Long Term Fiscal Forecast for NZ

Treasury has done a 40 year out fiscal forecast, and not surprisingly it finds that the ageing population will lead to health and superannuation costs exceeding our projected income.

Some on the left are saying this is why we should not have tax cuts today, because in 25 years one may have to start increasing taxes. I personally reject a strategy based on constantly increasing tax rates as our population gets older.

On the income side, even a 0.5% annual increase in average GDP growth will make a big difference to future surpluses. A focus on lifting economic performance is vital.

For superannuation, I have no doubt the the superannuation eligibility age will over time increase from 65, and this will reduce costs. Even Dr Cullen has hinted that this is a legitimate future option.

Personally I would also means test superannuation as it is ridiculous to pay a pension to multi-millionaires. But there is no chance politically of this happening.

Health costs are more difficult. For 15 years all Governments have shied away from defining what health services will be publicly funded and what won’t be. No-one wants people dying early because they can’t afford an operation, but can we afford as a society to say fund liver transplants for 109 year olds so they make 111?