By Bernard Hickey
This is the year it starts.
Sixty five years ago, New Zealand’s population was about to start increasing dramatically. Servicemen were starting to arrive home as the Second World War was ending. Young men and women around the country were feeling confident enough about the future to want to have children, and lots of them.
It seemed the beginning of a golden age. New Zealand was one of the richest countries in the world.
Untouched by war directly, it was able to produce the meat, wool and dairy products the world needed desperately. Protected by the nations that won the war, New Zealanders felt assured of economic growth, national security and that there would be pensions, education and health care for these new children as they grew up.
This was an age before oil shortages, the end of an open British market or sky high house prices and mortgages.
The following 20 years of economic growth and stability are still seen by many as our golden economic age, before rampant inflation or high unemployment or a housing boom that took the dream of home ownership away from a new generation of child bearers.
Now those children born between 1945 and 1965 are about to start retiring in their droves and the generations behind them will have to start paying for it. It starts from this year and the costs start ramping up from here. Yet this lucky generation of retirees has not prepared for it and is expecting the economic largesse that they were born from to pay for them in their dotage.
It won’t because this lucky generation have used up that largesse and will pass on some assets and an awful lot more debt to the generations that follow.
The Retirement Commission has rightly called for a national debate about extending the retirement age to 67 from 65.
Treasury is forecasting New Zealand’s net foreign debt will rise over 100% of GDP in the next decade, in part because of the extra government spending on health care and pensions for the baby boomers. We are starting this surge of public spending and borrowing from a very weak position.
The government begins this age of spending have already accumulated a structural budget deficit of 4% of GDP, which is about the same as our underlying current account deficit. To believe this is sustainable is simply not credible.
For it to make sense, New Zealand would need to rapidly and permanently ramp up its economic growth rate to over 3% per annum from the 1.5% per annum it has averaged over the last 40 years.
Prime Minister John Key is remarkably confident for someone in a generation that will spend the next 20 years paying taxes to fund the pensions and hip replacements and cancer treatments that will have to be paid for. He is hopeful the changes made in last year’s budget will be enough to transform growth.
The initial signs are not positive, particularly as we enter an era of deleveraging that economists who have studied such periods of after major financial shocks say will produce 5 to 7 years of sub-par economic growth.
Sub-par for New Zealand means 1-2% growth, which is what we’ve seen in the last year. We would also need for many of these baby boomers to not retire, by choice. By not retiring we mean still collecting the pension, but also working for longer.
For many manual workers or those already having health problems, this will not be a choice open to them. Yet this is a national debate that John Key and his baby-boomer backers will not allow. He has threatened resignation and his similarly cowed opposition won’t talk about it either.
Unfortunately, there is no more time to debate how to deal with it.
The great age of retirement and the spending that goes with it has already begun.
278 Comments
As if to emphasise the debt problems faced by NZ and other developed economies with this demographic issue, Willem Buiter says this via Bloomberg:
Fears of a sovereign default are “manifest” in Europe and will soon spread to Japan and the U.S. as governments struggle to control deficits, according to Citigroup Inc. economists led by former Bank of England policy maker Willem Buiter.
“Despite the recent drama, we believe we have only seen the opening and second act, with the rest of the plot still evolving,” London-based Buiter and colleagues wrote in a research note published today. “There is absolutely no safe” sovereign.
http://www.bloomberg.com/news/2011-01-07/sovereign-debt-unsafe-default-…
The “Hamsters Generation” - us the BB’s - eaten by the “Snake Generation” – and we deserve it. We had enough time not to ruin the planet - but we did.
Hamster behavior can vary depending on their environment, genetics, and interaction with people. Because they are easy to breed in captivity, hamsters are often used as lab animals in more economically developed countries. Hamsters have also become established as popular small house pets.
They have elongated fur-lined pouches on both sides of their heads that extend to their shoulders, which they stuff full of food to be stored, brought back to the colony or to be eaten later.
http://en.wikipedia.org/wiki/Hamster
and this demographic timebomb is a big reason why we need more affordable housing. If housing cost 3-4 times the median income then we could probably afford to raise income taxes a bit.
the problem is so many of the f#$## baby boomers have vested interests in keeping housing costs high. They are often the biggest opponents to planning proposals to free up development. So the selfish bastards will truly screw their children and grandchildren by pumping housing up further AND demanding higher taxes. The problem with that is then they will see their wealth eroded as the bubble inflates and pops again, and economic growth is minimised.
matt im a baby boomer and have to say you are right,the only hope is that i will leave a large amount of money to my kids so they can buy over inflated houses but dont bet on it ive got a lot of life to go, there probarly wont be anything left (i hope) so you are on your own
The 100% typical baby-boomer attitude --- 'Stuff the bloody kids, it's all for ME!'
