Diverging Paths: Retirement Income Policies in Australia and New Zealand

David Simmers

Retirement income provisions in Australia and New Zealand have been, and in many ways still are, similar. This is deceptive. Within that similarity they are taking diverging paths.

This paper briefly considers the similarities and differences in the government-provided pension (Age Pension in Australia and New Zealand Superannuation) and private superannuation provisions. In the past, in both countries the government-provided pension has been the more important source of retirement income.

Currently Australia is making a deliberate and determined effort to move the emphasis from government to private provision, and explicitly aims to make more people more independent of the Age Pension. Unlike New Zealand, Australia has an assets test, and the income test is much more severe. New Zealand, by contrast, is being more cautious. The Task Force on Private Provision for Retirement was not persuaded by any of the proposals (including the Australian strategy) for reducing the percentage of people requiring government-provided superannuation.

The paper looks at the reasons for this divergence, and ends by discussing some of the prospects for the two approaches, especially in the light of the high costs of the Australian scheme whose original aim was to save the government money.