Two a penny

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The Government has no plans to change superannuation entitlements or raise the age of eligibility in the face of a Treasury report’s dire warnings of the burden of an ageing population.

Treasury secretary John Whitehead today warned New Zealand’s net debt could reach $2 trillion by 2050 if government spending followed historic trends.

The statement showed the Government was currently issuing about $250 million a week in debt.

Releasing the treasury’s long term fiscal statement this afternoon, Mr Whitehead said “as a nation we are going to have to make some choices about what we want”.

“The only options that are feasible are options of changing taxes around.

Finance Minister Bill English said the Government would not go back on its promise to retain entitlements but the next round of tax cuts would not be happening in the short term.

“If we can get some better results on the economy then we will get some more tax revenue in. We will need to collect all the current amount of tax,” he told reporters.”

Growth in Government spending has averaged 6. But in the shorter term there isn’t an option on giving away a whole lot of revenue.2 percent over the same period.3 percent a year for the past 15 years, in total more than 20 percent higher than economic growth, at 5.The shift in the past three years was partly due to lower revenue and increased expenses from the recession, and revised growth and revenue predictions.

The statement more than doubled the projected net debt from the 2006 forecast to 223 per cent of GDP by 2050 if things did not change.

Mr Whitehead noted the imminent threat to government spending liabilities from the increasing 65-plus age bracket.

Also contributing to the shift was the increased expense of new Government policies over the past three years.

“By 2050 the ratio of people 65 and over to those of working age will double,” Mr Whitehead said.

A quarter of Government spending currently went towards that group, which made up 12 per cent of the population. .

Mr Whitehead emphasised he did not expect the worst case scenario to come true, but it was up to the Government to make the necessary choices to address the fiscal issues highlighted in the statement. Treasury’s given the same advice about super for 20 years, it hasn’t changed.

“Future Governments haven’t made the undertakings the current Government has made.”

More people were choosing to stay on at work longer and Mr English expected that to increase. We made an undertaking and we are sticking to that undertaking.”

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