Cameron Bagrie: independent economist issues warning over nation's overloaded pension system

New Zealand's treading water, with a warning our increasingly overloaded pension system isn't sustainable.

The latest OECD snapshot of our economy suggests unless we adjust systems, including the costs of health, long-term care and pension will increase by about five percent of GDP by 2060.

It says it could be countered by changes including upping Superannuation contributions. 

Economist Cameron Bagrie says we can't keep kicking the can down the road - and that we need to address entitlements, through lifting the retirement age or means testing. 

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Episode Transcript

Speaker 1 (00:00):
The OECD has just released its two yearly report card
on our economy and it is calling for some very
big changes to the electricity market. Economist Cameron Baggery is
with us on this, I CAM now. One of the
recommendations is that the government reduces the dividends that the
gent tailors pay out. Do you see that happening.

Speaker 2 (00:19):
I guess the government's in a bit of a catch
twenty two at the moment because they like the cash
that comes out of those dividends. But some portant part
of cash flows. But if you look at the long
term situation here in New Zealand is pretty simple. When
I go the electricity demands exceeding supply. Demand exceed supply
of trouses go up, So you need to restore a
little bit of balance in the equation that comes from
restoring supply. One of the mechanisms you used to restore

(00:43):
supply is you allow those soees to keep you a
little bit more money on their balance sheet so that
they can invest in infrastructure.

Speaker 1 (00:50):
Right, except that hasn't worked. Right, There is not an
investment that's working. So the other suggestion from the OECD
is a separate market, presumably government controlled, where they release
firming power and blood the market and try to keep
the prices down.

Speaker 2 (01:01):
Would that work so potentially, But once again, the devil's
in the detail. In regard to these sort of things.
It's it's fine and dandy to throw a whole lot
of big picture of ideas around, which we sort of
see from from year to year. Old of me. You
need to go to the find me time and regard
to whether we can assess whether the stuff is actually
going to work.

Speaker 1 (01:18):
What do you think about the idea of means testing
super right? Imagine you're a fan.

Speaker 2 (01:23):
No, I am a fan. I lock at someone like myself,
and the idea that I'm going to be entitled in
the zeal Superannuation just seems absolutely nuts. Like you look
at the maths, pretty simple mass sixteen percent of the
population at the moment's currently aged sixty five plus and
about twenty thirty years that proportion is going to move
up to twenty five percent. That means more costs in

(01:44):
regard to health in regard to the zeal Superannuation, and
a relatively smaller workforce which fall into tax base. So
we're on an unsustainable physical path. The government needs to
buy the bullet and regard to making some pretty big, hard,
bold decisions. We've been talking about the sort of stuff
now thirty years I can remember modeling this sort of
stuff in the nineteen nineties when I was at New

(02:04):
Zealand Treasury thirty years ago, and all what's happened is
that we've kicked the can down the road. Now a
little bit of stuff has been brought in the Zeeland
super Fund. Your key, we say, with contributions, but when
push comes to share to sharp here that we need
to address the entitlement side of the Zealand Superannuation and
that comes through here potentially lifting the age or means
testing has to come into the equation.

Speaker 1 (02:25):
Yeah, Cam, thank you very much, really appreciate your time,
Cam Bagri. Independent economists other things they recommend is lifting
the age of superby linking it with age expectation, like
a life expectancy with a cap of sixty nine, so
not going any higher than sixty nine. And that's where
you have to have the super by sixty nine. A
win full tax of fifty percent on capital games from

(02:45):
land rezoning as well. OECD is expecting economic growth would
recover to about one point four percent this year, and
then two point three percent next year. For more from
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