Sunday 30th October, 2011

Q+A debate on compulsory superannuation.

The debate has been transcribed below. The full length video interviews and panel discussions from this morning’s Q+A can be watched on tvnz.co.nz at, http://tvnz.co.nz/q-and-a-news

Q+A, 9-10am Sundays on TV ONE. Repeats at 9.10pm Sundays, 9:05am and 1:05pm Mondays on TVNZ 7

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DAVID PARKER & STEVEN JOYCE DEBATE COMPULSORY SUPERANNUATION
Moderated by GUYON ESPINER

GUYON ESPINER
Labour has been calling on National to engage in a debate on superannuation, so this morning we’re going to do just that with David Parker and Steven Joyce. Thank you very much for joining us. Can I start with you, David Parker? Isn’t this an attack on the working class, who need the money now and whose bodies may wear out earlier and actually need to retire at 65?

DAVID PARKER – Labour Assoc. Finance Spokesperson
Quite the reverse. This is ensuring the sustainability of superannuation. In respect of the people who are worn out because they’re doing heavy, manual jobs, we’ve said that they’ll get the equivalent of superannuation from 65 to 67.

GUYON Let’s talk about that in practical terms. Builders, plumbers, tradespeople - do you expect those kind of people to be working until they’re 67?

DAVID I think most of them will choose to, but some of them won’t be able to, and those who can’t because they’re worn out, we’ll make sure they’ll get a benefit or a payment equivalent to super.

GUYON And roughly what sort of percentage of people would be on that? Because you must know the rough numbers to actually have done your costings.

DAVID I would think less than 10% of the people who are currently on super from 65 to 67 will be on that transitional assistance because most people can work. In fact, already over a third of people are working past 65 to 67.

GUYON So about 10% of people would be getting it at 65, you think.

DAVID I think it would be less than 10%, but we really won’t know that until we get there.

GUYON Just before we come to you, Mr Joyce - timing on this. You were ruling this out - the Labour Party, the leader - as late as July, some of the comments I’ve seen, maybe even later than that. When did you actually decide to do this? Because as far as I’ve heard, it’s been the last two or three weeks.

STEVEN JOYCE – Assoc. Finance Minister
They wanted to pass polls.

DAVID We made the final decision in the last couple of weeks, but we didn’t say we’d never do it. We said, ‘One thing at a time’. At the time of the capital gains tax, they said, ‘What about superannuation?’ We said, ‘One thing at a time.’

GUYON Two weeks is a pretty short timeframe to launch such a major-

STEVEN Seen a few polls.

DAVID (CHUCKLES) The final decision was taken within the last two weeks, but of course there’s a lot of policy work that lies behind this, behind our capital gains tax proposals, because it’s plain that we need to change the status quo in order to get out of the hole we’re in.

GUYON Let’s bring you in, Mr Joyce. Isn’t it true that National knows this is an issue that must be addressed but simply does not have the political courage to do so?

STEVEN No, it’s absolute rubbish, and it’s interesting that David said that this is to get us out of a hole. The problem with this is that it doesn’t get us out of a hole at all. Labour are proposing to borrow around $16-$17 billion more over the next four or five years-

DAVID Not true. Not true.

STEVEN -and then say that somehow by putting super up out in 2022 that that’ll solve the problem. It’s about- Look, it’s like this. It’s like going down to the bank and saying, ‘Look, we know we’re maxed out on the mortgage. We wanna borrow a lot more dough. But here’s the good news – I’ve persuaded my wife to keep working when she retires instead of retiring in 12 years’ time.’ It’s rubbish.

DAVID Good politics, but bad economics and bad mathematics.

STEVEN No, very good mathematics, actually. I think it’s important-

GUYON We’ll talk about the economics in a minute, but I think if you could address my question, which is basically, is it sustainable to have pensions being paid out to 1.3 million New Zealanders in 2050? Do you think it’s sustainable to keep it at 65?

