Broke the mold
John Key’s win is historic. In the history of MMP elections – worldwide – ever – no government has won an absolute majority. MMP was imposed on Germany to make sure that country never had another Hitler. It is designed to make sure no party does what John Key achieved on Saturday.
Best of the best
The Letter has been saying for some time that John Key is the best politician we have ever seen. We remember meeting Walter Nash and we served in Parliament with Holyoake. Key beat Labour’s best, Helen Clark. He has increased his majority three elections in a row. Seddon, Massey and Fraser got three terms but they did not get increased majorities. Key has had the Global Financial Crisis and the Christchurch earthquake. John Key is in a class of his own.
We need an inquiry into the news
TVNZ, TV3 and state radio called this election wrong. The credibility of our news services has taken a huge hit. Night after night TV and radio told us John Key was a liar. First “Dirty politics” and then claims of mass surveillance were given not just top billing but saturation coverage. The news blogs are going to be the big winners.
Where did the four million dollars go?
Internet/Mana received from Dotcom, together with funding from the state, $4 million. It would have to be the worst value for money ever. Start with one reasonably safe seat and an established party, add four million dollars and Laila Harre, Annette Sykes and John Minto, and end up with no seat and no party. The Dotcom deal has set the left back a generation. But where did the money go?
The Letter believes two very late developments, too late to be picked up by the polls, were very influential. First the thwarted terror attack in Sydney. We learned from TV that a plot to execute in the street a member of the public was prevented by the intercept of a telephone call. John Key’s claim we live in a dangerous world and we need interception capability was justified. The Letter believes that news story caused a significant swing to National. It also explains other results. The Greens did not do as well as was predicted. The Greens had called for the GCSB and the SIS to be abolished. Labour and Winston Peters both did worse than the polls indicated and both joined calls for inquiries into the security services. It is very dangerous to run a campaign against the nation’s security services because a single security instance can prove you wrong.
Having your press secretary resign on election eve cannot have helped Colin. We know nothing but that is the issue. If you leave an event unexplained that creates a vacuum. The Conservatives’ sole achievement was to split the vote in Napier.
Remarkable win in Epsom
David Seymour increased ACT’s majority in Epsom. He had no cup of tea. There was a popular National MP on the ballot. Old fashion door knocking does work, especially when you like the person you meet on the door stop.
It is a lot more than zero
In polls taken early this year the pollsters claimed they could not find a single ACT voter. The party was dead. Members were resigning, donors had abandoned the party and the party’s leader was the first serving MP to be facing a serious High Court trial. The party made a decision to rebrand and refresh. It worked, but John Banks’ conviction on the eve of the election was a body blow from which ACT’s Party Vote never recovered. The Letter thinks John Banks is innocent and we have hopes for his appeal. But there is no doubt what caused ACT’s low vote. Any other third party would not have survived the conviction of its leader. ACT has come out stronger, with more members and in the black, an appealing leader, increased majority in Epsom, good policy and a credible slate of candidates.
It is a strong brand
ACT survived because like the Greens, ACT has a strong brand. ACT is the only party advocating that individuals, not governments, are the best to decide their lives. ACT alone advocated less tax, less regulation and more personal responsibility. This election shows how strong ACT is. In an election dominated by scandal then the parties who say everything is a scandal – like NZ First and the Conservatives – will do well. Policy-based parties like Labour, the Greens and ACT will be squeezed. As Jamie Whyte said, next year we will have “moved on” from Kim Dotcom and Mr Hager, but problems like housing affordability for which ACT had practical solutions will still be there.
The missing million
David Cunliffe failed to mobilise “the missing million”. The enrolled vote is down one percent. In the key South Auckland Labour strongholds the vote is as bad as 2011. What is different is the 100,000 right/centre ACT voters who stayed at home in 2011 voted this election. They were not going to let foreigners steal our election. They double ticked National. The next election will be decided by what that 100,000 right/centre voters do. ACT can win them back and we could have 12 years of centre/right government. Now that is good thought to end with.
Hi, I’m David Seymour, and if you live in Epsom, Mt Eden, Parnell, or Remuera, I’m honoured and humbled to be your new MP.
I’d like to thank the people, many of whom are here tonight, who have humbled me with their generosity.
Some of you are family, some friends, some old political colleagues, and others whom I’ve only met this year.
