Home > Dollars & Sense, Social Issues, The Body Politic > Regret at dumping compulsory super – only 37 years too late

Regret at dumping compulsory super – only 37 years too late


It started with the 1975 election campaign,



It’s consequences, 37 years later were,


private sector debt 1988 - 2009 (% of GDP)

Source: Private-sector debt and factors affecting it


Private debt shot up like an unguided missile, into stratospheric heights. There were no limitations on our private borrowings.

By comparison, up until 2008 (Global Financial Crisis), Crown debt has been falling,


Treasury - government debt to gdp ration - june years

Source: NZ Economic Chart Pack – April 2012


In the 1975 general elections, 763,136 voters decided the course of New Zealand’s social and economic history.

By electing Muldoon, under the manifestly unpredictable and unfair First Past the Post electoral system, Labour’s compulsory superannuation scheme was ditched the following year.

As a young lad in his first job, this blogger vividly recalls receiving a cheque from my then-employer, as a reimbursement of my previous super-contributions. I recall looking at the cheque and the pitifully tiny amount it was made out for.

I recall a feeling of disquiet…

Even as a teenager, barely politically conscious, I was uneasy that the scheme was being canned by Muldoon and wondering how we were going to pay for superannuation in the future. I was also  aware that bank mortgages were extremely hard to come by, as New Zealand had a low savings record. Businesses and industries competed with people seeking home-mortgages from banks.

A year later, I bought my first house and the experience was one I shan’t forget.  By 1978 mortgages were nigh-on impossible to obtain; vendors’ Second Mortgages were a necessity (where the house seller left part of the sale price as a Second Mortgage to the Purchaser); and interest rates were high.

New Zealanders simply weren’t saving enough.

Which is why, when the incoming (secretly right-wing Rogernomics-controlled) Labour government was elected into power, they de-regulated  New Zealand’s exchange rate and allowed overseas investment to flood into the country.

As a temporary, short-term “fix”, home ownership became easier. Second mortgages all but vanished. Interest rates dropped, as availability of finance met local demand.

On a long-term basis, the consequences created a rod for our economic backs.

Private borrowings from overseas skyrocketed, leading to ever spiralling-upward housing prices,


total household liabilities 1978 - 2007

3.1 Trends in household liabilities
Total household liabilities have increased in both real and nominal terms. However, until 1990 the growth was moderate (Figure 1). Following the deregulation of financial markets, the growth of liabilities accelerated, and in the past five years has been driven by lower real interest rates and rising house prices.

Source: Debt in the aggregate balance sheet of households


With no limit on the amount we could borrow from offshore lenders, there was no natural ‘cap’ on prices. That meant we could demand more for our properties and the banks would happily comply, and borrow more from China, Japan, America, or where-ever. The banks “clipped the ticket along the way, amassing billions in profits in the process (see:  ANZ profits up 17pc to $1.26b).

As the National Business Review reported in August 2010,

Last Wednesday Mr English bemoaned New Zealand’s debt problem, saying that in 2000 the country’s debt to the rest of the world was about $100 billion but now it was close to $180b, and forecast to hit $250b by 2014.

See: Key cautious over compulsory super

Essentially, we’re now chasing our own tails, borrowing more to buy more expensive houses; then on-selling at a “profit”; and borrowing more to buy higher-priced housing.

Gareth Morgan pointed out in May 2012, when he criticised the futility and destructiveness of property speculation,

“ So lubricated with the credit availability we all pile into the asset in unison and drive up its price. Hardly rocket science.”

See: House prices a cancer for the economy

Which led to the inevitable,


Home-ownership falls dramatically

Full story




Frustrated home buyers want investors to be discouraged

Full story


It’s interesting to note that the above Herald story had an associated poll that yielded a rather telling result,


Do you support a Capital Gains Tax on the sale of residential investment properties



The 39% who responded with ‘No’ corresponds roughly with National’s core support.

The 15% who responded with “Yes, as long as it’s not too high” are those who will vote for whichever political Party best meets the needs of their wallets – and the long-term repercussions for the country be damned. They still want to profit from property speculation, so long as said speculation doesn’t push property prices beyond their own reach.

Those 44% who voted “Yes” indicate a growing maturity and understanding that everything has a consequence – including property speculation. These voters perhaps  understand that,

  1. The money has to come from somewhere – and it is coming from overseas lenders,
  2. High levels of borrowing are ultimately damaging to our sovereign credit rating
  3. Housing speculation is not just a giant legal pyramid scheme – but is harming the future of our own children, who then have to escape to Australia to be able to afford a home of their own


Again, as Gareth Morgan said last year,

This is the legacy of the last 30 years. And it has become so entrenched in our psyche that our ability to build businesses and create wealth and employment has been numbed.

A bit like growing your own veges or preserving the summer harvest, it’s a lost craft. The cost to incomes is high, the consequence being our GDP per capita continues to slip down the OECD charts.

