Posts Tagged ‘1975 super scheme’

Regret at dumping compulsory super – only 37 years too late

21 January 2013 22 comments


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 =

Nanny State, Daddy State, poor state?

20 October 2011 1 comment


Full Story


National intends to sign up all workers?

Isn’t that… compulsion?

Isn’t that… “Nanny Statism“?

Isn’t that what National complained so bitterly about in 2008, promising to undo the dreaded tentacles of Nanny State?!

Well, let’s see…








Perhaps I’m being unfair on National.  Calling them hypocrites on “Nanny Statism” may be unwarranted.  After all, National voted against the Repeal of Section 59 (“anti-smacking legislation), right? They voted against the Green Party initiative, right?

The legislation also carries an amendment agreed earlier by Prime Minister Helen Clark and National leader John Key that says the police have the discretion not to prosecute complaints against a parent where the offence is considered to be inconsequential.”  Source

Oh, no! National did vote for the Repeal of Section 59!!

It seems apparent that the term “Nanny State” was nothing more than a very clever election “bogey”, designed to paint Labour as some kind of authoritarian Party that loves to do nothing but micro-manage our lives.  It was a clever ploy, and it certainly played it’s part in helping to defeat Labour in 2008.

But as with the banning of using cellphones whilst driving or launching a “Food in Schools” programme, National is not averse to legislation to enforce “social-engineering” policy.

Their change-of-heart in regards to Kiwisaver may be viewed as  a further step into so-called “Nanny State” heartland. But, like other changes to the way in which we organise our society and manage our economy, it is a necessity which we cannot do without.

Some folk may jump up and down and whinge till the cows come home, that compulsory enrollment is a violation of their right to exercise choice; that it is not necessary; etc, etc.

Well, newsflash, my dear fellow Kiwis – it is necessary, and it is long overdue. The spend-up we’ve been having has been financed through massive borrowings from overseas – and the credit agencies have taken notice of our borrow & spend habits.




Much of our debt is private debt – fuelling our housing bubble – and based on other peoples’  savings. Very little of it goes into the productive sector. In effect, the property speculation is based on borrowed money.

And the party, people, is rapidly coming to an end.

Kiwisaver will do for New Zealand what Australia’s compulsory super-scheme did for that country:  save.

Australia has amassed savings of over $1 trillion dollars,

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

It is little wonder that Australia is a wealthier society than New Zealand. Their superannuation savings scheme – compulsory since 1992 – has meant that Australians do not rely on foreign capital to the same extent that we do, here in NZ.

By contrast, New Zealanders voted away a compulsory savings scheme in 1975, when we voted for Robert Muldoon and his National Government. His (in)famous “Dancing Cossacks” election ad was sufficient to “spook”  us – as was a certain measure of self-interest. We simply didn’t want to save for our future if we could get away with it. And Muldoon was only too happy to be elected into power and oblige us.

The current National Government – a different creature from the one in the 1970s – understands the sheer necessity to wean us off foreign borrowings. That is why they  belatedly support Kiwisaver after initially condemning it when they were in Opposition.

However,  it seems that Key and English haven’t quite got the stomach and cojones to make Kiwisaver compulsory, as in Australia. They will be offering an “opt out” clause to voters.

I guess they don’t want to be devoured by that mythical beast they created, the dreaded Nanny State.

Daddy State will have to do.


Additional information

Dancing Cossacks anti Labour party political TV ad

Superannuation in Australia