Together we ran an enormous campaign. Over eight months, we hand delivered 85,000 pieces of personally addressed direct mail. We knocked on over 13,000 doors. Hundreds of people came to dozens of house meetings, we ran stalls, waved signs, and erected billboards. All of this was done by volunteers. Thank you!
My campaign was to be the best possible local representative for Epsom, and to enable centre-right government in Wellington.
On the first, my door will be open Monday. If you live in Epsom, Mt Eden, Parnell or Remuera, I’d be honoured to serve you.
On the second, coalition negotiations must take place. Make no mistake, Epsom voters have successfully used their candidate vote to bolster the centre-right in Parliament.
I’ll be taking Epsom values to Parliament, with a commitment to improving public policy for all New Zealanders.
I want to thank my opponents in Epsom, particularly Paul Goldsmith, with whom I’ll be pleased to serve.
ACT’s candidates up and down New Zealand have put in a phenomenal effort, thank you for all of your hard work and commitment.
To Kenneth and the Chinese community, your support has been phenomenal, and I have greatly enjoyed campaigning with you.
To Jamie. Mate. You have put in a phenomenal effort over the last eight months full time and for free. We started polling 0.0, you worked and worked, we nearly got there. It’s a terrible loss not to have you in parliament this year.
I want to finish by thanking all the amazing friends and supporters for all the fabulous and humbling help you’ve given the campaign.
Most of all I’d like to thank my fellow Epsom voters for electing me as your representative. Thank you!
Don Nicolson ACT Primary Industries Spokesman
Farmers have a clear choice this election
“On the final day of the election campaign ACT is still hearing from farmers who are upset with National, especially with their policy to legislate and make farmers do what they have voluntarily agreed to do; that is to fence off their waterways.
It seems a cynical and cheap shot by National to buy urban votes” said ACT Party Primary Industry spokesman Don Nicolson.
“That National is buying urban votes at the farmers’ expense is bad enough but it sticks in the craw of farmers who have invested so much to deal with water issues on a voluntary basis.
“There is no need to legislate for something that time has shown will be invalid; redundant.
ACT supports the farmers’ efforts to fence their waterways and believes it is an excellent example of how problems can be solved by people not governments.
“If a National Government can sell out its old support base for urban votes by treating a voting minority such as farmers with contempt what more will they cow tow to?
“ACT is the logical farmer vote.
“The ETS will be terminated, red and green tape cut, property respect will be regained giving more freedom to farm, criminals will be locked, plus the big ticket item, lower taxes-surely reasons enough to make sure a stronger ACT is returned tomorrow” Don Nicolson the ACT Party spokesman concluded.
ACT Primary Industries Spokesman
Contact 027 226 6331
ACT Final Election Rally
Dr Jamie Whyte
Oh So Café, 29 Crummer Road Grey Lynn
12 noon 19 September 2014
Elections campaigns are an opportunity for political parties to put forward candidates and policy to enable voters to choose what sort of New Zealand we want. In this campaign there have been three tests by which you can assess the electoral choices for your vote.
Much of the 2014 election campaign has been hijacked by a book and Kim Dotcom - both of whom will soon be forgotten.
So the first test was whether parties were diverted from the real issues such as the economy, jobs, housing affordability and education.
The ACT Party was never diverted by these sideshows and has put forward practical workable solutions to the issues facing the country. So ACT passed the first test.
The second test was an opportunity to gain easy votes by blaming “foreigners” for the challenge of housing and farm affordability. Colin Craig and Winston Peters based their campaign on blaming the Chinese for every problem.
Labour shamefully joined in. Only ACT has said we will not go into government with New Zealand First. Only ACT has passed test two.
Then came test three: sensational claims that New Zealand’s security agencies are not protecting us from terrorist threats but are really engaging in secret, illegal, surveillance on every New Zealand citizen.
A German fraudster brought in foreigners with an agenda against western security services to claim our Prime Minister is lying.
The media have given any allegation, however absurd, top billing. Perhaps the silliest was TVNZ giving top billing to an allegation statement by Winston Peters that the GCSB gathers foreign intelligence.
That is the GCSB’s mandate. It is as silly as making a news story from the fact that the welfare department gives out benefits.
The Prime Minister has repeated his claim that there are threats to New Zealand and his duty as Prime Minister is to defend New Zealanders.