As we contemplate economic recovery some thought at least should be given to the quality of the recovery we’d prefer – do we want it to be a housing-led one again where we all seek riches through a speculative race for property; do we want it to be a business-led type where jobs and incomes take priority; or do we really not care? Is it all too much to think about?

The sense one gets is that politicians at least couldn’t care less, just bring recovery on, any recovery.”

See: House prices a cancer for the economy

A further comparison;  Australia’s  superannuation scheme (also referred to as the Superannuation Guarantee) –  made compulsory in 1992 – has amassed savings of over $1 trillion dollars. In September 2010,

After more than a decade of compulsory contributions, Australian workers have over $1.28 trillion in superannuation assets. Australians now have more money invested in managed funds per capita than any other economy.”-  Source

Two years later, by September 2012,

Total estimated superannuation assets increased to $1.46 trillion in the September 2012 quarter. Over the 12 months to September 2012 there was a 13.0 per cent increase in total estimated superannuation assets.” – Source

No talk of  “nanny statism” here. Our Aussie cuzzies knuckled down; made hard decisions; and did the hard work. In 2006, the Sydney Morning Herald proudly proclaimed,


Australia 'tops' in managed funds

Full story


The Aussies have  earned the benefits.

By comparison the NZ superannuation Fund – begun in 2003 – made this announcement in October 2012,

New Zealand Super Fund breaks $20 billion mark; releases 2011/12 Annual Report

Posted On: Wednesday, 17 October 2012

The New Zealand Superannuation Fund reached an end-of-month record high of $20.08 billion in September.
The Fund, which commenced investing in 2003, was set up by the New Zealand Government to help pay for the increasing cost of universal superannuation. It is managed by the Guardians of New Zealand Superannuation.

See: New Zealand Super Fund breaks $20 billion mark; releases 2011/12 Annual Report

As for Kiwisaver, in the five years to June 2012, Kiwisaver has amassed  $12.9 billion in contributions.

See: IRD – KiwiSaver Annual Report 5

That’s around NZ$33 billion saved here in New Zealand – compared to A$1.46 trillion saved by our Aussie cuzzies.

By contrast, investment strategist and analyst, Brian Gaynor estimates that had New Zealand kept the Labour superannuation schemem it would be world approximately $240 billion dollars (See:  Brian Gaynor: How Muldoon threw away NZ’s wealth). As Gaynor explain,

Without this decision we would now be called “The Antipodean Tiger” and be the envy of the rest of the world. We would have a current account surplus, one of the lowest interest-rate structures in the world and would probably rank as one of the top five OECD economies.

We would still own ASB Bank, Bank of New Zealand and most of the other major companies now overseas-owned. Our entrepreneurs would have a plentiful supply of risk capital and would probably own a large number of Australian companies.

Most New Zealanders would face a comfortable retirement and would be the envy of their Australian peers. The Government would have a substantial Budget surplus and we would have one of the best educational and healthcare systems in the world.

See: IBID’

Never underestimate the capacity for some people to vote stupidly.

Meanwhile, here in New Zealand, we are only just waking up to the mistakes we made 37 years ago,


Strong support for universal KiwiSaver

Full story


Oh well, 37 years… rather late than never.

Which rather paints this current ‘government’ as a thing of the past; unwilling to learn from our historic mistakes; unwilling to learn from the Australian experience;  but willing to take the easy road; and playing Muldoon-style politics with our country’s future economic stability,


John Key - We cannot afford KiwiSaver

Full story

The question now is – have New Zealanders learnt enough history from 1975 to get rid of this inept, inward-looking government? Or will it be John Key – Muldoonism v.2 ?

As always, the choice is ours; a future of debt and under foreign ownership or “Antipodean Tiger” ?

National Party supporters – take note.






Previous related blogposts

Nanny State, Daddy State, poor state?


Horizon Poll: Strong support for universal KiwiSaver

Fairfax: Compulsory Super regret for most Kiwis

NZ Herald: Foreign ownership shortchanging locals

Reserve Bank: Dealing with debt

Treasury: NZ Economic Chart Pack – April 2012

Treasury: Private-sector debt and factors affecting it

Wikipedia: 1975 General Election

NZ Herald: Govt eyes blind to housing crisis

NZ Herald: House prices a cancer for the economy

National Business Review: Key cautious over compulsory super

Bay of Plenty Times: John Key: We cannot afford KiwiSaver

NZ Herald: Brian Gaynor: How Muldoon threw away NZ’s wealth


Radio NZ: NZ housing ‘seriously unaffordable’



= fs =

  1. 21 January 2013 at 5:35 pm

    Wow another well researched and written post Frank. I totally agree – the cancellation of the 1975 scheme was a crime. We need a strong and compulsory Kiwisaver.

  2. Kevin H
    21 January 2013 at 5:37 pm

    In the late 60’s and early 70’s Robbie, ( Sir Dove Myer Robiinson) the Auckland mayor, wanted to build an “Underground”in Auckland. It was kaiboshed by the short sighted National party as the said it would be too expensive @ $100m. Now we’d be lucky to build the same thing for $100b. They are such amazing custodians of the exchequer, well for their mates they are.

