About the Author

Avatar photo

Dr Muriel Newman

Labour Leadership and the Pension Debate

Print Friendly and PDF
Posted on

Shearer fishThe sudden resignation of Labour Leader David Shearer last Thursday has thrown the spotlight onto Labour Party politics. After just 20 months in the job, he decided to call it quits explaining that he no longer enjoyed the full confidence of his caucus colleagues. Some clearly believed he was not capable of leading the Party to victory in 2014.

The Leader of the Opposition is often called the hardest job in politics. Not only does the task of holding the government to account fall largely on their shoulders, but they must also present themselves as a credible Prime Minister in waiting. Striking the balance between being a hard-nosed attack dog and a visionary capable of leading the country forward, is not easy – especially for someone like David Shearer who was more the nice guy than the mongrel.

What had also become clear was that Labour’s potential coalition partner, the Green Party, had become the go-to party for the media. As a result Labour had been elbowed out of the primary opposition role and the Greens were cannibalising Labour’s vote. That had become so obvious that a challenge to David Shearer’s leadership had become inevitable.

A crucial trait, which all successful political leaders need, is an instinct for politics. This includes an understanding of basic matters such as when to stage a stunt, and when to give it a miss. With David Shearer and the Labour Party struggling in the polls, anyone with an ounce of political nous would have cautioned against a ‘dead fish’ stunt in the Debating Chamber. Nevertheless Mr Shearer took in the fish to challenge John Key over the proposed changes to the snapper quota. The Herald’s Isaac Davidson picks up the story:

Labour leader David Shearer has used a couple of fishy props in Parliament to demand the Government scales back its controversial proposals to limit recreational snapper take. Mr Shearer whipped out two snapper in the House during Question Time this afternoon, one noticeably smaller than the other.

He asked Prime Minister John Key: ‘Does he think it’s fair that a commercial fisher can catch a snapper as small as 25cm but a recreational fisher has to go to 36cm?’

Mr Key responded that if Mr Shearer’s new chief of staff Fran Mold recommended that he bring dead fish into Parliament, ‘then she’s dead as well’.

Mr Key then sought leave to have Mr Shearer table the larger snapper ‘so I can have it for dinner’.1

That he chose to go ahead with the stunt – in spite of advice to the contrary – and was ridiculed as a result, was possibly the final straw – coming as it did hard on the heals of a particularly bizarre exchange with the Prime Minister over a secret briefing about the Government Communications Security Bureau Bill:

David Shearer: Did he or anyone in his office ever contact the Labour Party to obtain broader support for the bill?

Rt Hon JOHN KEY: I cannot believe the member is asking that question. If he wants me to answer it, I will get on my feet and do so.

David Shearer: Did he or anyone in his office ever contact the Labour Party to obtain broader support for the bill—did you contact me?

Rt Hon JOHN KEY: OK. Yes, Mr Speaker. After one of the Intelligence and Security Committee meetings, I asked Mr Shearer whether he would like to come to my office to have a discussion. We sat down and had about a 30-minute discussion where Mr Shearer said: “Keep this confidential. If you come out and say we’ve done it, that won’t look good and I don’t want you shouting it out about the House.” My deputy chief of staff went to see Mr Goff and also went to see Mr Robertson. On numerous occasions we reached out and at one point— [interjection…]

Rt Hon JOHN KEY: If the member really wants to get down and dirty, members of the Labour Party said they did not understand the law.

David Shearer: Is he saying that he made contact with me after the Intelligence and Security Committee meeting and that it was my request that he should remember that?

Rt Hon JOHN KEY: I am afraid the member is wrong. I went up to the member after the Intelligence and Security Committee meeting and said “Do you want to come to my office?”, to which the member said yes, and I said that we would probably take the stairs to avoid the other guys. We actually waited for the other members, in particular, Dr Norman, to leave so that he did not see the member coming up to my office.2

Quite why David Shearer felt it was important for the world to know that he had attended a secret meeting about the GCSB Bill with the Prime Minister is not easy to fathom, but the end result was widely regarded as a spectacular ‘own goal’ for Mr Shearer and the Labour Party.

In his resignation speech, David Shearer claimed he had successfully promoted Labour’s policy platform. In particular, he mentioned ‘NZ Power’ and ‘KiwiBuild’.

NZ Power was the policy Labour announced in conjunction with the Green Party to derail National’s asset sales programme. Under their policy, the competitive market that operates in the electricity sector would be replaced by a regime of government pricing and control. This is in spite of the fact that the only sustainable way to lower prices in the electricity sector is through more competition – along with the removal of costly regulatory burdens such as the Emissions Trading Scheme and the unrealistic goal of having 90 percent of New Zealand’s electricity generated from expensive renewable sources.