STEVEN Guyon, you’re talking about 2050. That is 40 years from now, Guyon. There’s a much more fundamental issue-

GUYON Yes, and the people living then will be living with the decisions that our politicians make today.

STEVEN Yes, and the decisions that our politicians could make today that would be truly horrible would be borrowing so much that we become like a Portugal or a Greece or a Spain, and then saying, ‘We’ve got this fig leaf over here that says will solve it with superannuation or a capital gains tax somewhere down the line.’ That is not a sustainable economic policy.

GUYON Can I just get a concession or otherwise from you on whether you think it’s sustainable to have superannuation paid out at 65 years old in the future?

STEVEN Yes, because it’s in all our numbers going forward laid out in the PREFU last week. It is a pact that’s been made with New Zealanders for a long time. It doesn’t need to change. What needs to happen is we need to get our books back into balance, we need to give our companies an opportunity to grow and we need to do it without loading lots of extra costs on to them - what these guys wanna do - and we then actually have to do that to grow our economy. You do that well, and then you look after those problems in the future.

DAVID What the PREFU shows is that even in four years time New Zealand will be spending 20 times the amount we spend on the unemployment benefit on superannuation. We’re spending within four years more than we spend on education. We have to give people warning of the change that is coming. National’s got their head in the sand on this one.

GUYON OK, well, let’s just look at how much you would save, because according to Brian Gaynor in the Herald, you would save just $3 billion by 2033. Now, that’s two years worth of your $5000 tax-free threshold, so you’re not really saving a lot of money, are ya?

DAVID The National Party says we don’t need to change-

STEVEN No, we do need to change, just not that way.

DAVID The National Party says we don’t need to change superannuation. The Retirement Commissioner, Australia, United Kingdom, United States say we do need to change, and everyone who says ‘you need to change’ agrees you need to give people lots of warning. The National Party pretends there’s no need to change but then would make people go cold turkey.

STEVEN No, people pay their taxes all their lives. I’ll tell you what would make people go cold turkey, David - if we went down your ‘spending and borrowing’ track over the next few years, then the IMF would-

DAVID That’s not true. You can say that as often as you want, but it’s not true.

STEVEN Here’s the deal. I brought you along my little bit of paper today. You can tell me where we’re wrong. Tell me where we’re wrong.

DAVID If you want to talk fiscal irresponsibility, tell me why National’s blown out the deficit to over $18 billion through tax cuts, 42% of which went to the top 10%.

STEVEN Here you go, here’s ten or eleven things you could sort out. So you’re not going to increase the ECE funding, then? Cos that’s a billion dollars over four years.

DAVID You say that we’re going to increase that funding overnight. It’s just not true.

STEVEN You’re not going to spend anything on capital? That’s $3 billion over four years.

GUYON OK, we’re not going to have you reading a list out, actually, Mr Joyce-

STEVEN It’s quite important, though, cos they’re sitting there saying they won’t do it, but they won’t give us numbers.

DAVID If you want to talk about numbers, why don’t we talk about the PREFU? Why don’t we talk about the actual numbers that have come out from the Treasury? Three scenarios there; you’ve taken the most optimistic.

STEVEN No, that’s not true.

DAVID Alan Bollard thinks- He obviously doesn’t agree with you.

GUYON Let’s get back to superannuation, cos we can talk about the broader economic numbers just near the end here. What about universality of superannuation - I wanna ask both of you about this - the idea that everyone gets it? I mean, what’s the fair bit about paying superannuation out to millionaires who don’t need it?

STEVEN Well, the reality is, the pact that’s been with New Zealanders for a long, long time now and agreed by all parties, is they pay their taxes and at the end of their working lives they get a minimum income which they can survive on during their retirement and have some time with their families.

GUYON Regardless of whether they need it?

STEVEN Well, that’s the pact we’ve had, and it’s actually-

GUYON And you agree with that, David Parker?

