The NZ Society of Actuaries Retirement Income Interest Group (who sound like an exciting bunch of characters, by the way) say at rates of 6% plus 6% (from the worker and the employer) people may have more money to spend when they are retired than when working. On that basis, this dynamic bunch – who I’m sure charge significant fees before one can belong to them, a bit like the Northern Club – say five plus five would be better.
Surely, they are right. If you earn an average income, do you really want to slog your guts out in your working years so you’re much comfier financially when you’re old and decrepit and can’t enjoy it as much? No holidays for the fam on the Gold Coast while you’re working but plenty as soon as you stop.
Indeed, the nub of the issue is that we just aren’t a high-income economy today and I don’t see a clear path to make us one by 2032. AI tells me the average annual salary in New Zealand is $81,484 and the median, probably a better figure to use, is only $69,836. That’s hardly champagne living, and becomes five grand less at an average salary or $4,000 less at the median rate for the employee once their 6% is taken out, not to mention the 6% the boss also has to find.
But the figure that I can’t get out of my head is from Westpac data earlier in the year. More than one in three Kiwis today has less than $500 in savings. That’s a definition of poverty. Crash your uninsured car and you’re in a dreadful financial spiral. No wonder, according to another recent report, this time from the Helen Clark Foundation, only a third of us feel financially secure.
Twelve per cent might make for a stronger collective future. However, it would also make things much tougher for a heap of Kiwis until they retire – employees as well as for SME owners, a much-neglected collection of businesspeople, who’ve survived – just – a torrid few years, but still aren’t finding it easy. If it’s a choice for them between paying off bills, keeping their businesses going, handling their mortgage repayments, or 12% more into KiwiSaver, I reckon I know what the majority would choose.
And this talk of mortgages segues me rather conveniently to another much more pressing matter; the Reserve Bank of New Zealand’s desire to lift the Official Cash Rate and therefore mums’ and dads’ interest rates, meaning even more cost-of-living struggles.
I accept our economy is a hard thing to generalise on. The South Island and our farming friends seem to be in clover. Yet that’s not true in major cities, namely Auckland and Wellington for the most part.
Auckland Business Chamber chief executive Simon Bridges. Photo / Michael Craig
Additionally, it hasn’t been all the members of RBNZ who are entirely frisky for rate rises. The fulltimers at the bank were less enthusiastic than the independent members who presumably don’t run a small business at the current time, have paid off their mortgages and still take regular holidays to Australia.
Yes, inflation is a thing that can at times be a wretched beast. But during the height of the Middle East war I couldn’t for the life of me understand how restricting more cash in a stalled recovery was a good idea. Especially when the big driver of this was foreign oil, which we’ve less control over than our teenage children’s social media usage.
Today as – touch wood – the war is over, more traffic is heading through the Strait of Hormuz. On this basis, the arguments for holding rather than raising become even stronger. Petrol prices are down a little and some commercial banks are saying therefore that the RBNZ will slow its hawkish push down and rates will stay lower longer.
I certainly hope so. We aren’t high income in New Zealand, and we badly need an economic uptick. One word matters more than KiwiSaver, more than inflation, or any other for that matter. It’s growth.
Simon Bridges is the chief executive of the Auckland Business Chamber and was the leader of the National Party from 2018 to 2020.
Catch up on the debates that dominated the week by signing up to our Opinion newsletter – a weekly round-up of our best commentary.