Key John: New Zealand Superannuation Amendment Bill — First Reading 
Key John: New Zealand Superannuation Amendment Bill — First Reading 
[Volume:617;Page:12556] 
JOHN KEY (National—Helensville) 
: 
 National will be supporting the New Zealand Superannuation Amendment Bill as it goes through the Social Services Committee. 
In my opinion the demographics of this nation in terms of superannuation is one of the most important issues we face. Most New Zealanders will be aware that there is a huge demographic avalanche of aging population coming down the wire so to speak. It begins in 2011 when the first of the baby boomers start retiring and moves out until the end of the 2020s when the likes of myself—a late baby boomer—will be starting my retirement which will no doubt be well earned. The interesting aspect of that avalanche of older New Zealanders coming down the wire is the demographic implications it will have on the number of people working. If we sit back for a moment to contemplate we are talking about the current situation where one in eight New Zealanders is aged over 65 but within about 30 to 40 years that number will move to one in four New Zealanders aged over 65. To put it another way the number of New Zealanders supporting somebody on the New Zealand Superannuation Fund will decline rapidly and it will become increasingly difficult to fund that pension. So the whole issue of New Zealand superannuation and demographic changes is extremely significant. 
As the Minister quite correctly pointed out this bill looks to repeal the Retirement Income Act of 1993 and its main provisions are to move the functions powers and appointment of the Retirement Commissioner to the New Zealand Superannuation Act of 2001. The Retirement Commissioner’s present functions are extremely significant because of the changes that are taking place. One of the issues the Retirement Commissioner needs to look at is the impact of New Zealand superannuation. The issue of whether New Zealand superannuation can fund a lifestyle for those who want to have retirement is really driven by whether one believes that its current funding—at about $20000 per annum for a married couple or $12000 for an individual—is enough to sustain a long-term retirement and what would be the implications of growth on those payments. 
I say this because New Zealand superannuation is linked solely to the payment of the average wage so if the average wage increases on a relative basis the amount of funding going to the elderly in the community goes up. If New Zealand continues to grow as predicted by Treasury in its long-term forecasts at about 1.5 percent then in 20 years from now average married couples will receive $27000 as opposed to the $20000 they receive today. Yet if New Zealand could grow on average just 0.5 percent more year in year out on a per capita basis then that $27000 would move up by over $8000 to $35000 a year. 
It may seem a little strange that I am making the case for growth when theoretically we are in a Parliament that signs up to growth and the Government tells members that it is pro-growth but I say it because the Budget that the Minister of Finance is about to deliver in just a few weeks’ time will do absolutely nothing for growth in New Zealand and the Treasury forecasts tell him exactly that. This is why under the Official Information Act he tried to stop me from getting the recent document of Treasury’s own assessments of growth forecast for New Zealand. That is why he prevented me from having that document even though he got Treasury to sneak it out on its website on a Friday afternoon hoping we would not see it. I hope the Minister of Finance will address the issue of growth in his up-and-coming Budget so that New Zealand superannuation can be given the treatment that it really deserves and our elderly can have a higher standard of living in their retirement. 
Darren Hughes 
: National Party policy on the hoof! 
JOHN KEY 
: That is what we would like to see not a redistribution on the basis that no doubt Mr Hughes would be asking for. 
One of the things that the bill also looks to do is to repeal the 6-yearly reviews—there have been two of them—by the periodic report group. That group did some very good work in looking at the overall impact of superannuation issues. In fact when the Minister appointed the most recent group he said he had asked it to focus on ways to improve amongst other things the private provision for retirement income. Most people will know that the recent periodic report group was headed by Vance Arkinstall who did a good job of presenting the issues as they related to the industry. The reason that overall stocktake review is being repealed is simply that it has been decided that an ongoing work programme is more necessary and beneficial on a yearly basis as opposed to 6-yearly review of the overall stocktake. 
When the National Party received a briefing from the Minister’s officials we made it quite clear that we supported this ongoing work programme because of the importance of the superannuation issue but we did make the point that there were no provisions as we currently see it for an overall stocktake and no provisions at all to demand that it actually took place. There is a risk that when one has an individual work programme looking at individual silos as they operate within the superannuation area the overall review of issues facing New Zealand is not addressed fully. We have asked the officials and the Minister to consider this issue. It is noted in the explanatory note of the bill and National will make sure the issue of overall stocktake and overall review of the provisions is addressed in the select committee. 
As I said earlier there is no doubt that New Zealand superannuation is one of the heftiest bills the Government faces and it will increase dramatically. It is so hefty that it currently costs $5 billion to provide New Zealand superannuation to superannuitants in this country and that is an amount equivalent to 4 percent of gross domestic product (GDP). As the demographics I discussed earlier change and as the baby boomers retire and the bulge flows through there will be a huge increase in the cost of New Zealand superannuation. We will see that increase go up to about 8 percent of GDP which will be a massive nominal amount of spending on behalf of the Government. 
It is one of the reasons why the periodic report group suggested three possible outcomes to address the sustainability of the issue and they were: increasing the age of eligibility altering the way that New Zealand superannuation rates are set or means testing of entitlement. They were the three options that the periodic report group gave and I have made a number of public comments related to those. It is my opinion that at some future date the age of eligibility is likely to increase in New Zealand irrespective of which political party is in power. It will come quite simply because New Zealanders will continue to live a lot longer and in my opinion they will demand more of their own capital so that they can enjoy retirement. 
I say that because  
The Economist 
 ran a very interesting review on retirement savings recently. It pointed out that longevity has been going up at the rate of 2½ years per decade. It has certainly been increasing and currently in New Zealand the average age of longevity for a man is 76 years and for a woman 81 years. Those numbers will flow further out and I do not think it is too hard to believe that in 30 years from now the average age of longevity for a New Zealander will be somewhere around the late eighties to 90 years of age. New Zealanders will live a lot longer in their retirement they will need a lot more of their own private sector capital and the fact that people will want to retire slightly later and have more private sector capital makes a great deal of sense. 
National will support the bill as I said earlier but we will monitor it as it goes through the select committee process. We will ensure that this very important issue of national significance gets the treatment that it deserves under the new New Zealand Superannuation Amendment Bill.