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Insights 46: 7 December 2018
Read: Dr Oliver Hartwich writes in NBR on MFAT's consultation on the future free-trade agreement between NZ and the UK
Watch: Jenesa Jeram introduces on The AM Show her new report on NZ Superannuation
New report: Embracing a Super model: The superannuation sky is not falling

Super model needs a face-lift
Jenesa Jeram | Research Fellow |
Like many young people, I have long been told that New Zealand Superannuation (NZS) is unaffordable, and to prepare for a future without it. Yet both major political parties have avoided touching the issue.

On Tuesday, The New Zealand Initiative released its latest report, Embracing a Super model: The superannuation sky is not falling, which explains why this is so.

Embracing a Super model finds many things to celebrate about the superannuation model. New Zealand is one of a handful of countries to offer a universal non-means-tested pension, payable from 65 until death.

Our generous pension is also more affordable than public pension schemes in many OECD countries. The projected future cost of NZS is still lower than what many countries pay today. NZS is universal and so simple to administer; it does not distort incentives (as much as means-tested systems) to save or continue working. New Zealand also has low elderly material hardship rates.

NZS is working well. But there is reason to be concerned.

The costs of NZS as a proportion of GDP will rise. As the population ages, there will be fewer working-age people and more people drawing on NZS. Productivity growth will be an important means of reducing those costs relative to incomes, though it is unlikely that productivity alone will be enough.

NZS may be affordable in the future, but it will come at a cost. Tax revenue will need to rise, and/or spending on other public services will need to reduce.

Embracing a Super model recommends small tweaks to preserve the most celebrated aspects of the model, while reducing future costs. Recommendations include raising the pension age, re-indexing NZS, and maintaining a strong focus on productivity. Policy changes need to be signalled well in advance to give people time to financially prepare.

Voting for small tweaks means we can keep the model, while ensuring people are able to thrive throughout their lives, rather than just in retirement.

So why are political parties not acting?

The problem is, younger generations are not being told the whole story.

A refusal to touch NZS could mean a tougher working life because of higher taxes paid, or less money to support those most in need. Or both.

We can be proud of the way the welfare system supports our elderly. But we need to be equally proud of the way children, the working poor, and the vulnerable are provided for.

The full report and a two-page summary are available here.

Letting us help
Dr Eric Crampton | Chief Economist |
Community sponsorship helps Canada accept far more refugees than the government’s quota could accommodate on its own. And it looks promising for New Zealand as well. But scaling the programme to its full potential may require sponsoring communities to pick up a greater share of the cost.

During the 2015–16 Syrian refugee crisis, Kiwis wanting to help were stymied by restrictions on the number of refugees allowed into the country. Governments make trade-offs in distributing scarce public resources, and helping refugees get their start here is not costless. But Kiwis willing to cover accommodation and travel costs to let another refugee family find a new life here needed to convince the government to open the door.

Over the past year, the government has trialled a small-scale version of Canada’s refugee sponsorship system. Four community organisations sponsored 23 refugees, covering their domestic transport costs, finding and providing accommodation and household goods, and helping sponsored refugees to settle in the community and find work.

The Initiative has supported this kind of approach. In 2016, we hosted the Canadian High Commission’s Dean Barry, who explained Canada’s sponsorship system to interested officials and NGOs. We welcomed the government’s trial.

Last week, Amnesty International petitioned Parliament to make the programme permanent. It also released a short report with successful stories of refugees and their sponsors. If the government’s evaluation proves as positive as Amnesty’s report, the programme should be scaled up. But how much it could be scaled up may depend on cost.

Sponsorship helps Canada to accommodate more refugees not only because the sponsors’ community of support helps refugees build new lives as Canadians, but also because it is cheaper for government to open the door to a refugee when sponsoring communities take on more of the cost.

Our government budgeted about $30,000 per sponsored refugee during the trial’s first year, with costs dropping quickly to under $20,000 per year – offset by taxes paid by these new Kiwis as they find their feet. After the first year, costs mostly consist of health and education services the government provides to everyone.

Accommodating sponsored refugees costs the government less than accommodating traditional refugees. But convincing government to substantially expand the sponsorship programme might require sponsoring communities to cover a greater portion of the cost. Government helping less could let all of us help more.

To read the Amnesty International report, click here. To hear Dean Barry’s talk for the Initiative, click here.

The final frontier of self-determination
Oliver Hartwich | Executive Director |
Life is unfair, especially as you get older. That is what Dutchman Emile Ratelband must have thought when the court of Arnhem rejected his request to lower his age by 20 years.

Arguing that being 69 was a disadvantage on online dating site Tinder, he wanted to reduce his official age to his ‘felt’ age.

To no avail. The judge ruled that the grey-haired TV personality, motivational coach and former politician could feel as old as he likes. Yet that does not change the date of birth in his passport. And admittedly, Ratelband looks every single of his 69 years.

Still, this is a crying injustice. In our enlightened society, it should be a human right to determine one’s age.

Age is the final frontier of self-determination. Everything else is already acceptable. We can change one’s name, appearance and nationality (but maybe not one’s accent). We can choose from scores of sexual orientations and genders. Even Santa doesn’t have to sport a white beard at the parade.

So now age. Age is more than a number. Just like gender, it is a fluid concept. That is because it is radically subjective, and it can change daily.

It is time for train conductors to accept my 4-year-old self and hand me a free ticket. People should not give me strange looks when I order a Happy Meal at McDonald’s. My GP has no right to charge me for visiting him on days I feel 13. Yet the bottle shop will sell me all the beer and spirits I want, and I will get to watch R-rated movies.

My driving licence will never expire since I refuse to feel like 75. For the purposes of New Zealand super and the SuperGold card, consider me at least 65. But for my health, trauma and income protection insurance, I will always be well under 40.

So many injustices are purely ageist. Once we have dealt with them, life will be more rewarding.

Why not choose the wrong career or partner only to erase those wasted years later and start over? Or make the right decisions straight away thanks to the wisdom that comes with age? Or let time heal all wounds by just turning forward life’s clock?

Ratelband was onto something when he went to Arnhem court. Let’s wish him well for the unavoidable appeal. Or for his next time travels.

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