Jason Heale
Auckland, October 14, 2024
New Zealand is facing a demographic crisis that could seriously hurt our economy. By 2034, more than 20% of us will be 65 or older, piling pressure on healthcare, superannuation, and social services. As we enter the “super-aged” category, the reality hits hard. While living longer and healthier lives is positive, the downsides are real and urgent. If we do not act fast, we risk economic stagnation and potential social upheaval.
Last week, Treasury Chief Advisor Dominik Stephens gave us yet another warning—one we have been hearing since 2006.
Economic Pressure
Want to see our future? Look at Japan, where an ageing population has left towns like Nagoro nearly deserted. The village, now mostly dolls made by a remaining resident, shows the stark reality of a shrinking population: struggling businesses, ghost towns, and growing poverty among the elderly. This could be our reality, too—businesses closing and older Kiwis left without enough support.
A shrinking workforce means fewer workers for businesses, stifling innovation, slowing growth, and reducing tax revenues—all while demand for healthcare and support soars. Our economy depends on young people joining the workforce and paying taxes, but with a rising deficit, we cannot keep going down this road. Our elderly will suffer first, but the long-term consequences will impact future generations.
So, what can we do about it?
With this growing pressure, debates about superannuation reform have ramped up as Politicians scramble to find solutions. Nicola Willis, National’s Finance Spokesperson, has pushed for urgent reform, warning that younger generations will be stuck footing the bill if we do not act. National wants to raise the retirement age to 67 starting in 2044. On the other hand, Labour is sticking with 65, saying that as long as we keep topping up the NZ Super Fund, the system can hold up. But, as Sir Bill English once said, touching superannuation is “political suicide”—underscoring just how challenging it is for politicians to make any meaningful changes to this sensitive issue.
Solutions Beyond the Super Fund
But Treasury’s warnings suggest that just topping up the Super Fund is not enough. We need to consider tougher solutions—like raising the retirement age or means-testing superannuation so it goes to those who really need it. It is a conversation we cannot keep putting off.
Mr Stephens suggests we need more young people who are willing and able to support their elders—a good start. Looking beyond New Zealand for answers, Germany has tackled this problem by offering businesses incentives to keep older workers employed. This lightens the economic burden and gives older workers a renewed sense of purpose—something we should consider here.
We can begin by raising or means-testing the retirement age, reducing the pressure on superannuation and keeping skilled workers in the workforce longer. Retraining older workers could also help fill critical gaps in areas like healthcare. Meanwhile, targeted immigration policies could bring in younger, skilled workers to support our ageing workforce.
The ageing crisis is already here. If we do not act now, we risk economic decline and deepening social divides. But with bold action, we can secure a strong future. The super-ageing clock is ticking.
Jason Heale is the Communications Manager of the Auckland-based Maxim Institute, an independent think tank working to promote the dignity of every person in New Zealand by standing for Freedom, Justice, Compassion, and Hope.
