Current Govt policies unsuitable for ageing NZ population, Treasury warns in latest fiscal outlook

“So this document is very important in that respect, because it does lay out the problems very clearly.”

ANZ senior economist Miles Workman. Photo / SuppliedPopulation ageing remains a significant long-term fiscal challenge.Despite favourable economic tailwinds in the past 20 years, New Zealand’s debt is higher than anticipated.It is vital New Zealand closes its structural fiscal deficit sooner rather than later.Fiscal pressures will accelerate in coming decades, with costs of superannuation and healthcare expected to rise significantly as the population ages.There is no one solution and successive governments will need to consider a mix of options to deliver fiscal sustainability over the coming years.

Secretary to the Treasury Iain Rennie said New Zealand had been running a structural operating deficit since the 2019/20 financial year.

“In 1965, there were seven working-age New Zealanders for every person over 65. Today, that ratio is four to one, and by 2065 it is projected to be just two to one,” Rennie said.

“As the age structure of our population shifts, the cost of maintaining NZS [New Zealand Superannuation] in its current form will rise significantly.

“Similarly, health expenditure could increase from 7.1% of GDP today to around 10% by 2065 if policies remain unchanged.”

He said an adjustment to fiscal policy was required to bring expenditure and revenue into balance, even if more favourable conditions prevailed in future years.

The report warns unchanged policy would lead to debt rising to around 200% of GDP by 2065.

-RNZ