Rising superannuation and healthcare costs are forcing a long‑delayed reckoning over savings, productivity and intergenerational fairness, reports senior writer Mary Anne Gill.
Panel host Steven Joyce who chairs the Management School’s Business Advisory Board, left and ANZ chief economist Sharon Zollner at the economic forum. Photo: Mary Anne Gill
New Zealand’s ageing population is often described as a “silver tsunami” but the wave is already breaking.
Speaking at the University of Waikato Management School’s Economics Forum last month, ANZ chief economist Sharon Zollner said spending on New Zealand Superannuation had already climbed sharply.
“On Treasury’s numbers, it’s already increased from just under four per cent of GDP 20 years ago to just over five per cent now and under current settings, we’ll go to around eight per cent of GDP over the next 40 years.
“That’s obviously a lot of money we’re not spending on something else,” she says.
Superannuation was only part of the challenge. Health costs associated with an ageing population would rise even faster.
“The people over 85, the health care costs are five times those of 65‑year‑olds.”
Former cabinet minister David Parker said the superannuation debate could not be separated from New Zealand’s poor productivity performance.
“For me, it’s most important ambit is its relationship to productivity,” he says.
“I see no credible way forward for New Zealand to lift our productivity unless we match the Australians in their better savings rate.”
Australia’s stronger performance reflected deeper capital markets and higher levels of retirement saving.
“They apply more capital to their labour and where does that capital come from? Largely from their retirement savings.”
Milford Asset Management chief executive Blair Turnbull delivered one of the starkest warnings.
“In 1970, you had seven workers to every person over the age of 65. Today that’s about four workers to every person over the age of 65. And by 2060, it’ll be two workers every person over the age of 65.
“The truth is, as hard as we don’t like this, we just cannot afford the superannuation system because we don’t have the workers,” he says
Raising the retirement age alone would not solve the problem.
Aged Care Association chief executive Tracey Martin
Aged Care Association chief executive Tracey Martin said the issue was far more complex than a single age threshold.
“Fifty three per cent of over 65‑year‑olds are women. In the next 25 years, 660,000 New Zealanders will be renters over the age of 65.
“This is too simple a conversation to just say, should we raise the age of super or not?”
Panellists agreed there was a need for stronger private savings – likely through changes to KiwiSaver – alongside a universal public pension that prevented poverty in old age.
“The longer we put off things because they’re difficult, the worse the set of options will be and the harsher the transition will be,” says Zollner.
For regional economies, the implications are significant.
An ageing population affects labour supply, healthcare demand and housing markets, while a shrinking workforce is left supporting a growing retired cohort.
Delaying only narrows the choices.
Facilitator Steven Joyce, left, with S?haron Zollner, David Parker, Blair Turnbull and Tracey Martin. Photo: Mary Anne Gill
