From Guyon Espiner’s Q & A interview with Treasury Secretary John Whitehead:
GUYON One of the other areas that I guess would be a bit of a shot in the arm for capital markets in New Zealand, would be increased savings. In Australia they’ve had compulsory retirement savings for 18 years. Do you advocate that here?
JOHN We haven’t advocated compulsory superannuation in the past. I think it’s another area where we need a really good debate. I think people that put issues like mining and compulsory superannuation on the agenda, it’s really good for New Zealand, because we need to work through what’s in our own interests, and that’s one of them. So we would certainly be interested in looking at that issue amongst others.
GUYON Do you support it, you’re the chief advisor to the government on the economy, do you support the idea of a compulsory retirement saving.
JOHN What I do support is that we need to get much better at savings in this country, and we need to look at a range of options for that. KiwiSaver has been one of those. Take the recent personal income tax and GST changes, I think [they] are helpful in that.
New Zealand is often compared (disparagingly) to Australia and Singapore. Right-wing economists like Don Brash are especially fond of Singapore with its flat tax structure and robust economic growth.
But Singapore and Australia also have compulsory superannuation schemes. Really successful ones that have grown their capital markets and been a windfall for their economies. So I find it interesting that Treasury obviously don’t even think it’s an idea worth considering and Don Brash urged the government to shut down KiwiSaver and cash up the Cullen fund. (Australia and Singapore also both have very large sovereign wealth funds.)
When I was a child I’d explain to my parents that when I grew up I was going to be a multi-millionaire. They’d ask me how I planned to do that: what would I study, what job would I do etc. I’d sigh with exasperation and explain that I wasn’t going to study anything or have any job. I’d just have loads of money and a huge mansion and fly around the world all the time. People like Brash and the Treasury Secretary seem to have the same approach to our economy:
We should be like Australia and Singapore!
Oh, you mean introduce compulsory savings to grow our capital markets and establish a large sovereign wealth fund while investing huge sums in science and technology research to improve our productivity?
No. I mean we should just have high wages and low taxes and high economic growth!
They do have some ideas on how to grow the economy: more tax cuts for the rich and making it easier for foreign investors to buy New Zealand assets; all those things that have been tried in New Zealand and many, many countries around the world and have never, ever worked. Let’s try them again!
Of course the real problem is that compulsory super interferes with the free market which is a taboo activity in the otherworldly cult of right-wing economic thought. Blogs like NoRightTurn and The Standard tend to look for class-based conspiracy theories in which people like Brash are always out to further the interests of the rich. Well if we had a compulsory super scheme with billions of dollars floating around looking for investment then that would suit the rich very nicely, thanks. The indifference (or hostility) towards a proven idea like compulsory super is a religious impulse not a rational one – which brings us back to the question of why a crucial government department like Treasury has been allowed to run itself like a religious sect for the past few decades.