Sorry if I sounded a bit harsh – I appreciate that cutting the health budget doesn’t automatically mean fewer front-line services.

In the real world, some departments (and countries) are better run than others. But is doesn’t pay to overestimate the gains that can be made from ‘efficiency savings’. Every opposition party claims they will cut waste, every government struggles to deliver on the promise.

Sure, you can trim a bit here and there, as the present government is doing. But the only way to make substantial savings is to have the government stop doing stuff. This is rarely popular with either the people who were doing the stuff, or the people on whose behalf it was being done.

Michael Littlewood – congrats on sparking an important debate.

One doesn’t have to research far back or be an Albert Einstein to realise that the asset was run down badly when the government buy-back occurred and had been under or non-invested in for 20+ years. I don’t blame those involved for bleeding the asset dry, I think that most companies would have done that. I had shares in one or two of these companies which hasn’t hurt my super.

You’ve brought in the suburban rail stuff, eg the Auckland CBD Loops, electrification etc isn’t part of the function that KiwiRail’s business services. Why have you done this? In reality these are local government and central governments infrastructure investments and whether they keep ploughing money into them to improve them is their business. KiwiRail is just the instrument to provide these types of services etc

I appreciate that the ecconomy would slump, the consumer part of the ecconomy anyway, with all that money taken out of consumer spending but it is the bullet the country needs to bite despite the hardship it would impose on todays generations.

Sorry if you think I deserve more demerit points for this but I think you ignore the real aspects of the problem of the population spending instead of saving.

There is also currently a lot of talk about Key and English refusing to talk about raising the retirement age though I heard a ‘
throw-away’ line from English where he said he was happy to talk about it but Govt policy was not to change things, at least during this first term. He didn’t say it that way but I’m putting two bits of his words in my own for clarity of the intent I got from the interview. So you agree with English and he with you.

My answer to your today’s query is ‘don’t put off until tomorrow to do something you can do today’.

It is an appalling situation when elderly people receive handouts from the State for no good reason whatsoever.
Those amongst the population who engaged in thrift, hard work, savings and investments should be able to provide for themselves in their old age.

Those who were too busy wasting their money downing jugs of Lion red and eating hamburgers, along with HP agreements, lotto tickets and other unnecessary things to either live within their means or to save and invest should either continue working in their old age or be taken care of by their children.

If this category of people had not been such appallingly bad parents (they were) their children would willingly look after them (they won’t) and only have themselves to blame; accordingly they should not expect the rest of us to chip in and reward their slothful and imprudent behaviour.

Abolish pensions immediately is what I say!

http://www.nightcitytrader.blogspot.com

This is a perilous path. If it is to reflect living costs, presumably housing, will it take account of things like climate (heating requirements) and other regional variations?

One national level encourages people to retire to cheaper-cost areas, and should help slow the growth of Auckland into a huge distortion at best an economic drag on the rest of the country and at worst gradually weighing it down into the Third World. As pointed out before, if New York had the same proportion of the American population as Auckland does of the NZ population, then New York would have more than 100 million people.

Cost of living in Auckland will continue to outpace costs in the rest of the country. Paying Auckland retired people more than retired folk in the rest of the country would be unfair to national taxpayers.

Regarding the actual NZ Super I think raising the compsulory age from 2025 onwards and making the Tier 2 scheme more inline with superannuation (rather than using it to help provide for short-term requirements) would be a good idea. It might not be such a bad idea also to increase the residency requirement from 10 years to, say, 20 years with a minimum of 10 years continuously in the country and 10 years in the country since birth. You could then have an ‘Overseas Rate’ for people who choose to move abroad and people who come back would have this applied to them until they meet the 10 year requirement again (or something to that effect).

The main thing is that while the 3.7% increase in GDP requirement that we’re going to face in 2050 sounds small now, it’s just the super cost. It doesn’t, I presume, take into account the costs we’re all going to have through health care, additional public services, and so forth. So we’ll seriously need to consider adding a few more years on, which will increase the labour force, increase the period we can save for Tier 2, and also increase the period we’re paying taxes into Tier 1.