The baby-boomer's parents and grandparents worked hard and saved hard so that their offspring would enjoy benefits they themselves didn't experience, but those offspring now believe that their own kids and grandkids should be propping up the baby-boomer's lifestyle.
And the baby-boomers are intent on spending everything they can until the day they die and leaving nothing for their kids --- when the baby-boomers owe everything to their parents and grandparents.
Many baby boomers are like me and the MOTH - 1st and 2nd generation kiwis who have not inherited anything and therefore all what we have got we have earned ourselves. Even with a capital gains tax we would have done well. Because we were motivated to succeed and set about reaching our goals despite any setbacks and with no expectation of an inheritance to make it easy for us.
Key's a boomer himself (born 1961) - turns 50 this year. Which puts him at 26 years of age at the time of the '87 crash. I find many of the male boomers who were at the height of their prime (25-30 yo) during the halcyon lead up to that crash are some of the most "in denial" folks I know presently. These were such heady days in the finance, real eststae and related industries.
You should do an age demographic of the various principals of the recently failed finance companies. I'd be curious, as I imagine the tailend BBers (1960-1965ers) are the over-represented failures (or perhaps they are better called "opportunists") in that fiasco.
I was 27 y.o. when the stockmarkets crashed , in 1987 . That " black swan " event decimated my portfolio then . And it taught me the value of doing some commonsense research into each investment , before biffing the dosh at it .
It amazes me how many people in NZ ignored that event , and blithely went on to wreck their savings on the higher interest rate promises of finance companies , 2 decades later .
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But to the issue of the BB's entering retirement , as a BB , I am appalled by John Key's lack of action . He is stoically sticking to his ridiculous election pledges , in the face of a vastly changed world economy .
The election this year , and the platforms which each of Labour and National stand upon , will be a seminal event in the future of the country .
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NZ has a proud record of being one of only a few countries worldwide , which have never defaulted on their debt . ............ But I fear that record may be put to the test over the next decade .
...
I wonder Gummy if the reason some didn't learn from the 1986 fiasco is because they still had too much faith/respect for their advisors or people they were buying from-part of the 'gentlemen's agreement' type of trust. I know we learnt, but then we never were the sort to truly trust advisors. Preferred to trust our own instincts. :-)
A friend had some $ invested and I suggested to them that they might want to take their $ out. This friend is basically investor illiterate. So they contacted their advisor who placed their investment, but the advisor said I was wrong and that the advisor themselves were invested in this company and they weren't going to pull their $ out. My friend left their investment in and consequently they lost their $ - as did the advisor!
Many BBs grew up in an environment where professionals gave trusted advice. For many this is still a hard thing for them to give up.
'If you can't trust your bankers advice, who can you trust?'
Yourself
'Oh, no, I don't know anything about that'
Then start to learn
'No, I wouldn't be confident in that'.
So lessons still not learnt.
@matt
Often the focus seems to be affordable 'first time' housing - to prop it all up, with assumed 'trading up' keeping it all going.
Is there any merit to considering a move to supply the 'last time' housing market instead.
The downsizers/ older people who do not want to rattle around in the McMansion anymore.
As ever, quality has to be the key here - but if the offer is good enough many may opt for a new better constructed / lower maintenance style.
Leasehold land again?
If the benefits of a 'better' house in retirement existed, maybe the McMansion would become available at a lower price for those with families etc.
I'm carefully avoiding mentioning things like retirement villages/ towns, just trying to shift the focus from affordable 'first homes', to affordable 'last homes'.
I am also NOT advocating burial in the house at the end.
Loose thoughts - but maybe the shift in emphasis could help.
Sensible comments, but unfortunately our crazy planning systems won't allow for decent homes of this sort.
I have posted before about the need for higher density, as opposed to smart growth. Look to Jorn Utzons Kingo houses as a good example of quality design planning, one of the few modern examples.
Of course this fits into the larger picture of Urban Design, which needs a radical new approach in the west in general.
This could be part of the problem, from Careers.govt.nz: There is no undergraduate urban design degree in New Zealand
The baby boomers planning policies are going to come around and bite them.
Not enough being earned by the economy to pay for the rising costs coming from the BB generation expanding rapidly.