Test three was whether to back the Prime Minister and say John Key is right that we need to have security agencies to protect us from foreign threats or to join in the attacks. When they realised the way to be reported was to attack our security services and demand inquires the other parties joined in the attacks on the GCSB.
The Greens have gone so far as to promise to dismantle New Zealand’s security agencies. Labour, New Zealand First and the Conservatives have all said they want to weaken our county’s security by holding inquires and creating new restrictions.
Labour, the Greens, New Zealand First and the Conservatives have failed the test of looking after our nation’s security. I did not include Internet/Mana because they do not even pretend to be advancing New Zealand’s interests having being been bought and paid for by Kim Dotcom.
Only ACT has publicly supported the Prime Minister on this issue. You have to go to the web to find ACT’s statements because the TV and print media only reported statements weakening our security against terrorist threats.
Yesterday in Australia we have witnessed how a credible threat to behead an Australian citizen was prevented by surveillance that all the other parties want New Zealand to stop. If we elect a Labour/Green/New Zealand First government our security agencies will not be able to prevent the sort of threat that the Australian security agencies thwarted. If you think terrorism cannot happen here then vote for Labour, the Greens, New Zealand First or the Conservatives.
In test three, the most important test in this election, “Who will protect New Zealand from terrorism?” just ACT and National pass.
Only two parties put the country’s security first ahead of cheap headline getting.
Just ACT has passed all the tests of this election.
ACT deserves your Party vote tomorrow.
Voters who are concerned that on the latest polls we may be heading for three years of instability have it in their hands to deliver a decisive result.
A Party Vote For ACT is worth four times a party vote for National.
This is because of a little known aspect of MMP.
Under MMP the electorates a party wins are deducted from the number of list MPs awarded.
On average it will take 60,000 votes to elect each National list MP.
Whereas it takes just 16,000 to elect an ACT MP
So the answer is easy.
Party vote ACT for three years of stability.
In three days’ time I will be elected along with a number of ACT MPs. I think the media will be surprised and ask how it happened?
Let me tell you.
First, ACT has been rising in all the polls. On the latest Colmar Brunton poll, David Seymour wins Epsom and I am elected.
Second, once a party wins an electorate, the number of votes needed to win a Party seat is very low. Each National list MP will take about 60,000 votes, more than the total votes of any one electorate. By contrast, just 28,000 votes will add me to David Seymour. And 44,000 Party votes will give ACT three MPs.
The electorates won by a party are deducted from its list MPs. That is why Labour may get no list MPs.
The ideal way to game MMP is to have a party that wins only electorates and a partner that wins only list seats. Labour and the Greens are now in that situation and may as a result steal the election from National, who would be recording the biggest win in our history if this were a first-past-the-post election.
I predict that ACT will win a number of seats and that ACT will hold the balance of power on Sunday.
ACT’s Deputy Kenneth Wang is the most popular Chinese politician in New Zealand and on some Chinese website polls ACT is in second place ahead of Labour.
We have used the internet to poll and so we know that the land line polls are wrong. As all the land line polls are different, and the differences are greater than the margins of error, even the journalists who report as news what their pollster predicts must know that the land line polls are not credible.
ACT’s polling shows that 11% of New Zealanders support ACT’s message of low tax, less regulation and more personal responsibility.
We have been told by usually reliable sources that TVNZ’s Vote Compass survey also reveals significant support for ACT’s policies. In a campaign that has been dominated by side issues rather than genuine policy debate, this is a more interesting poll finding than the supposed voting intentions conjured up by landline phone polls.
I have today delivered a request under the Official Information ACT to TVNZ to reveal the Compass Vote survey results that will show that many New Zealanders agree with ACT’s ideas.
We have written to TVNZ demanding that they publish the Vote Compass results before the election. As the survey was paid for in part by the Electoral Commission using Taxpayers money I have also forwarded this demand to the Electoral Commission. Voters need to know this information now before the election.
At the last election up to 100,000 right wing voters stayed at home. They were voters who thought John Key was going to win easily and think National is too much like Labour.
To be frank, they are the voters who under MMP had previously elected an average of seven ACT MPs, and they thought ACT had lost its way.
I think I have shown this election that ACT has a fresh team, that we have gone back to our core policies of lower tax and less regulation and that we are worthy of our supporters’ vote.
The numbers coming to our website show there is interest in our alternative to the tax-and-spend approach of all the other parties.
We believe we will do well because we have addressed the issues that matter.
