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Prime Minister Bill English announced changes to New Zealand’s retirement rules on March 6. The changes include raising the retirement age to 67, and requiring that migrants must have lived in New Zealand for 20 years to receive a pension from the government.
The new retirement age, which affects people born after June 1972 — bypassing the “Baby Boomer” generation — has been described by several commentators as an unfair burden on younger generations of New Zealanders. The New Zealand Herald’s deputy political editor Claire Trevett wrote that the new rules will affect students who will still be paying off their student loans while “the baby boomers above them got off scot-free.” “It’s pure intergenerational warfare,” according to the blog No Right Turn, mirroring ACT Party leader David Seymour’s comments that the changes amount to “intergenerational theft.”
Politicians are divided over the retirement age issue. While the Labour Party supported raising the pension age to 67 in 2011, its current leader Andrew Little is opposed to the government’s plan. Former Prime Minister John Key often said that he would prefer to resign than raise the retirement age. David Seymour opined that New Zealand First “would rather serve yum cha at their party conference than debate the issue.”
Announcing changes to the retirement age that will predominantly affect younger people was a risky option during an election year, and while only 62% of people aged 18-24 who were eligible to vote casted their ballot in the 2014 election, the 2005 election showed the power of the youth vote when students voted for the Labour Party en masse after the party offered to take interest repayments off student loans.
By announcing an increase to the retirement age, the government has highlighted the issue of intergenerational equity. While many commentators have noted that increasing the retirement age unfairly targets younger generations of Kiwis, supporters of the increase argue that it is in the best interests of young people to have the retirement age increase, for not doing so would make New Zealand’s retirement funds unsustainable. New Zealand’s public spending has become so unsustainable that by 2060 the country’s public debt will exceed 206 per cent of its Gross Domestic Product, meaning that the government will have to spend more cash paying off its debts, reducing the amount of money it can spend on essential services like retirement payments.
New Zealand is not the only country with a debt problem. Greece and Ireland have begged European leaders for bailouts, and the United States’ private and government debt has grown to over 250 per cent of its GDP. New Zealand’s debt problem fortunately has not reached the stage where the government considers bankruptcy or rising inflation as viable solutions. New Zealand’s options, according to David Seymour, include raising taxes, growing productivity, and changing retirement rules. The current National-led government favours the latter: by increasing the retirement age, the government believes it will save around $4 billion per year to help “balance the books.”
Simply raising the retirement age is not the only solution to New Zealand’s financial difficulties, of course, and even Bill English said that “you can afford anything if you’re willing to make the trade-offs, and it’s always a matter of what’s fair.”
But by announcing that the retirement age will increase, affecting a significant portion of the New Zealand population — and in an election year, no less — the government has signalled that the country cannot maintain the intergenerational unfairness of huge public debt which high public spending causes, and that changes must be made to allow younger New Zealanders to enjoy similar entitlements as their predecessors did.