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 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,
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,
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.
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.”
Which led to the inevitable,
It’s interesting to note that the above Herald story had an associated poll that yielded a rather telling result,
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,
- The money has to come from somewhere – and it is coming from overseas lenders,
- High levels of borrowing are ultimately damaging to our sovereign credit rating
- 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.”
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,
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 ReportPosted 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.
As for Kiwisaver, in the five years to June 2012, Kiwisaver has amassed $12.9 billion in contributions.
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.
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,
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,
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
Horizon Poll: Strong support for universal KiwiSaver
NZ Herald: Foreign ownership shortchanging locals
Reserve Bank: Dealing with debt
Treasury: NZ Economic Chart Pack – April 2012
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
Radio NZ: NZ housing ‘seriously unaffordable’
= fs =
For a better New Zealand…
~ Cleaner rivers
~ No deep-sea oil drilling
~ Less on Roads - more on Rail
~ A Living wage at $19.25/hr
~ Marriage equality - Yay! Got that one!
~ Strong, effective Unions
~ No secret free-trade deals
~ Breakfast/lunches in our schools
~ Introducing Civics into our school curriculum
~ Cut back on the liquor industry
~ A fairer, progressive tax system
~ Fully funded, free healthcare
~ Ditto for education, including Tertiary
~ Fund Pharmac for Pompe's Disease medication & other 'orphan' drugs
~ No state asset sales!
~ Rebuild public TV broadcasting!
~ Keeping farms in local ownership
~ Reduce poverty, like we reduced the toll for road-fatalities
~ Jobs, Jobs, Jobs!
~ Being nice to each other
- Letter to the editor – “Throwing money at the problem” of homelessness
- Flying the Red-Green Banner of Resistance
- Why is Paula Bennett media-shy all of a sudden?
- Success for National Govt – new bank opens!
- The Mendacities of Mr English – Fibbing from Finance Minister confirmed
- Letter to the editor – homelessness, class eugenics, and middle class sensibilities
- Upper Hutt residents mobilise to fight State House sell-off
- Budget 2016 – Who wins; who loses; who pays?
- Letter to the editor – Did Bill English try to pull a swiftie on ‘The Nation’?
- State house sell-off in Tauranga unravelling?
- The slow dismantling of a Prime Minister – downward slide continues
- Andrew Little’s “dangerous” speech – a cunning plan for the Middle and the Left
- Foot in Mouth award – another former ACT MP plumbs new depths of dumbness
- Letter to the editor – Who are the Real Greedies?
- Hooton and Farrar slag Key – With friends like these…
- Letter to Radio NZ – Homelessness, Poverty, and the Final Solution
- Letter to the editor – Mark Weldon’s fan club offers support
- Panama Papers: Matthew Hooton’s Alternate Universes on Twitter and Radio NZ
- Foot in Mouth award – Former ACT MP exposes flaw in free-market system
- Letter to the editor – Dear Leader loses the plot in Parliament
- Dodgy tax havens and even dodgier Peter Dunne’s memory
- 2016 – Ongoing jobless tally
- Climate Change Minister Paula Bennett revealed
- National – Party 4 Sale?
- That was Then, This is Now #28 – John Key on transparency
- When National is under attack – Deflect, deflect, deflect!
- National MP Mark Mitchell and his breath-taking display of arrogance
- The Mendacities of Mr Key # 16: The sale of Kiwibank eight years in the planning?
- Flag thoughts and settling dust – Dedicated to our esteemed Dear Leader and Audrey Young
- When Fact Follows Fiction – The Weird World of U.S. Politics
- June 2016
- May 2016
- April 2016
- March 2016
- February 2016
- January 2016
- December 2015
- November 2015
- October 2015
- September 2015
- August 2015
- July 2015
- June 2015
- May 2015
- April 2015
- March 2015
- February 2015
- January 2015
- December 2014
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- March 2014
- February 2014
- January 2014
- December 2013
- November 2013
- October 2013
- September 2013
- August 2013
- July 2013
- June 2013
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- 423,818 hits