We see commentators express surprise that John Key and National’s popularity have been unaffected by a determined effort to destroy our Prime Minister.
This just shows that voters are smarter than the media gives them credit for.
Voters know that in 12 months’ time the issues that matter will be jobs, the economy, the cost of a house and whether we feel safe.
Mr Dotcom will have left our shores for America and nobody will even remember what “Dirty Politics” was all about. As Helen Clark might put it, we will have moved on.
What the voters will remember is that the election campaign didn’t quite happen. The serious disagreements between the rival parties went unexamined.
What will improve education: more parental choice or more bureaucratic control?
Who is better at making investment decisions: private investors risking their own money or politicians risking taxpayers’ money?
How will we reduce the number of children born into disadvantage – by transferring parental responsibility to bureaucrats and taxpayers or by increasing incentives to work and opportunities to work?
What will do more to reduce the cost of housing: imposing a capital gains tax on those who build and then sell houses or freeing up the supply of land for residential development?
These and many other important matters have gone unexamined because, with some honorable exceptions, the media seem to believe that politics should be reported as if it were a game of snakes and ladders.
The parties’ policies, what they will do if elected, have been squeezed out by the kind of thing Winston Peters specialises in: feigned outrage at the wickedness of politicians and speculations about who will form coalitions with whom.
Yesterday Radio New Zealand hosted the final debate between the leaders of the minor parties. We discussed only two topics. Kim Dotcom’s “Moment of Truth” event and post-election coalition deals. And Radio New Zealand is supposed to be the most serious and thoughtful broadcaster in the country!
* * * * *
Some parties have not announced policies that are sufficiently well worked out to warrant serious discussion – most notably, New Zealand First, the Conservatives and Internet-Mana. They merely wave their hands in the general direction of a vague idea, and call it a policy.
By contrast, ACT has announced a number of serious policies, fully costed and backed up by academic research.
We started our campaign three months ago by publishing a fully-costed budget.
No commentator or rival party has disputed ACT’s figures.
In that budget, we showed how by cutting corporate welfare – the corrupt practice of giving taxpayers’ money to companies that can win favour with politicians and bureaucrats – we could cut the company tax rate from 28% to 20 percent next year. In a subsequent policy document, we showed how we could cut the company tax rate to 12.5% by 2020.
New Zealand now has one of the highest company rates in the world. Most New Zealanders do not realise how far New Zealand’s company tax rates are out of line because of two factors. Australia’s company tax rates are also high and the USA’s tax rates are the highest in the OECD.
Americans know their tax regime is dysfunctional. Even President Obama wants to cut their company tax rate and get rid of all the loopholes (which, by the way, mean that American companies end up paying a lower rate of tax than New Zealand companies pay).
The Australians also knows their company tax rate is too high. The new Liberal government has announced that it is reviewing the Australian company tax rate company.
If Australia reduces its company tax rate New Zealand will find itself at a serious disadvantage.
In parliament, ACT MPs will be pointing out our company tax rates are unsustainable.
People will ask, “Why was this not an issue in the election?” Well, it was, but the media thought other things were more important. We have explained why cutting the company tax rate from 28% to 12.5% will increase investment, economic growth and wages.
Other parties also seek to increase economic growth and wages. But they are all convinced that the answer is more of them and less of you.
They all say that they can pull off some form of Muldoonism. They can pick winners and replace private investment with politically directed investment. They all claim that investment decisions are made better by politicians risking taxpayers’ money than by private investors risking their own money.
This absurd idea has attracted a fraction of the analysis given to the private emails of a blogger who is not a candidate for any party.
Other parties’ solution to low real wages is to have the government make low wages illegal. But wages do not depend on the will of legislators. They depend on the productivity of workers – which depend on their education, the amount of capital they work with and their degree to which they can specialise.
Legislating higher wages in the absence of improvements in these factors will simply cause unemployment. In the presence of such improvements, on the other hand, wages will increase without any need for legislation.
You cannot make people rich by decree. If you could, we would all be billionaires. The only route to wealth is productivity.
Legislate any minimum wage you like. It won’t increase productivity. And it won’t, therefore, help us close the wage gap with Australia.
ACT predicts that in 12 months’ time, when the Australian economy has recovered, the gap between New Zealand and Australia will be an issue again and the planes will again be carrying our best and brightest across the Tasman, and to the US and the United Kingdom too (if the United Kingdom still exists).
