Brad Olsen: Infometrics Principal Economist on the OECD report on the NZ Superannuation scheme

An economist says a new OECD report says what most people already know about the pension age.  

Its latest Economic Survey warns if current policy settings continue, we could be spending 5% more of our GDP on health, long-term care, and pensions by 2060. 

Infometrics Principal Economist Brad Olsen agrees the pension age should be adjusted to general life expectancy.  

He told Ryan Bridge that while there are many considerations, New Zealand needs to at least do something or else we'll hit a fiscal cliff.   

Olsen says the country keeps having the conversation, but no one seems to want to take the bull by the horns.  

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Episode Transcript

Speaker 1 (00:00):
So back to this new OECD report for a second.
They reckon the age of eligibility for super should go up,
basically get the pension later. Okay, that's not so controversial
now outside of a New Zealand first in our parliament.
But recommending eligibility be linked to life expectancy that is controversial,
eventually rising as high as age sixty nine, also recommending

(00:22):
means testing to factor in ethnicity and occupation. Nikola Willis
agrees that something has to change on this.

Speaker 2 (00:29):
Whether or not it is through the approaches that the
OECD suggests is another question. Bush. Is there a form
required to our superanuation settings? Yes?

Speaker 1 (00:39):
So Brad Elson informetric CEO with us this morning.

Speaker 2 (00:41):
Hey Brad, good morning.

Speaker 1 (00:43):
How would it work the life expectancy part if it's
is it linked to an average for an ethnicity or
how would it work?

Speaker 2 (00:51):
Well? I mean, all of those details would have to
be worked through when we've looked at it before. The
general better approach, in my mind, would to be to
have it to just general life expectancy. And partly that's
how you'd already get up to sort of sixty seven
sixty eight as the age, because we are just spending
so much more time. We're living so much longer that
we're spending more time on New Zealand super. So you

(01:14):
could do that over time. You could look at it.
Stats in z brings out comprehensive life expectancy figures over time.
I'm probably less keen personally on you know, lucking things
through life expectancy for different ethnicities or cohorts, only because
I don't really feel that you should be paid out
earlier in life or change your expectancy just because you're

(01:35):
a different ethnicity. If we've got problems there, and so,
for example, we know that Marty die earlier, we shouldn't
pay them out because they die earlier. We should stop
them dying earlier. There's sort of a different approach. But
long story short, the OECD has made it clear we
need to do something about super You know it, I
know it, Everyone seems to know it. But we were
also not particularly convinced it will happen, be it something

(01:56):
around means testing or the age or life expectancy or
for example, one of the things Treasury has talked about,
which is linking superannuation payments through to inflation rather than wages.
All of those things we're going to have to consider
because at some point otherwise we're going to hit a
bit of a fiscal cliff.

Speaker 1 (02:14):
Yeah, we're going to pay the piper. Hey, what about it?
So just coming back to your point, and it was
a good one about you know, ethnicity and whether you
use that as a barometer for how long somebody or
how early somebody gets supers It doesn't seem I mean,
it's the current situation is not fair on average. You
have to accept that. But also if you were to say, oh,

(02:35):
this Chinese person or this Indian person, or this European
person gets SUPER earlier or later. I mean, you can
all get hit by a bus tomorrow, can't you, And
then you've only had SUPER for a year or two,
and then that's not fair.

Speaker 2 (02:49):
Well exactly, and not only that, but again depending on
just how detailed you get it, you know what happens
if you then then bring in the likes of, you know,
the occupation that you're in. I know, that's a constant
one that's brought up in terms of, you know, people
who are often in more manual trades and similar they
often can't keep working past a certain stage, and so
you get into all those complications. I guess that the

(03:10):
worry writers that when you look at some of those
occupation groups, the same rings true today, Like it's not
like at age sixty five. Today you know, builders are
just absolute spring chickens, and at sixty five plus one
they're all of a sudden completely destitute and unable to work. Like,
the pressures on occupation groups are very much there. I
think the decision we've got to come to as a
country is, at the moment, we've got a universal system,

(03:32):
everyone broadly gets it all at the same time. If
we move away from that, we've got I think, have
a much broader conversation about why, what is the purpose
of New Zealand super what are we trying to achieve?
And at the moment, I think the challenge, right Ryan,
is we keep having this conversation. I mean, we could
do this every three weeks now a report that comes
out and says it. And are we realistic that it's
ever going to change? I certainly feel pretty despondent that

(03:53):
anyone's actually going to take the bull by the horns.

Speaker 1 (03:56):
As soon as WinCE Competer's leaves politics and this will
all change mark my words.

Speaker 2 (04:00):
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