Answers:
- Reduce govt waste and expenditure on departments that are not part of core govt activities. This has not yet been done.
- Remove the govt and RB table legs from underneath the property ponzi scheme in residential and rural property by raising rates to encourage an end to the bubbles and the start of real saving.
- Incentivise investment by Kiwi into export earning entities and increase the cost of investing in property and other non export earning areas.
- lay out the financial path honestly for the electorate to be able to see and understand why they have to support the govt in a move to raise the retirement age and lower the pension payment over time....but only if the other above actions are taken.
Outcome:
- Govt returned to office with a mandate to do all of the above
- All measures put into play during the 2011-2014 term of govt
- Govt returned to office with recession still here in 2014
- By 2017 the first signs start to show of increased savings and an end to the economy being held prisoner by the banks. The light can be seen at the end of the tunnel
- Labour returned to office in 2017 on a raft of promises to hike the minimum wage by 50% and boost the WFF payments and Inject 10billion into the state housing scheme and boost the dole payments by 50% and reward and raise taxes on the 'higher income earners' and cut gst on food and provide a gst refund to those on low incomes
- Immigration to be boosted by 50% each year Labour are in office.
- Labour policies to be funded on higher taxes for the rich and increased overseas borrowing.
........yer bashing our beloved Labour party again , Wolly . They wouldn't do all those things you hypothesize ............. They must've learnt from the appalling mess they made of things 1999-2008 , surely ? ........... [ I can be sarky too , St. Nick !........ ]
Me...Labour bashing....surely not....
Money down on Labour promising to extend WFF... raise the minimum wage level...spend more on 'job creation'...increase the size of the state sector...vastly expand the immigration programme...appoint Clark as Gov Gen....post Goofy to be High Comm in London...and raise taxes on the 'wealthy'...plus introduce capital gains taxes and bring in death duties.
BBs are the easy target for 'society'...will the attack get out of control and result in lunatics opting to sort the problem out using a club because there is an element in this society that will behave like that....and while the move to blame BB for the costs being picked up by future generations gathers pace...let's give a thought to one of the really serious liabilities shall we...Laws explains it so well in the newspaper today!
"An entire industry has been built around supporting, managing and dealing with and to these ferals. Where would Corrections be without them? Probation? Child Youth and Family? More importantly, all the state-funded Maori organisations that claim they are keeping these new barbarians from our door" sunday times. http://www.stuff.co.nz/sunday-star-times/opinion/4522948/Michael-Laws-Weak-lawmakers-loading-guns-for-fearsome-ferals
I wonder if BH could take the same amount of time to cost out dealing with these "ferals" and compare it with the BB liabilities....how about it Bernard?
Emotive Scare Tactics. Look out the greys are coming. Batten down the hatches. Attack them. Shoot first. They are a burden on Society. If not they will be. They will be a drag on you and yours for years to come.
Minimal to nil FACTS. Any realistic assessment of the situation requires FACTS. Dig out the last census and find out the age distribution of the population. An analysis of current total welfare payments NZ wide. How much is paid by way of "old age pension". How much is paid by way of "universal super" How much is paid in WFF. How much is paid in other forms of welfare. Forget health for the moment. In other words get the full FACTS first, and then have the debate.
Welfare Spending Pie Chart 2009
Sorry to keep posting this....
Yes, but the missing bit is the breakout of the 7744 Super payments. How much is "age pension" and how much is pure "super". If the predominance is "super" then those are still contributing to society. If the predominance is "old age pension" then there is a different problem altogether. The argument that the asset-rich BBers are a drain on society doesnt hold up.
Why would that matter? The point is - what do you think regards the percentage breakdown? Were you expecting one category of expenditure to be less or more than another? How do you think we will cope with the greater numbers of those turning 65 from here on in? And what about the fact that we are on average living longer these days? Should we reduced welfare to our young (e.g. WFF) in order to continue to fund a universal payment to our old?
And the difference between 'income related rents' and accomodation supplements' would be?
So that about 1.5billion a year of tax going to prop up rents and therefore prop up unaffordable housing by encouraging landlords to buy up renters. Which means the banks benefit from the bloating of the prices through the need households have to borrow to buy. Whichever way you look at this, the end game fattens the banks and is eating into the wealth of the country....and it's supported by govt policy.....go figure.
More than twice the figger spent on invalid pensions as on the unemployment benefit ........ No prizes for guessing where WINZ sent the Harris gang and all the other long-term malingerers.............With the assistence of some WINZ friendly doctors to sign the bludgers onto the tax-payer drip-feed for life .
