Treasury has revealed that fiscal pressures will accelerate in the coming decades, with the cost of superannuation and healthcare expected to rise significantly.
The Treasury has published He Tirohanga Mokopuna, its latest Long-term Fiscal Statement, which highlighted the growing pressures on New Zealand’s public finances, especially the cost of superannuation and healthcare, and called for a proactive, balanced response to ensure long-term fiscal sustainability.
“Over the past two decades, the Treasury has consistently warned that population ageing is placing increasing strain on the Government’s fiscal position. Despite some positive developments, New Zealand has been running a structural operating deficit since 2019/20, underscoring the need for sustained fiscal adjustment,” said Iain Rennie.
“This means that even without future pressures from population ageing, climate change, or infrastructure needs, we must adjust our fiscal settings to bring revenue and expenditure back into balance.”
As per earlier Statements, He Tirohanga Mokopuna found that population ageing remains a significant long-term fiscal challenge with New Zealand Superannuation (NZS) and publicly-funded healthcare expected to rise substantially.
In 1965, there were seven working-age New Zealanders for every person over 65. Today, that ratio is four to one, and by 2065, it is projected to be just two to one. Most New Zealanders over 65 receive a pension funded from general taxation. As the age structure of our population shifts, the cost of maintaining NZS in its current form will rise significantly. Similarly, health expenditure could increase from 7.1 percent of GDP today to around 10 percent by 2065 if policies remain unchanged.
The Statement also noted that climate change, defence, and infrastructure investment will add further fiscal pressures in the decades ahead.
The Treasury’s analysis showed that early action would reduce the overall cost of reform, make changes less disruptive, and result in higher per capita incomes and lower long-term tax rates.
“We don’t need to tackle 40 years of pressures in one fell swoop,” added Rennie.
“Starting earlier provides more opportunities to share transition costs across generations and avoid more disruptive change later. It allows us to signal changes well in advance, helping New Zealanders plan and adjust. Returning to surplus is an important first step.”
The Statement outlined a range of policy options, including adjustments to NZS eligibility and indexation, changes to tax settings, and improvements in public asset management. It emphasises that no single tool will be sufficient and Governments will need a portfolio of responses over time.
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