DAVID I think our superannuation settings are very good and sustainable if we increase the age of eligibility over time. I think that if you change the basics of it there are all sorts of other things that come into play, such as encouraging people to retire early. It’s actually good that a lot of people work past the age of eligibility because they contribute to society and they pay taxes.

GUYON Should they still get the pension when they’re working? Why do you get the pension if you’re working?

DAVID Well, if you do it the other way, you’re encouraging people to retire early in order to get the pension, which actually decreases the effectiveness of your economy. So I think we can sustain superannuation, so long as we’re honest about the age of eligibility.

STEVEN We’re honest about it, and the reality is it is sustainable. It’s in all the numbers going forward. It’s not the problem of the moment. Labour are trying to pretend they’re courageous. It’s actually desperate. The real issue right now is how you balance the books. We’ve laid out a path-

DAVID You’re pretending it doesn’t need to happen. Clearly it does.

GUYON OK, let’s go to the subject of compulsory superannuation. Now, in 1996 we had a referendum on this issue. 91.8% of people voted against that. What part of that number don’t you understand?

DAVID Well, I think it’s pretty clear that New Zealand’s got structural economic problems. For decades now we’ve imported more than we have exported, and we’re going backwards every year. Those clever Australians have got it right. We need to save more, just as they do.

GUYON But people don’t want it. They don’t want compulsory superannuation, according to the last referendum we had on it. Why are you going to force it on them? Don’t you trust New Zealanders to make their own decisions on this?

DAVID Because New Zealanders understand-

GUYON If they understood, they’d do it, wouldn’t they?

DAVID New Zealanders understand that we’re economically in a hole. If you change nothing, nothing will change. New Zealand needs to save more so that we can invest more in the export sector. National’s alternative is the ultimate of ‘borrow and hope’. You flog off your assets, you spend the money, and you hope that by the time you’ve done that your economy’s come out of the hole. We don’t accept that as a proposition.

STEVEN That’s absolute rubbish.

GUYON Steven Joyce, compulsory superannuation. Isn’t it-

STEVEN Well, I think it’s good for people to save for their retirement, but the problem is this - you’ve got a young couple who’ve started themselves out in business. Does it make sense to be pulling income from one of the partners, who’s perhaps got a salary job, instead of them paying down the cost of their borrowing for their business? Does it make sense for a young family on a first home who’ve got a big mortgage to suddenly be doing compulsory super cos David Parker says it’s a good idea? I don’t think it is. You’ve got to give them the option of making choices that include the ability to pay off the debt they’ve got on their own assets before they do compulsory super.

GUYON OK, final quick topic on this - contributions to the super fund again. (TO DAVID) You’re going to start them again - $750 million. Most of that will be borrowed because you’re still in deficit. Does it really make sense to borrow from offshore to put it in a savings account back home?

DAVID What doesn’t make sense is to maintain the myth that you can continue superannuation at current levels and current ages if you don’t pre-fund some of it.

STEVEN Pre-fund it by borrowing it.

DAVID Now, we know that the rate of return that the super fund earns on money is greater than the Crown’s cost of funds.

STEVEN No, it’s not, actually.

DAVID This is about being honest with the people of New Zealand that the current generation has to contribute in order to fund the cost of their retirement as the baby boomers retire.

GUYON OK, final word from you, Steven Joyce. Why isn’t National continuing to fund the superannuation fund?

STEVEN Because it’s a bit like saying that you just go to the bank again and say, ‘Look, I’ve got this fantastic idea to make money. If you lend me some, I’ll put it in the stock market and I’ll do better than you could.’ It’s just absolutely ludicrous. And actually the history-

DAVID You’re going to fob off assets instead.

STEVEN No, the history of the super fund in New Zealand is that it’s actually just about made the cost of government funding. It doesn’t achieve anything. It’s a bit of a fig leaf, and David knows it.

GUYON Better leave it there, but thank you both for joining us this morning. We appreciate that.

ENDS

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