The NZ Treasury's Lack of Imagination Threatens our Future. It has no faith in Economic Magic (Einstein did).

Our Treasury is at it again. Telling Kiwis a bleak future awaits them, especially in retirement. Its latest report about how NZ Demographic Change will affect the Country's Finances is enough to make the PM's eyes glaze over, Finance Minister Willis fall asleep, NZ First leader Peters to press Delete on his laptop & everyone else to take anti-depressants. Though NZ won the Americas Cup with a boat called Black Magic & we've a radio station called Magic FM, Treasury's having none of it. Instead, it patronizingly tries explaining to you & me, who it takes to be financial dumb dumbs, how high finance works: "Government revenues are not magicked from thin air, but are obtained through taxes", it says. "If superannuation transfers increase because of demographic ageing then the government must increase taxation, or decrease expenditure on other services. Alternatively, it could change super policy settings, to reduce the associated fiscal cost of transfers to super-annuitants".

Except its not true. Want the evidence? Its contained in my article, joint with a former NZ Finance Minister who did the budgets, called Welfare: Savings not Taxation that has now been published around the world. It shows how NZ can lower taxes and increase spending on Super & health-care in the decades ahead, a feat which Treasury tells you is impossible. Where's the magic? What makes our calculations work? Compound Interest. In 1976 the Wall Street Journal published an article ascribing to Einstein the belief that “compound interest” was “man’s greatest invention”. The crux of our solution is savings accounts which are set up for every adult New Zealander. They have similarities with Kiwi Saver, except also include savings for health-care, which mean everyone has health insurance & go private if they wish, not just the wealthy. People's savings accounts receive contributions from their employers, the government, and themselves in lieu of taxes. Here's the thing: by the time of retirement, average earners will have a balance of about $800,000. Where does most of that money come from? Nearly 70%, or $560,000, derives from compound interest, and only 30% from contributions. We've done the sums. So have journal editors & referees.

What that means is you can enjoy a high standard of living, both in terms of retirement income & high class health-care, whereby the vast majority is funded not by higher taxes, nor by cuts in government spending on services, but instead by the miracle of compound interest. But Treasury doesn't believe in miracles. It doesn't have the imagination to see how you can get a high rate of return on your savings by tapping into the world's equity markets and earning the high rates of productivity growth that are being achieved in other countries. It wants us all to be stuck in low productivity NZ and wants to make that problem worse. Do Aussies get truck-loads of compound interest? The average balance for a person in its Super savings scheme is now about $A 350,000 for retirees, or $A 700,000 for a couple - nearly 10 times the average balance NZ'ers have in their Kiwi Saver accounts. Compound interest is now driving the spending of Aussies in retirement. Not higher taxes. Nor cuts in public services. The NZ Treasury's lack of imagination threatens our future. Its message of doom is based on incorrect economics. It is presenting NZ'ers with fake options that both look awful, when other options exist that could create a stunningly bright future for this country.

Sources:

https://www.treasury.govt.nz/sites/default/files/2024-09/an24-08.pdf

The Prize for the (only) Kiwi billionaire who's widely read, doesn't only think about money & isn't afraid to put his views into writing goes to .. Bob Jones.

Its not easy to keep up with the Joneses, especially during a cost-of-living crisis. At 84 years old, Sir Bob Jones is more interested in the world, and has more interesting observations to make about it, than any other big-business owner in NZ. Its hard to keep up with this Jones, but not on the money front - in terms of reading, writing & public commentary. So Sir Bob gets the inaugural DownToEarth.Kiwi Prize for, "NZ Billionaire who doesn't take himself seriously and who has things to say to help NZ that make sense". He has stuff in common with Elon Musk. Though he hasn't invented as much, Jones has a big achievement even Elon hasn't pulled off - he single handedly started a new political party & had the genius to name it, "The New Zealand Party". Winston went & plagiarized the name, adding the word "First" to the end of it. By adding that word, Winston turned his party into one more nationalistic & protectionist than Sir Bob's more liberal & libertarian one. Had MMP been in place back in the 1980s when Sir Bob started his NZ Party and won 12.2% of the vote, he would've had more seats than the Green's won at our last election.

What's impressive about Sir Bob is that he's never been afraid to write & say what he thinks, often infused with comedy. Not so practically every other billionaire in NZ who mostly have, in my view, betrayed folks like me. They've never been supportive. They mostly give money to all political parties. One of them once told me that he didn't care who was in power, since he makes money regardless. Others have rebuffed me when I've pleaded for moral (never monetary) support (since I run on a zero budget) saying, "Look mate, my philosophy is, if you're making money, then don't rock the boat". I heard that line at the NZ Initiative whilst attending its meetings on behalf of a wealthy libertarian Kiwi who'd decamped abroad with his French citizenship. Another (almost) billionaire, Alan Gibbs, like Sir Bob, has also never been afraid to publicly air his political views. They are warrior types. As for the rest of today's Kiwi's rich list types, when they're quoted in the news these days, its mostly to tell us what good people they are & bleat about how they would like to pay more taxes because they believe in equity, or that capital taxes are a good idea. Or they try pretending they're in favor of some dubious social cause that wont help NZ's prosperity but is rather due to their own private aim of wangling social standing and making their employees like them more. They know who they are.