  3. 21 January 2013 at 6:05 pm

    Indeed it was. Now we’re wasting billions on the RoNS and still not investing in public transport.

  4. Jasper
    21 January 2013 at 6:36 pm

    Fantastic journalism & research Frank! Can you sckool and train the next generation in Journalism as this current bunch in the “Lame stream” media are absolute shite!
    Cheers Frank.

  5. mick
    21 January 2013 at 8:30 pm

    where my cake ?

  6. 21 January 2013 at 9:31 pm

    Yes Frank Get your own tv show on economics tv 3 will do nicely tvnz wont thats for real.

    • 21 January 2013 at 11:08 pm

      Gentlemen, I am humbled by your generous compliments. 🙂

      Mick – cake all gone. And someone in my house has a rather suspicious chocolaty-grin. If, however, it’s our Economic Cake you’re vreferring to – the Nats and their Rogernomic mates gave it all away years ago. Squandered wealth and opportunities…

  7. Procrastinator
    21 January 2013 at 11:16 pm

    A brilliant insightful post, one can only be filled with remorse to think of what this country could’ve been today.

    At present, this country’s future is taking an extremely abysmal turn with a government whose policies appear to be a meld of the worst aspects of Muldoonism, Rogernomics and Ruthanasia.

    For those who were charmed by and fluttered away their vote to elect this government of confidence tricksters, this post is recommended reading.

    Voting is a responsibility not a trifle act. The consequences for the future are high, as demonstrated here.

    Keep up the good work, this country needs this type of insight.

  8. Dv
    22 January 2013 at 12:04 pm

    Interestingly we bought a house in 79. Cost 3x salary. (Now the house is about 6x equivalent salary)
    We had saved about 40% of the cost via a post office scheme. We got a state advances loan for 3%, but we still had to borrow 14k at 20%!!!!
    The PO scheme and cheap state advances loan allowed us to save enough to get into our home.
    Where are those schemes now.

    • 22 January 2013 at 12:23 pm

      I recall that Post Office scheme, DV!

      If memory serves, Stan Rogers changed the criteria mid-way through the Post Office’s scheme. All part of Douglas’s User Pays and cutting back state services policies.

  9. Alwyn
    22 January 2013 at 12:25 pm

    I do like the way that people like Procrastinator complain about “Rogernomics” and then say what a shame it is that we did not continue with the compulsory super introduced in 1974.
    Why do they choose to ignore the fact that that scheme was Roger Douglas’? It started as a private members bill he put forward from Opposition in 1972 and then was developed and promoted by him when in the Cabinet from 1972 to 1975,

    • 22 January 2013 at 12:58 pm

      Indeed you are correct, Alwyn. The compulsory super scheme was Douglas’s brain-child.

      It might be said that everyone has at least one good idea – and the 1975 scheme was Douglas’s contribution.

      Had we persevered with the scheme and saved an estimated $246 billion (according to Brian Gaynor’s calculations), the New Right would not have had the economic “crisis” of the mid-1980s to use as an excuse for mass privatisation of our assets. In effects, Douglas would have torpedoed the neo-lib agenda with his own super-savings scheme.

      Rich irony? 😉

    • Procrastinator
      22 January 2013 at 1:20 pm

      Alwyn, to clarify what I said earlier:

      “At present, this country’s future is taking an extremely abysmal turn with a government whose policies appear to be a meld of the worst aspects of Muldoonism, Rogernomics and Ruthanasia.”

      Emphasis on: worst aspects of Muldoonism, Rogernomics and Ruthanasia.

      Further irony can be found with Muldoon, he was a proponent of the welfare state even though his flawed economic policies undermined it.

  10. Strawberry Paddocks
    22 January 2013 at 4:44 pm

    I’m too young to remember any of this but I showed your blogpost to my (National voting ) parents and they bother agreed that it was true. For the first time in their lives they’re questioning whether to vote for National again. I don’t think they can bring themselves ever to vote Labour though. They may just stay home or go to Fiji for a holiday.

  11. 23 January 2013 at 12:34 am

    Could never figure out why Muldoon campaigned to dump the compulsory super scheme. Then I figured it out; he wanted to get re-elected in 1975. So he bribed the electorate with our own money.

    Much like Key bribed a million-plus voters in 2008 with tax cuts. again our money. Never underestimate two things in this country,

    (1) the ability of National to promise whatever it takes to get elected. Even if we can’t afford it. (And they call Labour irresponsible spenders!)

    (2) Voters dumb enough to believe their promises.

  12. K. Young
    24 January 2013 at 12:35 pm

    Well said, ALH84011!

  13. Mr D. Duck
    23 July 2013 at 6:46 pm

    It looks like New Zealanders haven’t learnt a single thing from the Muldoon days! Electing Key is Muldoon 2.0.

  1. 22 January 2013 at 10:40 am
  2. 29 January 2013 at 2:00 am
  3. 28 February 2013 at 4:52 pm
  4. 27 May 2015 at 5:15 am
  5. 1 June 2015 at 8:00 am

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