Wealth
Being Rankin’d and other tales from the Gulag Archipelago
Of History and Relevance
Humpty Dumpty and putting things back together again
Where’s Our Government?
Of Honeymoons and Little Men