Boost to elderly: 2pc rise in super

The Government says superannuitants will be better off if GST is raised to 15 per cent, with Prime Minister John Key pledging to raise super by just over 2 per cent to soften the blow.

In a speech yesterday that further signalled a likely increase in GST from 12.5 to 15 per cent, Mr Key told a Grey Power meeting in Auckland that pensioners would receive a "double whammy" increase to compensate them for the rise in prices that would follow.

Superannuitants would get a tax cut that would apply to their pension payments and any other income they received from interest, dividends, or part-time work. Superannuation payments would also be increased by just over 2 per cent.

"This double-whammy increase means that under an income tax-GST switch, superannuitants would have their incomes lifted quite significantly, and by an amount that exceeds the increase in prices."

Mr Key said that, as across-the-board tax cuts would also increase the after-tax average wage, the elderly would benefit from a rise in "floor" super payments, which were linked to the average wage.

The final shape of the tax and GST changes had not yet been agreed, Mr Key said. But the compensation to low-income groups and superannuitants would be worth "hundreds of millions of dollars".

"On that basis they have nothing to fear from a GST increase – in fact for superannuitants, they're going to be better off."

A 2 per cent increase in super payments would give couples anextra $9.60 each week, and a person living alone would receive an extra $5.50.

A rise in GST to 15 per cent would bump up the average Kiwi household spend by about $19.

Jens Meder, Auckland Grey Power vice-president, was pleased with the Government's offer. "If we are compensated no-one will be hurt. We will be better off than before."

However, New Zealand needed to increase its national saving rate to make progress, he said.

But Grey Power member Arthur Walker said superannuitants would still suffer if GST went up, even with the Government's proposed measures. "It's going to hurt a lot of people. I can't see how we will be better off, unless they raise superannuation by more."

Mr Key also dropped new hints about the likely outcome of tax rate changes in the Budget, saying that the middle tax rate could fall from 33c to 30c in the dollar. Finance Minister Bill English has already said the top tax rate is likely to be cut from 38c to 33c, and the company rate to fall below 30c.

Mr Key's comments come as Labour leader Phil Goff prepares to launch Labour's "Axe the Tax" bus tour this weekend, to campaign against the planned GST rise.

Mr Key said he hoped Mr Goff would explain whether Labour planned to campaign in 2011 on lowering super payments, raising taxes and lowering GST.

Mr Goff had previously voted to raise GST without any compensation for superannuitants, he said.

"How they can launch an anti-GST campaign after that is beyond me. That's opposition politics, I guess, but it's rather hollow and hypocritical."

Mr Goff said Mr Key was desperately trying to sell his tax and GST package because polls had shown it was deeply unpopular. "No-one voted for paying more for milk, bread, clothing, power or rates."