New Zealand is ill-prepared for the pressures an aging population will bring, according to a recent Treasury report.
The baby boomers are starting to hit retirement, we are having fewer babies and are living longer. This means health and super costs will soar in the future.
Shamubeel Eaqub Photo: RNZ / Tom Furley
The report, which forecasts the financial burden of super and health costs 40 years hence, says we will need to borrow 200 percent of the country’s GDP to fund our aging population’s needs.
Economist Shamubeel Eaqub says that if the New Zealand government carries on as they are now, we will become a banana republic.
And he says Treasury puts out too much dense waffle and needs to do much better when it comes to communicating the big topics we need to grapple with
Yet according to Prime Minister John Key, this is highly unlikely because forecasts are notoriously inaccurate.
“The PM says that [level of debt] would never be allowed to happen and we would make some changes.
“Well, that’s the bloody point! What we want to do is make some changes now. We know were going to get older, we know that there are costs associated with it - the question is what are the changes are we going to make and can we make them early enough to make sure we’re well prepared and we don’t create a system that’s really unfair for future younger generations.”
Eaqub acknowledges the prime minister has a point about looking four decades into the future.
“What did Yogi Berrra say? ‘Forecasting is hard, especially about the future.
“But one thing we do know for sure is we get older, and we know that we’re living longer – these are very long term trends that are taking place.”
Eaqub says New Zealand’s tax structure needs an overhaul if we’re to get a handle on this problem.
“It’s currently very much based on spending and labour income. As we get older there are fewer people in work and that big burden of taxes will be too big for the small working population of young people.”
People believe they have a right to superannation when they retire because they have paid into to it all their working lives, but successive governments have not been setting aside money, says Eaqub.
“Super is completely unfunded, so we will have to either raise the entitlement age or introduce some form of means testing.”
So how do we ensure our politicians do what’s right, rather than what’s politically expedient?
“There are no votes to be gained by implementing these policies, even though it is the right thing to do. The public is so disengaged they’re not part of the conversation.
“It doesn’t matter what these governments promise today. At some point in the future we are going to have this battle between the ages, between the generations, and that is not a healthy thing.”
The public, Eaqub says, must demand action because “if we start now, it’ll hurt less”.
