You'd be forgiven for not knowing the name of the NZ Treasury Secretary, since most of us have learnt not a thing from her over these past years regards how to make the country a more prosperous place. Caralee McLiesh has been the most invisible Treasury Secretary we've ever had. She's presided over a huge rise in public debt, high inflation, high interest rates, fiscal deficit blowouts, an incompetently designed wage subsidy scheme that had no claw-back (which would've meant companies that never ended up needing the public funds would've had to pay them back), appallingly low productivity growth for which she never provided a hint of a solution, and what is shaping up to be a triple dip recession, making our economy almost the worst performing in the world on the basis of GDP growth .
McLiesh then leaves it to her "exit interview" with the Herald to give her solution as how to increase prosperity in NZ - increase taxes. In particular, go after the assets of those who have worked hard all of their lives and are now over 65 by imposing capital taxes on their wealth. She gets her wires crossed, messing up one of the few things she manages to blurt out during her vacuous interview, namely that, “With an ageing population, we’re seeing an increasing share of Government transfers going to the wealthy, because of course, we have an increase in population of the over-65s, and some of those are in the higher income categories.” What's she on about? The over-65s may have more wealth accumulated over their life-times (which in NZ mainly comes in the form of a house they may own). But in terms of income, which the Treasury Secretary refers to, Stats NZ reports the over-65s are in the second to lowest income group. Its obvious why - they're mostly no longer earning wages and must rely on the pension & typically meagre savings. For those who own a home and live in it, no income derives from that asset, just expenses.
The figure below reports data from Stats NZ on this matter. It shows the Treasury Secretary could not have got it more wrong - the over 65s are in the lowest income group in NZ, with the exception of 18-24 year olds, many of whom are non-working students. Why didn't the Treasury Secretary explain the crux of the issue? We have a Pay-As-You-Go Pension System. Our over 65s already paid taxes when they were young to fund pensions (and health-care) for their parents' generation. Now they have themselves retired, our new young generation is doing the same for them. And so it goes on. The alternative is a funded savings-based system, whereby people start saving for their own retirement (and health-care) when they're young. Kiwi Saver is a start in this direction, but other nations have mandatory systems way larger than Kiwi Saver, which is too small to make a big difference. Why didn't the Treasury Secretary discuss how to strengthen savings-based schemes rather than talk nonsense about hitting "wealthy" elderly with capital taxes to force them to pay twice for welfare.
If "tax the rich elderly more" represents the quality of advice the PM and Finance Minister have been getting from Treasury - no wonder NZ is in trouble. What's astounding about McLiesh's views is that cutting waste & bureaucracy & designing more efficient ways of running health-care doesn't figure in her comments. There are health systems abroad achieving better outcomes than ours at far lower cost. Single (public) provider, single (public) payer systems like NZ's (and the National Health System in UK) are falling apart. Yet improving efficiency & productivity appears to have never been of interest to McLiesh - only hammering the public to pay more for the broken systems she presided over. Asked what her legacy would be, McLiesh replied, “Any leader wants to leave things better than when they came". On that Key Performance Indicator, her tenure at the Treasury was a failure.
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