English’s super reset

Published in Insights, The New Zealand Initiative’s newsletter, 10 March 2017

You have to feel sorry for Prime Minister Bill English. Though he inherited a largely positive legacy from his predecessor, his young premiership is also saddled with the two large failures of the Key era: our out-of-control housing market and Key’s refusal to deal with NZ Super.

To English’s credit, he is showing a willingness to tackle both these issues.

On housing, he has made it clear that he is committed to reforming the supply side of the market (let’s hope he starts with it quickly).

And on Super, English just announced what Key had never dared: an increase in the age of eligibility.

There can be no doubt that such a change is needed. As life expectancy is increasing, of course the retirement age has to reflect this.

Sooner or later, a change in Super had to happen. Unlike Winston Peters’ claims, this is no secret plot by the National government. No, it is worse: it is the brutal logic of demographic arithmetic.

So we can be thankful to the Prime Minister for finally addressing the issue. Such changes are never popular, and the fact that English does not shy away from them deserves praise.

Having said that, English also deserves criticism because his proposal could have been much better.

I have three problems with English’s plans: the government’s lack of communication, the plan’s political probability of survival, and the schedule of the Super changes.

First, the introduction of the Super proposal was politically clumsy. The public was unprepared for the announcement. Even English appeared unaware of the timing of the release and was unwilling to answer simple questions about it just hours before the press conference. With this kind of political management, it is hard to shore up support.

Second, the plans might not survive this year’s election. As an election year announcement, Super has now become a bargaining chip for future coalition talks. In any case, plenty of things can happen between now and 2037.

Third, the phasing in of the eligibility changes should not happen in large chunks between 2037 and 2040. It lets baby-boomers walk off scot-free. Instead, it would be fairer to start the Super changes now and move the retirement age up gradually, say one month each year for the next 25 years.

Despite such criticism, it is still a most welcome move for English to restart the super debate. It had to happen.

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