KiwiBuild was the policy Mr Shearer claimed would ensure low-income families had access to affordable homes. The policy, however, totally failed to address the root cause of the housing affordability problem, which is a lack of land on which to build houses – in those parts of the country where the problem exists.

David Shearer also championed a number of policies introduced by the former leader Phil Goff, that were regarded as ‘points of difference’ with National – namely a capital gains tax and lifting the retirement age.

In spite of the rhetoric surrounding a capital gains tax, the only way that such a tax would provide a significant income stream for the government is if it includes the family home. Labour had ruled out including the family home, but if they plan to adopt the tax when they are next in government – as a serious source of tax revenue – then the family home would have to be included.

When it comes to superannuation, Labour’s policy would see the age of retirement lifted from 65 to 67 years by 2033 – increasing the age of eligibility by two months a year from 2020. Labour claimed that a retirement age of 65 is unaffordable in the long term. They said that their policy, which would affect more than 2 million people of working age, would save the Government $100 billion over 20 years, from 2030.

At the time, John Key called Labour’s pledge to raise the pension age a “cruel joke” that would force people to work two years longer “to pay for its other promises”. He said that Labour had made such huge spending promises in the lead up to the 2011 election that the retirement age had to be raised in order to balance their books. In comparison, in 2008 John Key made a commitment to keep the age of entitlement at 65 for as long as he is Prime Minister, explaining that National had fully funded the pension out to 2025.

The present superannuation policy was set in 1993. A cross-party accord agreed to raise the age of entitlement from 61 to 65 by 2001. Floor and ceiling rates were set at 65 per cent to 72 per cent of the average weekly ordinary time earnings after tax for a married couple – with a cost of living adjustment to be made in April of each year. The present married superannuation rate is set at 66 percent of the average net wage, and amounts to a gross payment of $620.68 a week for married pensioners and $410.32 for a single pensioner.

Once elected, Labour’s new leader will need to asses all of these policies in order to decide where his preferences lie – including on the super issue.

According to Treasury figures, around 637,000 New Zealanders will receive a pension by the end of this financial year at a cost of $10.89 billion, or 4.8 percent of the country’s economic output (GDP). By 2060, the number of pensioners is expected to reach 1.5 million, and the cost of super is expected to rise to 6.6 percent of GDP. In reality these figures are at the lower end of the international scale of public expenditure on pensions, and are no cause for alarm.

This week’s NZCPR Guest Commentator is Michael Littlewood, the Co-director of the Retirement Policy and Research Centre at Auckland University. Michael’s commentary New Zealand Superannuation is expected to be cheaper? provides a summary of a study that has just been released by the Centre, which explains why New Zealand’s present superannuation arrangements are not unaffordable in the future – just so long as successive governments continue to focus on increasing economic growth:

“New Zealand Superannuation is in fact a claim by today’s pensioners on today’s economic output.  In simple terms, it represents a transfer of the ability to consume resources from today’s producers to today’s older consumers.  The transfer mechanism is higher income taxes than would otherwise be the case if we didn’t have NZS.

“The same will be true in 2060.  This analysis emphasises the importance of economic output and, for the security of today’s and tomorrow’s pensioners, the importance of increasing that output at a faster rate.  For many more reasons than just the affordability of NZS, how to make New Zealand more productive should be at the centre of discussions about the economic implications of an ageing population.”

The facts show that New Zealand super is affordable into the foreseeable future if successive governments remain focussed on policies that encourage economic growth. Compared with other countries, our spending on pensions is low. What that means is that there is no crisis that demands radical change to the age of entitlement or to the value of the pension and that John Key’s approach is based on sound economic data and sensible reasoning.

In addition, a new proposal for flexible super is now being tested – whether super should be available at a lower rate for people under the age of 65, and a higher rate for people over the age of 65. The discussion document has been released as part of the confidence and supply agreement with United Future, and would see someone receiving a rate of super adjusted 6 percent lower for every year before the age of 65 and 10 percent higher for every year over 65. Submissions for ‘flexi-super’ have been called for and close on Friday 11 October – full details can be found HERE.

Super policy will be a test for the new Labour leader: will he pursue the alarmist approach of past Labour leaders to demand an increase in the age of retirement so they can have more money to spend on their pet projects, or will he take a prudent approach and keep New Zealand’s economy growing strongly so the pension age can essentially be left where it is?


Should the pension age be left at 65, raised to 67, or should flexi-super be introduced?  

Click HERE to see the results