ACT MPs in parliament will be asking the government: “What is the plan to close the gap with Australia?” and the public will be asking why was that not an issue at this election?
Well, if you examine ACT’s press statements, it is an issue.
We have put forward a five point plan to catch Australia.
ACT has identified a major reason for housing unaffordability, which is also a significant reason for the country’s slow growth – red tape and, in particular, the Resource Management Act.
The RMA has proved to be a license for local government planners to undermine private property rights in favour of kind of soft socialism. The costs in administration, compliance, delays and uncertainty are huge.
In 1990 the average New Zealand family could afford a house.
ACT predicts in 12 months’ time housing will still be unaffordable because the RMA is fundamentally flawed. ACT’s policy is to admit the RMA experiment has failed, repeal the law and start again.
In parliament we will be telling National that their RMA amendments do not go far enough.
One issue that has had a little air time during the campaign has been poverty and, especially, child poverty.
Claims for increase in child poverty have been uncritically reported. Claims that 20% of New Zealand children live in poverty are derived from a perverse definition of poverty. A child is said to live in poverty if she lives in a household with an income less than 60% of the national median household income.
On this definition, no increase of income would suffice to lift children from poverty if all other households’ incomes increases by more. It is a ridiculous measure of poverty which grossly exaggerates the amount of poverty in New Zealand.
Nevertheless, ACT believes that many children are indeed born into serious disadvantage. We believe kids at the economic bottom of New Zealand need a better deal. And we have a plan to help them. It is based on job creation and wage increases caused by lower taxes and lighter regulation, on welfare reform, and on parental choice in education.
We also acknowledge that many of those households in poverty are there because the adults in the house put their addictions ahead of feeding their children. A fact the Greens and Labour deny. ACT MPs will be supporting moves by Paula Bennett to require drug testing and to provide assistance to addicts to come of drugs.
In 12 months’ time, when Mr Dotcom is just a sour memory, our state schools will still be failing to provide 20% of their pupils with an education sufficient to find work in a globalised economy of growing automation.
ACT has a solution: Partnership Schools (or charter schools, as they are known overseas). The media print the Education Union’s attacks. But they put no effort into discovering and reporting the great progress being made by Partnership School pupils who were failing in state schools.
That is why ACT MPs will be pressing to allow every school to have the advantages of being a Partnership School.
The 20th century American journalist, H L Mencken, said that all elections “soon become and advance auction sale of stolen goods”. This election is a vivid illustration of the fact.
All the other parties simply compete to offer people goodies paid for from money confiscated from other people and, often, from themselves. The racket has become so absurd that the Greens have now announced a plan to give everyone who has a child a flax basket full of goodies. Even the Greens are willing to destroy plants if they believe it will buy them some votes.
The Taxpayers Union has their bribe-o-meter, which reveals the gruesome facts about how much extra tax all parties except ACT will be imposing on us after the election. But the media is generally uninterested in the issue.
Would New Zealand First have its support if the media reported that Mr Peters has promised more spending than the Greens, Labour and the Conservatives combined? His claim that he can fund it all by cracking down on tax evasion is laughable. New Zealand has one of the toughest tax regimes and lowest rates of tax evasion in the world.
ACT produced a plan to fully fund all our proposals. It has been galling to go to the trouble to use Treasury figures, to have our policies professionally costed and then see commenters just make up figures with regard to ACT. The same commentators then print no commentary on the absurd promises of the Greens, New Zealand First and the Conservatives.
In 12 months’ time, when the taxpayer has to pay, people will ask why this was not an issue in the election. Well, it was, but it was not covered.
Let me make another prediction.
Next year there will be over 100,000 burglaries. Those burglaries will affect around 250,000 people who will ask, “why was this not an issue in the election”?
That is why in parliament, ACT will be presenting legislation to send professional burglars to jail.
I am confident ACT will get its 3 strikes for burglary through and the law will dramatically reduce the number of burglaries in New Zealand, just as our 3 strikes policy has reduced violent crime.
* * * * *
When voters go to the polling booth on Saturday, many will ask: “Who will always vote for less tax, less nanny state and more personal responsibility?”
There is only one answer.
That is why I predict many will Party Vote ACT.
It will be ACT, not New Zealand First, holding the balance of power for the next three years.
