NZ Initiative on NZ’s fiscal future

The NZ Initiative has released a report called Guarding the Public Purse which looks at the long term fiscal challenge we have with an aging population. In 2010 every 100 working people have to fund 50 non workers (under 15 and over 65) while by 2060 it will be 100 working people funding 72 non workers – so every three workers will have to fund not just themselves but two other people!

If no change is made to current settings, will have to increase by 5% to 6%. That means a drop in disposable for a family with $80,000 income of $4,000 or so a year.

They make two recommendations:

  1. Have a tax and expenditure limit rule which caps the level or growth of tax/spending in ordinary circumstances.
  2. Create an Independent Fiscal Institution to monitor how the Executive complies with , reporting to Parliament

They also have some useful facts on what some changes would make:

  • The cost of NZ Superannuation would in 2060 be 14%, rather than 22% of core Government spending if it is linked to inflation, not wages.
  • If we get of 2.5% rather than 0.5% average incomes in 2060 would be $174,000 rather than $65,000

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