A day after former National Party leader Don Brash advocated raising the eligibility age for New Zealand Superannuation a Treasury deputy chief executive has spoken about the unsustainability of current pension policy settings.Treasury deputy chief execut
A day after former National Party leader Don Brash advocated raising the eligibility age for New Zealand Superannuation a Treasury deputy chief executive has spoken about the unsustainability of current pension policy settings.
Treasury deputy chief executive Gabriel Makhlouf told a conference on retirement income that Treasury analysts have updated the 2009 long term fiscal statement with recent economic and fiscal data and found the level of the Crown's net debt would stand well below the 223 percent level projected in the 2009 report.
"Their estimate is that net debt in a revised 2009 statement would stand close to the 2006 statement projection for net debt of just above 100 percent of gross domestic product (GDP) in 2050 and rising -- that is a level of net public debt similar to what Greece is experiencing at present."
The substantive conclusion of their research was that the underlying reality remained unchanged from the perspective of the Crown's finances, Mr Makhlouf said.
New Zealanders were in the same boat as every other developed economy on the questions that needed to be addressed in the context of the long-term finances of government.
"We are confident that were we to present another formal statement to Parliament today then the long-term outlook would again be unsustainable with net Crown debt by mid-century standing above 100 percent of GDP and, critically, trending higher beyond that date."
By 2060, there will be four people aged 65 years and over for every 10 New Zealanders of working age, between 15 and 64. That compares with a ratio of two to 10 today.
"At the moment, around 13 percent of total core Crown spending, excluding the interest costs on servicing the outstanding stock of Crown debt, goes to pay for New Zealand Superannuation," he said.
"Assuming current policy settings are maintained, the 2009 statement projected these costs to consume around 22 percent of Crown spending by 2050," he said.
Put another way central government spending on New Zealand Super will consume 8 percent of national income by 2050, up from 4.4 percent currently.
"As we said when we published our 2009 long-term fiscal statement, New Zealanders need to do some significant things differently in the years ahead from what they have become accustomed to. Some serious trade-offs will be required to maintain the Crown's finances in order."
Governments around the world were looking at a range of options relating to public spending and tax and one of these is pension reform.
"A number of governments are to reduce the generosity of pension entitlements of their public sector workers. And a number of the high-performing OECD countries are in the process of progressively raising, or have announced they will raise, their pension entitlement ages to 67 or 68 years," Mr Makhlouf said.