We will support John Key and a stable centre-right government. And we will make it a more principled and reforming government
“Some advocate raising the minimum wage significantly to reduce child poverty. Unfortunately, lifting minimum wages will do little for child poverty.
This is because most of the extra wages received by parents on low incomes will be clawed back by the Government. The most obvious losses are through income tax and ACC levies.
Further, families partly reliant on welfare benefits and partly on paid employment may lose part of their benefit. In addition, Working for Families payments and housing assistance are reduced as earnings rise.
Consequently, net family income may grow only marginally for many families, even after a considerable rise in minimum wages.
Furthermore, a large hike in the minimum wage can result in job losses. New Zealand’s minimum wage is among the most generous in the OECD relative to average earnings, and the most generous relative to earnings in our history. Going much higher takes us out of our zone of historical experience.
Although past minimum-wage rises have not resulted in large job losses, we know that at some point they will.
Advocating large rises in minimum wages means rolling the dice on the jobs of the least advantaged employed people.”
From “New deal for kids” by Jonathan Boston and Simon Chapple, Listener, 21st June 2014
Boston and Chapple are co-authors of Child Poverty in New Zealand (2014)
"It is safe to predict that in 12 months time these American polemicists that Mr Dotcom has flown in will be forgotten.
"Next year Mr Dotcom will be in America facing trial and what will be important to New Zealanders will be issues like the economy and jobs,” said Dr Jamie Whyte ACT Leader.
“This why ACT has stayed out of all these so called scandals.
"I have only talked about our practical solutions to reduce taxes, cut red tape and grow a stronger economy."
Media Release ACT Party 15 September 2014 Immediate Release
David Seymour: ACT Candidate for Epsom
Prisoners could earn $90,000: Colin Craig's Incredible Claims Continue
Hot on the heels of a Conservative Party candidate proposing to double the price of a bottle of wine, Colin Craig has come up with an even more fantastic idea to buttress his uncosted tax policy.
He suggests prisoners should work to pay for their prison costs. Recent figures cite the cost of imprisoning a person at $90,997 (Te Ara http://www.teara.govt.nz/en/prisons/page-1)
Such an income would put a prisoner in the top ten per cent of earners. Who knew there was so much untapped productivity in our prisons?
If only Colin Craig had properly costed his tax policy in the first place. He is now making a mockery of his ‘honest politician’ brand by insulting voters with increasingly thoughtless proposals.
You cannot claim to be a fresh and honest politician when your sums do not add up.
David Seymour: ACT Candidate for Epsom
Contact 021 678 999
Cost per prisoner: http://www.teara.govt.nz/en/prisons/page-1
Income Band: http://closertogether.org.nz/wheredoyoustand/
As Leader of the ACT Party, I have on many occasions made it clear that ACT would strongly prefer to see the New Zealand Government led by John Key than by David Cunliffe or any of the other current pretenders to the throne. And John Key has in turn made it clear that he would again be comfortable working with the ACT Party after the election by urging those who want a National-led Government and who live in Epsom to vote for the ACT candidate, David Seymour.
But I have also been clear that there are many aspects of National’s performance over the last six years which we in ACT find profoundly disappointing.
There has been no serious effort to increase our longer-term growth rate, and as a result wages and salaries continue to lag well behind those in Australia.
There has been no serious effort to remove the barriers which now restrain the growth of our export industries, with the result that, despite some of the best export prices in a generation, New Zealand continues to spend more overseas each year than we earn overseas.
There has been no attempt at all to move to a situation where every New Zealander is equal under the law, with the result that more than 130 years after they were due to have expired, we still have Maori electorates and ever more extensive preferences for Maori built into law.
There have been only tentative measures to reduce criminal offending, so that there are now, for example, some 120,000 burglaries every year according to Treasury.
And there have been only tentative moves to allow a tiny minority of parents to have choice about how their children are educated.
That’s why ACT is asking for your Party Vote on 20 September. We know how to increase wages and salaries in New Zealand, by reducing the corporate tax rate and radically reforming or rescinding regulation such as the Resource Management Act and the Employment Contracts Act.
We know how to allow real growth in our export industries, by getting the weight of government off our backs, enabling the Reserve Bank to ease monetary policy without an increase in inflation, thus getting the exchange rate down to a more realistic level.
And we are committed to one country, one law; to putting repeat burglars into gaol for the maximum allowed under current law; and to giving parents choice about where and how their children are educated.