So if you spent $10million building a hotel and your income only just covered the wages of the receptionists and cleaning staff, then you’d decide this was a triumph because it was making an operating profit? Even as the vale of the hotel was reducing by the day, you were paying out $1million a year in interest, and you’d have to stump up another $10million to replace the hotel once it was worn out?

In the real world, capital has a cost. The value of our “investment” in KiwiRail reduces by hundreds of millions of bucks each year. And KiwiRail can’t electrify Auckland railways, build the Auckland city loop it wants, or buy new trains in Auckland or Wellington out of its income, but wants taxpayers to pick up the tab. It is an unsustainable drain on the economy. We can’t afford to keep subsidising railways if we want to retire at 65.

The great irony is that I believe that (very reluctantly)Labour was pushed into supporting rail to get Green support. I think in the end that Labour actually realised that between themselves and the Greens that they actually had this right and in the end supported it. This couldn’t be said about too many of their joint projects BTW. Thanks to them we have a great national asset back in the people’s hands, it could have been bought back for less after the GFC, but this is always easy to say in hindsight.

I have no political allegiances so don’t have the problem of looking at these types of things through rose-tinted glasses.

Getting on to super, I have been creating my own super for years, I was lucky in that I understood this at an early age. What’s really required is the “Cultural” change and getting people to realise that the Crown won’t always be there to catch them when they fall. In the figures I’ve seen, the amounts people are saving or had saved for them aren’t enough. I’ve tried to save 15%+ of what I’ve earned to try and maintain my lifestyle in retirement

Didn’t he sign something which said he would resign if he did?

For one thing, it provides another discipline on the Government to keep inflation low and avoid a blow-out on these expenditures.

Good on you for kicking off this discussion. It’s something that needs to happen, especially as it has never happened before. We need decent data before we make a decision on this. You seem to be guided mainly by cost considerations. That is obviously important but there are other considerations – the impact on tax rates; an adequate period of notice (who are we really talking to – today’s 40 year olds or today’s 50 year olds?); growth implications (a higher state pension age implies higher labour force participation rates at older ages); the impact on ‘labour intensive’ occupations (for example drainlayers vs desk jockeys).

In the end, it is the producers (including many over age 65) who give up part of their claims on future economic output to support the dependent population (including the old).

And then there is the politics – as someone I know commented, when John key says “The Government is committed to these settings and I have said many times that I would rather resign than change them.” there is a difference between “I would rather” than “I will”.

Incidentally, you said that life expectancy was 60 in 1898. That may have been the “from birth” number but that is not the important one because of high infant mortality. The correct number is that life expectancy of males at age 65 was 12.7 years in 1898. For males it is now 17.8 years.

[DPF: I agree not just about cost. For example when we talk eligibility age, I plan to highlight how it impacts manual labour roles more.

What might be more useful for life expectancy is what it is for someone aged 18 as that is when most start to pay taxes. ie how many people will pay taxes all their life but never get super?

At current levels it is substandard, future will be even worse.

I did say that “some” of the increased superannuation bill could be funded by efficiencies in other areas, rather than the whole amount. I think it is tempting to focus on the big ticket items, and forget that the minor programs add up to quite an impressive sum. Obviously it is hard to argue that we should borrow to fund the Race Relations Office and Ministry of Women’s Affairs, even if they don’t add up to much individually. But my experience with government IT is that projects will typically cost anything from 3 to 10 times as much as best practice. If IT costs 10% of government administration (which is a guess based on average IT spend ratios across all organisations), then you could save 5% of government administration costs just by running IT efficiently. If other aspects of government administration are similarly inefficient, then the savings are greater. I’m confident that you could save at least a billion a year through attention to detail.

But, if you’re after big ticket items, the million dollars a day that KiwiRail costs us is an easy target. The $450million NZAID budget is another, since it’d be hard to argue that people should retire later in order to fund overseas aid. There is $800million already. An ACC that blows $4.8billion in one year yields lots of scope for savings, even if those savings are in the area of compulsory premiums rather than taxes.