Peter Williams
Writer and broadcaster for half a century. Now watching from the sidelines although verbalising thoughts on www.reality check.radio three days a week.
It’s nearly 32 years since Ruth Richardson was removed as the minister of finance by Prime Minister Jim Bolger but she still cares passionately about this country’s economic direction.
With the 2025 budget now only three weeks away, she’s gone public with what the modern day National Party Minister of Finance should be addressing, but she’s not seeing much that encourages her to think New Zealand is on a path to a sustainable economic recovery.
Ruth Richardson has outlined her thoughts in the Taxpayers Union “Taxpayer Talk” podcast. You can listen to the episode on the website, or on Apple Podcasts, Spotify, iHeart Radio and other good podcast apps.
I’m probably biased because I hosted the podcast but I reckon it’s fascinating listening. The key takeaway is that the country needs some major economic surgery. To give you a taste of what Ruth has to say, here’s a few quotes:
“Core Crown spending is heading towards 35 per cent of GDP, when it should be below 30, and our deficits are just wracking up a horrendous level of debt for the future.”
“Nicolas Willis has to take her brave pills and make the right reform choices. She has to set about right sizing the state. She has to make some pretty bold decisions.
“And they start with addressing the major driver of the overspend, which is the pay-as-you-go unfunded National Superannuation liability. That monsters any other public spending decision that she should take.”
In the year to June 2024, the cost of superannuation to everyone aged 65 and over, no matter their financial circumstances, was $21.574 billion. That represented over 15 per cent of core Crown spending last year.
So, I ask her, do we asset test or income test it or surcharge it to keep the cost of it down? Remember your surcharge from 30 years ago was not exactly popular was it?
“We have to address the underlying issue of when one becomes eligible for superannuation. For a start we have to do what virtually every other country has done and that is to acknowledge that we are fit in our old age and we do not need to qualify for a universal pension at 65.
“I would nudge it up to 68. It might only be three years but it would have an enormous fiscal impact.”
She’s worried that we as a nation are behaving as if there are no threats to our economic security.
“Unless we take the decisions now to stave off these risks we will end up with Generation Screwed, that is my kids and your kids and their kids.
“If Christopher Luxon and Nicola Willis want to achieve the growth economy they talk so much about, they need to undertake the economic reforms consistent with us being able to achieve that objective and that means a very substantial course correction on public spending.
“We are behaving as if a big state will lead to a big economy and the answer is it will not.”
She insists that Luxon has to get out and explain to the country that it is time to say enough.
“If we’re going to be a growth-oriented economy we have to be able to back the engines of growth and you don’t do that through high tax, high public spending, high regulation and high debt.”
The largest industry in this country, and indeed in most western hemisphere nations, is healthcare. The Crown budget last year was $29.6 billion and with nearly one and half million of us having private health insurance paying on average around $2000 annually in premiums, there’s upwards of another three billion dollars in that sector of healthcare. The reality is there will always be demand for the government to spend more on health, but is there a better way? A real user-pays, insurance-based model, for instance?
“We have to model ourselves on Singapore. Their system has three things going for it. It’s efficient, it’s accessible and it has a cost-sharing approach. There is a dual public-private service. There is a medi-save system and a medi-shield system. There is a compulsory savings scheme for healthcare expenses and a national insurance plan that covers major medical costs. I think we’re going to have to move in that direction.
“There are a number of health entrepreneurs, and I think of Cecilia Robinson from Tend, who are already demonstrating high tech and very responsive attitudes towards primary healthcare. People like her could make a huge difference in the way we use health expenditure.
“There’s enough money in health. We just don’t use it efficiently.”
Ruth Richardson’s first job as a law graduate in the early 1970s was at the Justice Department. She was part of a small, and young, team which drafted the Accident Compensation Act. It was ground-breaking legislation which took away the ability for New Zealanders hurt in accidents to sue for damages under Common Law and that a statutory framework would replace it. It was a step-change in the way New Zealand did business. She believes now is the time to make similar decisions about health.
“An Accident Compensation-like revolution is required on the health front and the Singapore example is a very good place to start.”
“We were able to sell a revolution in the provision of accident coverage because the previous system had lost all credibility. That was in 1972. I would say now the health system has lost credibility too. It is not a system held in high regard.”
We spoke the day of Rory McIlroy completing his career Grand Slam of major golf championships which we’d both just watched. Although he’s from British-ruled Ulster, McIlroy is still very much Irish and Ruth Richardson sees his success as a reflection of the economic success being enjoyed by the island of Ireland.
“Ireland won the economic race by doing three things. It kept its corporate tax rate low (12.5 per cent) and any investor in the country knew an Irish government was not for turning on that matter, second they were very open to foreign investment and foreign business, so Winston needs to change his ideas in that respect, and third they have a wonderful education system.
“I think a very strong signal that we’re serious about growth is to at least halve our corporate tax rate, or to give the minister of finance the benefit of the doubt, make it 15 per cent!”
Company earnings are currently taxed at 28 cents in the dollar.
There’s plenty more with this came from. You want to hear Ruth on the size of Cabinet and the number of government departments and agencies!
It would be a very different land if Ruth Richardson was minister of finance again.
She was regarded as just too radical for the middle-aged white male leadership of the National Party during her tenure in the early 1990s and would be unlikely to get a lot of support in a modern day National Party either.
But her basic thesis cannot be dismissed. With our debt and spending levels as high as they are, our economic future cannot be assured.
If you’d like to hear more of Ruth Richardson’s financial medicine it’s at taxpayers.org.nz or on Apple Podcasts, Spotify, iHeart Radio and other good podcast apps.
It’s 50 very thought-provoking minutes.
This article was originally published on the author’s Substack.
