New Zealand faces Government debt spiralling out to 200 percent of GDP if we don't raise the age or retirement, a high-profile economist has warned.
The only other alternatives are to raise taxes or cut spending everywhere else - such as education or law and order - says Cameron Bagrie of Bagrie Economics, and former chief economist for ANZ New Zealand.
"We get a little bit excited about having Government debt of 20 percent of GDP," he told The AM Show on Monday.
"On current fiscal settings - superannuation, health, historical trends - Government debt by 2055 is going to go to 200 percent of GDP."
Labour tried to get voters onside with gradually raising the retirement age to 67 back in 2011, when Phil Goff was leader. They got smashed, getting only 27 percent of the vote to National's 47.
In 2017 the parties switched sides. Then-Prime Minister and National Party leader Bill English announced a gradual rise in the retirement age, which Labour opposed. Labour - with help from NZ First, which has always opposed raising the age of eligibility - won the subsequent election.
Bagrie says if the Government is serious about intergenerational fairness, it'll raise the age.
"We're talking about housing affordability, we're talking about climate change, carbon emissions, sustainability, we're talking about water quality - we want to leave the next generation on a better footing than the current generation.
"It's ironic one of the biggest intergenerational issues of our time - the fiscal cost of an aging population - we kick that one down the road, but the other intergenerational issues we're prepared to put on the table politically."
At present, there are about four workers for every person receiving the pension. That's expected to drop to two in the coming decades, as people live longer. Over the next five years, Government spending on assistance is expected to increase $6.8 billion - the vast majority of that not going to families in poverty, but to retirees.
If we decide to borrow to fund superannuation over the next 35 years, Bagrie says we'll end up with a $2 trillion debt.
"That's not going to happen, but it just illustrates that we've got some major fiscal pressures over the next 20 to 30 years. The sooner we move, the better - you can move in incremental steps as opposed to big steps. The longer we leave this, the bigger the bomb's going to be down the track."
Raising taxes instead, he says, will hit the next generation too.
"At some stage you've got to bite the bullet on this thing. It needs a little bit of clear, economic leadership. It's just a question of time until I think we're going to see that."
English said in 2017 raising the age to 67 wasn't unfair because when the oldest Millennials hit retirement in 2040, thanks to increases in longevity they'll actually end up receiving the pension for longer than the Baby Boomers retiring today.
Prime Minister Jacinda Ardern has ruled out any increases in the age of eligibility, saying she'd rather quit. Instead, she's confident putting money into the Superannuation Fund will generate returns big enough to keep the scheme afloat, without resorting to raising taxes or the age of eligibility.
Newshub.
