Superannuation affordability can’t be judged in isolation

Request to commentators: if you want to be taken seriously on the future affordability of superannuation could you stop looking at it in isolation?

Criticism of National’s decision to suspend contributions to the Government Superannuation Fund continues with the critics saying it means that universal payment of 66% of the after-tax average wage to people from age 65 is no longer affordable.

The Super Fund was established to use surpluses. We don’t have them any more.

Continuing contributions would be like a farmer doing a budget, realising the income wasn’t going to meet the expenditure and then increasing the mortgage to play on the share market.

Shares are usually a good longterm investment, but the advice given to individuals also applies to governments – you only buy shares with money you can afford to lose.

Shares might be cheap now but that will only be proved in hindsight. Share prices go up and down and no-one knows when they’ve reached the bottom or the top until they reverse direction again.

If the fund was buying overseas shares, the exchange rate also has to be taken into account because if the value of our dollar increases there would be a corresponding decrease in the value of returns in foreign currency.

On top of that the affordability of superannuation can’t be judged in isolation, all other expenditure has to be taken into account too.

If , for example, you could afford current superannuation payments or benefits for upper and middle income working families, which should be the priority?

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