In too many areas we are avoiding thinking about or preparing for oncoming changes.
About a decade ago I had a ‘Lambton Quay’ conversation with an environment policy advisor. For those who do not live in Wellington, LQ is the main shopping street which starts at Parliament buildings; it also has cafes and government offices. Wandering along it, one often bumps into public servants with whom one exchanges personal and political gossip; sometimes the official also cryptically comments on some issue which is concerning them.
(Most public political comment is based on Parliament and the Beehive and ignores the vital and fundamental role of officials’ thinking. Politicians frequently botch the subtlety of the policies; public understanding suffers.)
In this case it was mentioned that we might not be putting enough effort into climate change mitigation. Decoding, I think they were saying that we were putting all our effort into reducing greenhouse gas emissions despite knowing that it would not have much impact on climate change; New Zealand’s contribution is tiny. Given the world was not putting in enough effort, climate change was inevitable, and New Zealand needed to think about trying mitigate its impact, by adapting infrastructure and land use to recognise the oncoming future changes.*
We have not done much, as the damage from recent storms reminds us. (Perhaps we have done a little more to deal with rising sea levels. Have you noticed how engineers have been raising sea walls?)
We reacted to the storm surges as usual. Initial panic, then a lot of constructive support of one another. In the future we shall spend a fortune remedying the infrastructural damage, much of which we could have avoided by spending less earlier in readiness for the surges.
Too much of our policy is like that. We do not look forward, we fail to do adequate prevention, we handle the immediate crisis reasonably well, but it is painful to those directly hit, and then we spend a fortune on after-crisis repairs.
That is not true on all fronts, but here are a couple of further examples. The Wellington water system is crumbling. I learned that in 1994 when a storm hitting Wellington overloaded the storm water system. Flood water poured into the sewage system bursting a sewer pipe which flooded houses in Kilbirnie. Remedial work followed, but the pipes remained old and poor and there are further ongoing failures (usually not of the same magnitude). A mere thirty years later, in 2024, the Wellington City Council began developing a long term plan.
The issue is not unique to Wellington. The Auditor General reported in 2019/20, that the amount councils – excluding earthquake-recovering Christchurch – spent renewing pipes and other plant was 74 per cent of depreciation for water supply, 64 per cent for wastewater and just 39 per cent for storm water. A 2025 report said that local bodies were planning o do better, but that is a hell’uve a backlog. It is projected that we shall have to spend $49b on water infrastructure over the next decade.
The water system is largely out-of-sight out-of-mind; we treat roads better because they are above ground. We have been keeping rates and water charges down by not maintaining the system, thereby running down (consuming) public (or collective) capital in order to increase private consumption. In the longer run that means we have poorly performing public goods; typically by then the culprits are no longer in power.
My impression is that there are many other areas where we fail to maintain, or fail to provide for increasing demand, in order to increase current consumption, thereby plundering the future. Not all of them. Since the Kaikoura earthquakes, Wellington has been making a major effort to become more robust to earthquake shocks. Even so, one report estimates that 97 percent of our expenditure on natural hazards is on backward-looking remediation, 3 percent on forward-looking mitigation.
A different class of failures to face up to the future is illustrated by the ageing of the population. Following Treasury’s first Long Term Fiscal Projection in 2006 – twenty years ago – it became well recognised that the ageing population would put almost intolerable pressure on the fiscal system. The failure arises not only because of the increasing proportion of the population who are elderly, but the older population has higher demands on the healthcare system; the older it is, the greater the pressure.
It is a bit like water infrastructure. We have known for some time, the fiscal pressure was coming, but we have done hardly anything about it.** My fear is that when we hit the fiscal crisis, there will be a sharp cutback on the level of NZ Superannuation and publicly funded healthcare and other entitlements. It will be all the more distressing because the most affected will be hardest hit.
Unusually – and twenty years late – the Treasury has just gone public about its concerns. I don’t particularly agree with its policy recommendations. Mine are twofold (as well as strengthening the Kiwisaver provisions).
First, we should implement a rise in the age of entitlement to NZS. The increase should be in incremental steps and well signalled (recall the shift from 60 to 65 in the 1990s), with a backup of an (incomes-tested) invalids (or ‘early retirement’) pension for those below the eligibility age who cannot be reasonably expected to be employed or live from their savings.
Second, we should introduce a special tax code for NZ Superannuitants which would have the same tax rate at low and medium-low levels of income as for other taxpayers. But the rates would be higher above those income levels, reducing the value of NZS to the more affluent. (Yes it is a surcharge – the fiscal pressure cannot be resolved without one – but it is applied in a way which is simpler to understand.)
Of course there will be an outcry, led by you-know-who, even though initially few will be affected, You cannot make an omelette without breaking eggs (that’s Rabin’s Law). I would blunt the outcry by recycling most of the immediate savings back to the elderly, perhaps as greater housing and local body rates assistance, improved healthcare (say reducing waiting lists) and residential support. The gains I am after are long term, restraining rising spending. (The thresholds for the higher tax rates would rise more slowly than for ordinary taxpayers.)
Again we have been funding current consumption – in this case of the very well-off elderly – and so compromising the future. Again I am arguing, as I did above for infrastructure, that we should spend now to reduce harm in the future. In the NZS restructuring case any additional spending need only be a little, although it could be dressed up to appear a lot (such as including in the package healthcare spending which would have been already partially committed anyway).
In the end we need to think more about the future and avoid the inertia of nostalgia. The future soon turns into the present. As is mentioned on Lambton Quay, of to the relater’s chagrin.
* I became aware of global warming from the scientific evidence; it was economically underlined by its early stages coinciding with nineteenth-century industrialisation which was heavily dependent upon coal. Initially, I focused on rising sea levels, which are simply measurable and readily understandable. However, I was persuaded – the late Neil Cherry played a critical role – that the impact of global warming on weather was much more complicated. Some places would be drier, some wetter; some windier, some calmer; some would even be relatively colder. Moreover, there would be more extremist weather – storm surges. Hence my use now of ‘climate change’ rather than ‘global warming’ with a separate reference to sea-level rising.
** The Cullen Fund is to deal with the ageing ‘bulge’ similar to the educational bulge from the postwar baby boom. It is intended to phase out as the bulge from the boom works its way through. It does nothing for the ‘trend’, the general rise in longevity which arises from better health circumstances, which adds to the dependency ratio.