NZ Politics Daily: 29 May (liberation)

Is the proposal to fix the ‘intergenerational unfairness’ of superannuation actually a Trojan horse? Labour’s proposal to raise the superannuation eligibility age to 67 is being met by an almost deafening media chorus calling for National to agree – see: Duncan Garner’s Pressure for John Key to raise retirement age. National appears stuck with an election promise, but it’s giving some signals that it will follow suit in a few years according to Tracy Watkins who says that Key has admitted that ‘National had "kicked the tyres" on whether to revisit his 2008 and 2011 election promise’ – see: Nats thought about pension change. Labour’s proposal is to raise the age in increments between 2020 and 2032 – after the vast majority of baby boomers have already secured their full entitlement. They will get their super at 65 and collect it for their expanding life span, pulling up the ladder behind them. It is actually the following generation who will pay the boomers’ full entitlement but get less themselves. It’s OK – they are used to it. It is a generation that has had the cradle-to-grave welfare state ladder pulled up higher all of their lives. [Read more below]

At each stage of the ‘baby boomer’ life cycle the decisions benefitting them have always been pushed as ‘what was best (and necessary) for the country as a whole. And so it is now. The current pressure on National to agree to raise the age of eligibility for superannuation is perversely pushed as being necessary to remedy ‘intergenerational unfairness’ – see, for example, Grant Miller’s Doing nothing about super. It’s exactly the opposite in many ways but that shouldn’t come as a surprise to anyone who has tracked the fortunes of this ‘lucky generation’.

If you were born in the 1950s you would have grown up as New Zealand’s economy boomed, with almost zero unemployment. If your family couldn’t afford a decent private rental there were literally entire suburbs of state houses built and available at low rent. These were not the multi-story blocks that later tenants had to endure, but roomy, well-built (and now much sought after) houses with quarter acre sections. If you wanted to own your own house but didn’t have the deposit then your universal family benefit could be capitalised and there were subsidised housing corporation loans to make sure the mortgage payment weren’t too onerous. Most health and education services were, for all intents and purposes, free. School donations were actually donations – not invoiced with threats of exclusion if not paid. Tertiary education required almost no fees and living allowances were easily accessible, along with plentiful holiday employment.

Of course the top marginal tax rate was 66% in order to pay for all these benefits. But in the late 80s, just as middle class baby boomers entered their high earning years, the top tax rate was halved. That meant the next generation had to start paying and borrowing for their education, along with market rentals for state house tenants and numerous other user-pays charges.

A new generation of graduates already saddled with mortgage sized debt wasn’t really a problem. They were told the need to own your own home was irrational and there were plenty of houses they could rent from the well-off baby boomers, who were furiously investing their surplus income in property, claiming deductions but still free of any tax on their substantial capital gains. House prices rocketed – which was great for growing untaxed wealth, but was a disaster for families trying to buy their first home.

Baby boomers who joined Kiwsaver early will have received the highest proportion of Government subsidy for their savings – the state’s generosity is already being ratcheted down. Kiwisaver funds will be the icing on the cake for baby boomers, but is likely to be the main staple for those that follow with auto-enrolment already planned and compulsion being mooted by Labour (see: Alex Tarrant’s Labour considers not letting KiwiSaver savings out of NZ). John Armstrong certainly sees the writing on the wall: ‘it might survive as a vital back-stop for those unable to save for their retirement if the bulk of workers can draw their retirement incomes from elsewhere. It stands to reason that the more workers there are with KiwiSaver schemes, the less the future pressure on the existing state scheme’ – see: Shift that would turn Key into a superman.

Paper boys and girls are having their taxes increased to save a few million and childcare subsidies are being reduced, but huge sums are still flowing to the ‘lucky generation’ each year. The government apparently had no choice but to fork out $1.6 billion to save (overwhelmingly older) finance company investors who chased a few extra dollars in return for much higher risk. Treasury had kindly underwritten these risks and, as usual, the boomer’s well-being was deemed essential to all taxpayers.

Particularly hard hit will be Maori, Pacific people and those on low incomes whose relative life expectancy worsened in the 80s and 90s, a gap which has never been made up (see: Otago University’s Unequal playing fields). The number of years they will be able to securely retire will be dramatically cut – many Maori and Pacific males will never see a pension. Raising the retirement age is not only an intergenerational transfer of wealth – it is effectively a massive shift in public benefits to middle and high income pakeha retirees.

