The Finance Minister has revealed the Government will will make its first withdrawal from the Super in 2028 - five years earlier than initially planned.
In the first year, $32 million will be withdrawn - but from 2031, withdrawals are expected annually.
Infometrics Principal Economist Brad Olsen explains why this is happening.
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Speaker 1 (00:00):
Now, Nicholas Oh, I'm going to get back to there's
a text there on Oh on the ladies being hired
and the DEEO positions are going to come back to that.
Nikola Willis has today announced the government will make its
first withdrawal from the super Fund, first ever, in twenty
twenty eight with us now is brad Olsen, Inframetric's principal economist.
Speaker 2 (00:15):
Hey Brad good Evening.
Speaker 1 (00:17):
Now, last year the projection was that the first would
first dip into it in twenty thirty three. So why
has this come forward by five years?
Speaker 2 (00:25):
Well, effectively, it looks like the government doesn't need to
contribute quite as much into the future, and that as
soon as the model shows that there's not a contribution
to be made, that's effectively when the withdrawal starts to happen. Now,
all of this is not really a government choice. This
has laid out in legislation passed back in two thousand
and one, I believe as the Superfund was coming in.
(00:46):
So this isn't, you know, the government of the day
deciding they're going to do one thing or another. This
is very much just the mathematics of it. But what
it suggests as well, is that obviously we are getting
closer and closer to that time where the model shows
that actually the cost of the New Zealand Superstars is
large clearly and it needs to start to get a
bit of help from the super Fund to smooth that
over generations.
Speaker 1 (01:07):
Oh so this is an indication of us having hit
some sort of a threshold with how much we're paying
in pensions, is it?
Speaker 2 (01:13):
Well, that's in my view, that's part of it. I
mean that's also looking. I mean that the complicated formula
that goes into it looks at a whole range of things,
the cost of the Super scheme into the future, what
our economic growth is likely to be, like, what the
cost of future outgoings from the scheme and everything will be.
But it does mean we know over time that New
Zealand Super is starting to cost us more and more
(01:34):
as a proportion of GDP. We know that in the
upcoming budget, New Zealand Super is going to be a
larger line item than the entire education budget. I mean,
it's showing time and time again that these costs are
coming through. So it does Hidler there's a challenge and
that is also what the Super Scheme was designed to
do over time that fund would help smooth just how
big that cost was going to get.
Speaker 1 (01:55):
Okay, now, did you get any kind of a clearer
picture as to what is going to happen to we
save her in the budget?
Speaker 2 (02:02):
Look, I don't think the Finance Minister has given too
much away today apart from saying that ke We Saver
was in focus. I mean, I think you spoke to
her a week or two back about the potential for
the contributions that government makes to top up kei we savers,
you know, might be under a bit of pressure. The
Finance Minister won't go anywhere near answering that in the
lead up to Budget day. I wonder as well though,
(02:23):
particularly the focus might well be maybe that conversation, but
also potentially increasing the minimum contribution rates over time, so
a bit more targeted from the government in terms of
the contributions that they give back, but also lifting those
contributions like Australia has done that would help people save
more over time. So some potentials in the mix. But
(02:44):
put it this way, kei we saver also social investment
looking like a real key focus for the government. Limited
amount of money they've got to play with means they
need to get best bang for buck.
Speaker 1 (02:53):
Hey, why is the New Zealand initiative not allowed into
the budget lockup? But you are.
Speaker 2 (02:59):
I mean that's a question for Treasury as to who
they choose who gets in. I mean that seems to
be a little bit of a who's in who's out
at the moment. Well, I mean we've put our application in,
as we've done for coming up well over a decade
now at Infometrics. I mean we all provide different insights
and views, you know that. Really it's a question for Treasury,
(03:20):
and I think again, it seems odd that these organizations
have been allowed to apply but not told until a
week out from budget that they're not allowed to go in.
I would have thought they might have been told right
at the start, look, don't even apply because you're not
in the criteria. Letting them apply and then letting them
down a week out very very odd.
