On October 29, New Zealand Treasury released a report on the long-term fiscal prospects of the country, projecting national revenues and expenditures 40 years into the future. Challenges and Choices: New Zealand's Long-term Fiscal Statement, October 2009 devotes significant attention to the need for future adjustments to New Zealand Superannuation (NZS), the universal program which provides the principal source of retirement income to the majority of New Zealand citizens. Since 2006, when the first report in the series was published, the national budget has gone from a projected 25-year surplus to a deficit. Half of this deficit is attributed to the slowdown in economic growth caused by the worldwide economic recession; the remainder is attributed to increased costs in existing public programs, including the NZS program.

NZS is paid to all residents aged 65 or older, and it is indexed annually according to changes in average weekly earnings. Currently, the NZS benefit amounts to about 66 percent of average weekly earnings for a couple. NZS is noncontributory and is financed by general revenues. There is no income or asset test to receive the benefit and no requirement to retire from paid employment. Eligibility to receive a NZS benefit is unrelated to any previous earnings history.

The Treasury report states that changes in NZS will be needed to cope with the demographic aging of the population, which is expected to drive NZS expenditures from the current 4.3 percent of gross domestic product to 8 percent in 2050. The report points out that 25 percent of government spending currently goes to the population aged 65 or older who represent only 12 percent of the population. Further projected increases would, according to the report, raise questions about intergenerational fairness and the "crowding out" of other public expenditures on health and education.

The report recommends taking steps earlier rather than later to adjust the NZS to the projected aging of the population. Three possible options include—

- raising (gradually) the eligibility age to 69 by 2040;

- changing the indexation of NZS benefits to inflation-only rather than the current wage-indexing; and

- introducing income or asset testing in the eligibility conditions.

Future adjustments to the NZS will also necessarily take into account the role that KiwiSaver will play in increasing retirement incomes for participants. KiwiSaver, a type of subsidized retirement savings plan, was introduced in July 2007. Currently about 50 percent of New Zealand workers have KiwiSaver accounts.

The full report can be found at http://www.treasury.govt.nz/government/longterm/fiscalposition/2009.

This article was extracted from the United States Social Security Administration publication International Update, December 2009.

源: "Challenges and Choices: New Zealand's Long-term Fiscal Statement, October 2009," New Zealand Treasury.

Publication date: 10.2009