Today I want to talk about one of the areas of policy where National’s performance in government has been most disappointing, namely New Zealand Super. There are some very good things about New Zealand Super, and the OECD has concluded that it is a major factor in New Zealand’s having a very low rate of poverty among those over 65 – indeed, one of the lowest in the world.
But the reality is that it’s a kind of Ponzi scheme. The money you pay in in taxation during your working life is not put aside, either in a personal account in your name or even in a pooled government account, to cover the cost of paying you New Zealand Super when you reach 65. Rather, it is spent on paying a pension to those who have already reached 65.
This has been viable over the last few decades because we’ve had a large working age population relative to the number of those over 65. But that is now changing rapidly: the Baby Boomers are reaching 65 in increasingly large numbers. Whereas in 2010 there were five people of working age for every one person over the age of 65, by 2060 there will be only two people of working age for every one over the age of 65.
What this means is that those who are employed are going to have to pay progressively more and more in taxation to support those in retirement; or government is going to have to spend less on education, health, welfare, defence and so on; or the government is going to have to find ways of cutting back on the cost of New Zealand Super – there aren’t any other options.
Put in the language that economists like to use, New Zealand Super currently absorbs about 4.5% of GDP; this will increase steeply by 42% to 6.4% of GDP in just 16 years and will absorb almost 8% by 2060. An increase of 3.5% of GDP may not sound like a big increase, but 3.5% of GDP is not much below the total of what government now spends on all primary, secondary and tertiary education. It’s big number. And governments will be facing this very large increase in spending at a time when – also as a result of the ageing of the population – they will be facing huge pressure to increase the health budget.
John Key rightly points out that 8% of GDP is a smaller share of GDP than countries like Greece already spend on their taxpayer-funded pension schemes. But who wants to come close to being in the situation which Greece now finds itself, with unemployment of 27% and the country having to face severe austerity measures imposed by its external creditors!
Won’t building up funds in the New Zealand Superannuation Fund ease the problem? Yes and no. To the extent that government now runs a surplus which it sets aside to meet some of the future costs of New Zealand Super, that will ease the future fiscal pressures to some degree. But of course there is little or no benefit if the funds going into the New Zealand Super Fund are themselves borrowed, and according to the Treasury’s projections the government is not going to be running a cash surplus for at least the next two or three years. In other words, the real issue is the willingness of the government to run cash surpluses for years on end; whether those surpluses are used to reduce the now considerable level of government debt or to invest in New York shares, as the New Zealand Super Fund does, is a second order issue. Political parties campaigning in this election aren’t showing much enthusiasm for running cash surpluses for years on end, and even if they did, the New Zealand Super Fund was never going to provide more than a small part of the future cost of New Zealand Super.
Well, what about KiwiSaver? KiwiSaver is certainly a very attractive scheme for people who are using it – it’s heavily subsidised by the taxpayer and is also highly lucrative for those who manage large KiwiSaver schemes. But of course it doesn’t ease the future fiscal cost of New Zealand Super unless a future government decides to means test access to New Zealand Super. There may or may not be good reason to means test New Zealand Super, but the parties which are pushing KiwiSaver don’t even hint that that might be part of their plan. Perhaps a journalist should ask other parties whether they do plan to means test New Zealand Super, and if not, why are they are using taxpayers’ money to subsidise KiwiSaver so generously.
At this stage, there is little or no evidence that KiwiSaver is increasing aggregate New Zealand savings – most of the private sector savings going into KiwiSaver is being diverted from other forms of saving by the lure of the subsidies, and to the extent that private sector savings is increasing, it is being largely or fully offset by the increased government borrowing to fund the subsidies.
Then why not make KiwiSaver compulsory, as Labour is proposing? Making contributions to KiwiSaver compulsory is a seriously bad idea. People normally do not want to save the same proportion of their income at every stage of their life: when they are at an early stage of their career, possibly with the cost of raising young children and paying off a mortgage, they are less able to put money aside into a pension scheme, and forcing them to do so either puts them under enormous financial pressure or prompts them to undertake more borrowing. (I have not yet met a fund manager anywhere who can consistently offer a rate of return on KiwiSaver which compares favourably with the rate of return achieved by paying off a mortgage.)