We shouldn’t be surprised that the ever-increasing health spend goes largely unquestioned and attempts to direct it to more cost-effective prevention rather than treatment continue to be resisted. We can probably look forward in a few years to greater government regulation and subsidies for funeral services – those customised Harley Davidson hearses don’t come cheap.

Raising the age of entitlement to superannuation is presented as the only option. It is apparently unthinkable that we should ask the most well-off of a generation to contribute back some of the wealth they have accumulated (thanks to their dream run through the welfare state) so that their children can at least retire with the same security as the ‘lucky generation’.

Luck, as they say, has nothing to do with it.

Other important or interesting political items today include:

With the Green Party’s annual conference this weekend – coming off their incredibly successful 2011 election campaign – there’s some very interesting analysis about the Greens today. The competition between Labour and the Greens is analysed by Colin James who says thinks the Greens have the advantage, for now at least – see: Greens, Labour jostle for position. Yesterday’s Dominion Post editorial agrees – see: Greens eating Labour's lunch. John Moore has an analysis of whether the Greens are now ‘moving to the left’ – see: ‘Fool me once, shame on you; fool me twice, shame on me’ – How the Green Party aims to woo back left voters. On the same topic I’ve blogged a version of a journal article co-written with Niki Lomax that’s just been accepted for publication in the journal Environmental Politics: ‘For a richer New Zealand’: Environmentalism and the Green Party in the 2011 New Zealand General Election.

Chris Trotter makes an emotional plea for the nationalization of the Christchurch Cathedral – see: As the cathedral fares, so fares Chch itself.

Graeme Edgler has an interesting proposal that our MPs should be allowed (and encouraged) to regularly undertake part-time work in other jobs – see: Shirking their responsibilities?.

With the plug about to be pulled on TVNZ7 the campaign to save it is louder than ever. Duncan Graham acknowledges that TVNZ7 wasn’t perfect but says New Zealand will be much poorer without a commercial free channel – see: Whose airwaves are they anyway?. The campaign to save the channel is misconceived according to Steven Cowan, especially as it allows Labour to posture as the defender of public service television – see: Letting Labour off the hook.

National, Labour and even the Greens are skewered by Toby Manhire over the WWF’s damning report on New Zealand’s environmental record over the past 20 years – see: 100% Pure New Zealand. Ha, ha, ha.

The Timaru Herald says Stop this silliness to Judith Collins, Trevor Mallard and Andrew Little after another farcical episode – see: Mallard gets served, snaps and tweets.

Rod Oram looks at the contrast between the Auckland Council’s long-term growth plan for Auckland and Bill English’s zero budget – see: A tale of two budgets.

The media has an obsession with turning elections into a two horse presidential style contest according to political scientist Jack Vowles. He argues that this ignores the MMP reality that an election can be very close even though the gap between the two main parties is wide – see: Reesh Lyon’s Media Blamed For Low Election Turnout. Mark Blackham disagrees – see: Election turnout not media fault.

Morgan Godfery reviews The best and worst Maori MPs for May.

Willie Jackson says At least Louis Crimp is honest, claiming Crimp’s views are not that far from the more carefully worded utterances of Michael Laws, Paul Holmes , Don Brash and John Banks.

Kim Dotcom seems to be growing on New Zealanders according to the Southland Times editorial, despite the latest attempts by US law enforcement to smear him by claiming there were some child porn files amongst the 800 transfers per second on the megaupload servers – see: The pirate king?.

The struggle over reproductive rights in New Zealand has never been properly written up, but Alison McCulloch has a book coming out on the recent history of this very contentious area of sexual politics – see: Return of the DIY Abortion.

Finally, leftwing economist Brian Easton has penned a lengthy and very thoughtful take on the evolution of the political left in recent decades entitled Rogernomics and the Left. He concludes with a warning to the left – that its failure to take ideology and economics seriously, could result in the next Labour Government essentially being a repeat of the Fourth Labour Government: ‘The danger remains that there may be a repeat of Muldoon’s legacy in which a future government of the left has to introduce major radical modernisation to resolve its predecessor’s failures to respond to change, while handicapped by the limitations that these failures cause. Will the incoming government be as bereft of analysis and vision as the left was after Muldoon? Last time the consequence was Rogernomics’.

Below are the internet links to all the NZ politics material from the last 24 hours that are either informative, insightful, interesting or influential. This list and the links are taken from a fuller document, NZ Politics Daily, which is emailed out, Monday to Friday, to various researchers, academics, journalists, MPs and so forth. The document is purely for private/research purposes only, and if you would like to be on the subscription list, please email: [email protected]