On 25 September 2025, the Treasury released its latest Statement on the Long-Term Fiscal Position. The report paints a clear picture, without action New Zealand’s fiscal future is unsustainable. Among its proposed changes, the retirement age is again under review, alongside reforms to healthcare, taxation, and savings policies.
Mounting fiscal pressures
For two decades, Treasury has warned that population ageing will strain government finances. Today, New Zealand is already running a structural fiscal deficit, meaning even before accounting for long-term pressures, revenue and spending are out of balance.
The statement notes that while the 2025 Budget Update projects a return to surplus, failure to consolidate in the short term will make managing future fiscal challenges even harder.
Key financial pressures
In the 1960s, there were seven working-age New Zealanders for every retiree on the NZS or Superannuation. Today, it’s four. By 2065, it will be just two. NZS spending has risen from 3.9% of GDP in 2006 to 5.1% today, and is projected to hit 8% by 2065.
Publicly funded healthcare is expected to grow from 7.1% of GDP now to around 10% by 2065, as costs rise and demand increases with age.
Other pressures included in the statement were climate change, global defence pressures, and infrastructure needs which are also expected to add new fiscal burdens.
Debt projections paint a stark picture
Without policy change, government debt could climb to 200% of GDP by 2065. Even under more optimistic conditions, adjustments would still be required to restore fiscal sustainability. Treasury stresses that acting sooner reduces the cost of change and preserves more choices for future generations.
Options for reform
Treasury outlines a portfolio approach, combining changes across multiple areas rather than relying on a single fix.
1. Reforming Superannuation and savings
To stabilise costs the retirement age could gradually increase to 72 by 2065. Linking NZS payments to inflation instead of wages would ease fiscal pressure. Means testing could introduce thresholds for higher-income retirees could reduce costs.
Strengthening savings is another approach to reduce costs. Boosting contributions to the New Zealand Superannuation Fund (NZSF) and encouraging KiwiSaver participation could help offset future needs.
2. Controlling expenditure
Welfare spending (outside NZS) would need significant reductions to balance costs. Health efficiency, prevention, and limited user-pays models could ease pressure. Cutting non-health spending such as education and the judicial system would require drastic reductions, which may not be politically or socially feasible.
3. Tax reform
Income tax rates could rise from 21% in 2025 to 32% by 2065. GST might need to increase to 32% if used as the main lever. Broadening the tax base remains an alternative.
Why early action matters
Treasury modelling suggests that delaying reforms for 40 years would mean permanent losses in per capita income and higher taxes, compared to starting now. By signalling changes early, New Zealanders can adjust savings and retirement planning.
The 2025 Treasury Statement makes it clear, population ageing, healthcare costs, and other long-term pressures will reshape New Zealand’s fiscal landscape. Reforming superannuation, adjusting the retirement age, and balancing tax and spending policies are unavoidable parts of the solution.
The choice ahead is whether to act now, with gradual adjustments, or later, with sharper and more disruptive reforms. For Kiwis planning their financial future, it’s time to have these discussions and plan for a more comfortable retirement.