Moreover, having a compulsory savings scheme doesn’t seem to solve any problem. Australia has had a compulsory savings scheme for two decades and now has one of the highest rates of poverty for those aged over 65 among OECD countries – much higher than in New Zealand – and many observers doubt that the Australian scheme has done anything to raise Australia’s saving rate. And of course even having a compulsory KiwiSaver scheme doesn’t ease the problem of the future cost of New Zealand Super unless access to New Zealand Super is means tested.
So ACT does not favour compulsory KiwiSaver, and is opposed to the subsidies now going to KiwiSaver. We are opposed to the New Zealand Superannuation Fund as it brings no benefit and reduces the ability of taxpayers to contribute to their own retirement fund.
The best way to constrain the future growth in the cost of New Zealand Super is to gradually increase the age at which people become eligible to receive it, and to index the level of the benefit to preserve its real value rather than to have it rising relentlessly with the rise in wages. When the Old Age Pension was first introduced in 1898 the average life expectancy of a person at birth in New Zealand was a very long way below the present level. Few people reached the age of eligibility at that time – as now, 65 – and the pension at that time was a very low amount (equivalent to about $3,200 per annum in today’s dollars), was strictly means tested on both income and assets, was available only to those of good moral character who had lived in New Zealand for 25 years, and was to our shame denied to Chinese residents. As a result, only a small minority of adults received the pension at that time.
In 1950, the average life expectancy of a person aged 65 in New Zealand was a further 12.9 years; by 2004, somebody aged 65 could expect to live another 20 years; and in 2014, that expectation of further life at the age of 65 is even longer. Life expectancy at age 65 continues to increase and can reasonably be expected to continue doing so.
It would be outrageous to change the parameters of New Zealand Super for those who have already reached 65, or indeed for people within a few years of that age. They have planned their financial affairs on the assumption that New Zealand Super would be there for them. But ACT favours a very gradual increase in the age of eligibility to 67, starting in 2017. Many other countries are already increasing the age at which their citizens become eligible for a taxpayer-funded pension, with Australia proposing to move to 70 and other countries proposing 67 or 68, but thereafter indexing the age to average life expectancy, so that as average life expectancy continues to increase the age of eligibility would also gradually increase further.
If New Zealand Super’s real (inflation-adjusted) value was maintained thereafter, rather than increased with wages year after year, the fiscal cost of the scheme would over time become a much more realistic burden on future taxpayers.
Some people, no doubt cheered on my Winston Populist, will argue that they have “earned” New Zealand Super in its present form. Actually, they haven’t. The taxes paid by the average taxpayer have covered part of the cost of that taxpayer’s education and healthcare, and the cost of New Zealand Super for the past crop of superannuitants, few of whom will live as long as those retiring over the next two decades. The reality is that those retiring over the next two decades would on average be deriving benefits from taxpayers far exceeding what they themselves have paid in tax to support previous superannuitants if there were to be no change in the parameters of New Zealand Super.
So ACT favours a very gradual increase in the age of eligibility for New Zealand Super to 67, and indexing the amount of that benefit to the CPI so that its real value is maintained. This will cause hardship for people of low life expectancy and who do hard manual labour. For these people we propose introducing a means tested pension at the same rate as universal super for people aged 65 and over. We want New Zealanders to talk about the merits of providing pensions in a means tested basis and with the introduction of this new pension for people aged over 65 but under the rising age of entitlement to universal super ACT believes it will demonstrate the advantage of providing welfare assistance to people on the basis of need, not age.
We do not favour government subsidies for KiwiSaver – and certainly do not favour its being made compulsory. We are very much opposed to the current Government’s policy of sticking our head in the sand and pretending that there is no problem. There is no problem for this government or even the next, but the problems facing future governments and the people of New Zealand will be sheeted home to the Government we have now which is constrained by a rash promise that is not in the interest of New Zealand for it to keep. The people of New Zealand want New Zealand Super to remain universal and for the sake of its long-term sustainability the Government needs to act responsibly and raise the entitlement age.
 A recent study of the effect of the Australian compulsory superannuation scheme on Australian saving, undertaken by the global accounting body CPA Australia and reported in the New Zealand Herald on 18 July 2013, found that there has been an alarming “tendency by those approaching retirement age – especially over the last decade – to incur greater debt, to spend more, and to view their superannuation lump sum payments as windfalls to be used to extinguish debt or to fund greater consumption.” Indeed, the study concluded that “nothing has been saved during the 20 years of compulsory superannuation contributions.”