A Super question - your view?

So the super debate is heating up. I have a question for you:

Does economic growth solve our Superannuation dilemma?

I've heard arguments both ways: the wages link seems to militate towards seeing it as a problem; the cost of healthcare always gets a bit sidelined; we don't actually know with great certainty the demographic future.

What do you think?

Comments

[brendonRS]

I'm not nearly smart enough to actually contribute to the answer to that question, but there are a few things I've been thinking about the whole super thing lately...

First, to actually address the question, even if economic growth can solve the problem, counting on it to do so seems risky to me. Even if we do get to surplus sometime before 2020, current forecasts suggest it's going to be short-lived. In the spirit of the #endfossilfuelsubsidies campaign on twitter right now, I don't think we should be counting on significant economic growth to be the answer to anything in the long-term.

Second, a few other thoughts...

Our universal superannuation scheme has clearly worked. We're doing really well in international rankings for poverty among the elderly. That should give us pause whenever we think about changing it - we don't want to lose what we've gained.

On the other hand, as unreliable as demographic information might be, I think we can probably agree that we're going through some sort of transition phase in that peoples' experiences of wealth, work and life expectancy are diverging. A one-size-fits-all system doesn't seem like the best way of dealing with that.

To take a slightly more radical view of the whole thing, what really differentiates a old person from any other sort of person who for whatever reason can't work, or needs state assistance? Maybe superannuation could be a redundant issue if we moved to some sort of universal allowance system (I'm thinking along the lines of Gareth Morgan's Big Kahuna concept). Put differently, perhaps state assistance should be metered out according to need and nothing else. In the current environment, that would result in a considerable reallocation of assistance away from the elderly and towards the very young.

But back again to your actual question. Superannuation and healthcare are subsets of the "ageing population" problem. They should be considered together. What's more, they're not the only things about that problem that need to be considered. There's also the much more difficult question about the perpetuation of life beyond its natural boundaries, what that means and what our reaction to it should be.

[IAmWilbur]

Remember that superannuation is indexed by wages rates, which are a function of economic growth. So if the economy grows substantially, super costs are going to rise. The net effect of growth on the superannuation problem would still be good, as growth doesn't have a one-to-one relationship with wage rates, but it diminish the benefits substantially.

Of course, like the above author, I too am skeptical of twenty-first century economic growth, and would prefer a UBI. But I'm not holding my breath for either of those things to be taken into account by National or Labour.

[Slpaterson]

As with Brendon,
It seems a bit reckless or naieve to rely upon economic growth to solve our Superannuation dilemma. Even if they are right, I find it hard to see how I could be convinced they are not just making up numbers.

[Jordan Carter]

This is interesting. I think growth could help, not least because if you have to increase taxes to pay for super, at least you can do that while simultaneously letting people's incomes rise in the hand as well (if growth is fast enough). In other words growth dilutes the distributive clash.

The question then becomes, what are the sources of sustainable growth?