Speaker 1 (03:36):
Yeah, well I'm glad you're there, Brad brad Olsen, Infometrics
Principle Economists. For more from Hither Duplessy Alan Drive, listen
live to news talks it'd be from four pm weekdays,
or follow the podcast on iHeartRadio.
Now, Nicholas Oh, I'm going to get back to there's
a text there on Oh on the ladies being hired
and the DEEO positions are going to come back to that.
Nikola Willis has today announced the government will make its
first withdrawal from the super Fund, first ever, in twenty
twenty eight with us now is brad Olsen, Inframetric's principal economist.
Speaker 2 (00:15):
Hey Brad good Evening.
Speaker 1 (00:17):
Now, last year the projection was that the first would
first dip into it in twenty thirty three. So why
has this come forward by five years?
Speaker 2 (00:25):
Well, effectively, it looks like the government doesn't need to
contribute quite as much into the future, and that as
soon as the model shows that there's not a contribution
to be made, that's effectively when the withdrawal starts to happen. Now,
all of this is not really a government choice. This
has laid out in legislation passed back in two thousand
and one, I believe as the Superfund was coming in.
(00:46):
So this isn't, you know, the government of the day
deciding they're going to do one thing or another. This
is very much just the mathematics of it. But what
it suggests as well, is that obviously we are getting
closer and closer to that time where the model shows
that actually the cost of the New Zealand Superstars is
large clearly and it needs to start to get a
bit of help from the super Fund to smooth that
over generations.
Speaker 1 (01:07):
Oh so this is an indication of us having hit
some sort of a threshold with how much we're paying
in pensions, is it?
Speaker 2 (01:13):
Well, that's in my view, that's part of it. I
mean that's also looking. I mean that the complicated formula
that goes into it looks at a whole range of things,
the cost of the Super scheme into the future, what
our economic growth is likely to be, like, what the
cost of future outgoings from the scheme and everything will be.
But it does mean we know over time that New
Zealand Super is starting to cost us more and more
(01:34):
as a proportion of GDP. We know that in the
upcoming budget, New Zealand Super is going to be a
larger line item than the entire education budget. I mean,
it's showing time and time again that these costs are
coming through. So it does Hidler there's a challenge and
that is also what the Super Scheme was designed to
do over time that fund would help smooth just how
big that cost was going to get.
Speaker 1 (01:55):
Okay, now, did you get any kind of a clearer
picture as to what is going to happen to we
save her in the budget?
Speaker 2 (02:02):
Look, I don't think the Finance Minister has given too
much away today apart from saying that ke We Saver
was in focus. I mean, I think you spoke to
her a week or two back about the potential for
the contributions that government makes to top up kei we savers,
you know, might be under a bit of pressure. The
Finance Minister won't go anywhere near answering that in the
lead up to Budget day. I wonder as well though,
(02:23):
particularly the focus might well be maybe that conversation, but
also potentially increasing the minimum contribution rates over time, so
a bit more targeted from the government in terms of
the contributions that they give back, but also lifting those
contributions like Australia has done that would help people save
more over time. So some potentials in the mix. But
(02:44):
put it this way, kei we saver also social investment
looking like a real key focus for the government. Limited
amount of money they've got to play with means they
need to get best bang for buck.
Speaker 1 (02:53):
Hey, why is the New Zealand initiative not allowed into
the budget lockup? But you are.
Speaker 2 (02:59):
I mean that's a question for Treasury as to who
they choose who gets in. I mean that seems to
be a little bit of a who's in who's out
at the moment. Well, I mean we've put our application in,
as we've done for coming up well over a decade
now at Infometrics. I mean we all provide different insights
and views, you know that. Really it's a question for Treasury,
(03:20):
and I think again, it seems odd that these organizations
have been allowed to apply but not told until a
week out from budget that they're not allowed to go in.
I would have thought they might have been told right
at the start, look, don't even apply because you're not
in the criteria. Letting them apply and then letting them
down a week out very very odd.
Speaker 1 (03:36):
Yeah, well I'm glad you're there, Brad brad Olsen, Infometrics
Principle Economists. For more from Hither Duplessy Alan Drive, listen
live to news talks it'd be from four pm weekdays,
or follow the podcast on iHeartRadio.
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