Oooooooooooo , and a $ 2 billion spend on WFF ! And David Cunliffe wants to extend that , and to bolt on a few more goodies ............. If you vote Labour in2011 . Yippeeee .
.............. Gosh , even $ 1.5 billion of un-itemised spending ............ Well , small amounts like that , who'd bother to keep a track of it ............... It is only tax-payers' munny after all , plenty more where that came from ...................
I was talking to one of my cousins last night who is a chartered accountant in private practice and he made the point that several of his self employed clients are trying to sell their businesses at present but either there are no takers or people cannot borrow the money to buy them as the banks are being far more cautious than they were four or five years ago. One option for them is vendor finance but that has its risks.If the bank won't lend money to your buyer why would you take the risk of lending them money,often unsecured. He is just one accountant among many who have clients in the same position. When you look at the property market whether it be farms,sections,commercial buildings and houses the situation is not much different. There is a lot on the market but sales volumes are down. People cannot get the finance or do not want to get the finance as they cannot service the repayments. This is only going to get worse as time marches on. More and more baby boomers are going to want to cash up for retirement but there will not be enough buyers.This is the new reality. One they are going to have to get used to. Some will be lucky and will be able to sell. Many will just have to close the doors after having sold the stock in the shop for example. Values were pumped up because people had easy access to finance. Now the returns on investment are relevant again especially to the banks and finance will not always be easy to obtain.
Very interesting ex agent.
This is a risk for asset prices (particularly established family homes and family owned small/medium businesses and farms) that the baby boomers try to cash in their assets in retirement.
But there's no one there to buy (at the current elevated prices)
So prices drop...
I call this the estate sale risk for the 2020s and 2030s.
For example, the average age of farmers is around 58.
cheers
Bernard
..... " the estate sale risk for the 2020s and 2030s "............. !!! Good thing that you were in journalism , not marketing , Bernard . ................
Try this :..... " The Business Big Bash by BB's " ......... yer gotta get some pizzazz into your language , guy .
........... But hey , what say the retirees want to keep or to acquire cashflow positive businesses and properties . Rent spare bedrooms in the family home to foreign students . Farmers put off retirement , in toto . My " hero " is a guy in Canterbury who never retired , but kept farming ( with alotta help ) until he pegged out at 98 years old . ......... Had he " retired " at 65 , would he have lived to anywhere near 98 ?
Gummys Motto : Never " retire " !........ Keep busy . Keep the cashflow rolling . ......... Bugger the government and their idiotic hand-outs , I don't need them .
ooooops spoke too soon...Black Swan here, duck everyone
"The Supreme Court in Massachusetts ruled against US Bancorp and Wells Fargo in a widely watched case.
Backing a lower court ruling made in 2009, it said two foreclosure sales were invalid because the banks did not prove that they owned them at the time.
Bank shares fell sharply after the ruling dragging the wider market down.
The decision is among the earliest to address the validity of foreclosures done without proper documentation - so-called robo-loans because they were carried out by people who were unqualified and who often did not check a single line in the paperwork". BBC
I do get so tired of hearing how the baby boomers are the cause of everything bad and how this problem MUST BE ADDRESSED.
Those baby boomers were children once. A workforce depleted by the Second World War, and with few married women working, managed to build the maternity homes, the hospitals, the kindergartens, the primary schools, the intermediate schools, the secondary schools, the universities and provide well for those children out of their taxes. It was much harder for them because, apart from the above, the children kept growing. Today those baby boomers will die. I promise you that. They are an ever declining tax burden.
As the baby boomers will constitute the largest group in society over the next 30 years there are not the number of younger people who will be able to buy their business and their houses. Not at the price the baby boomers want anyway. So prices will go down, rest home profits will go down etc etc. And perhaps you little darlings will have to look after your Mum and Dad in their old age. It is only a few baby boomers who have a lot of money – most of them don’t. It would be interesting to know how many of them have Super as their only income.
People are important and it is the responsibility of a Government to provide an economic structure that ensures its people can look after themselves in an environment that is designed for that purpose. This applies to all whether they are children, teenagers, young parents, middle aged and the elderly. If they can’t look after themselves then collectively, the people, through their Government should. But to blithely talk of increasing the age of entitlement or means testing is showing a lack of thought without discussing what economic structure would actually encourage people to be able to work after 65. What about those who are in manual jobs – they can’t keep on working. Have you looked at the mess in Australia where entitlement is means and asset tested? The poverty for many of the elderly over there is awful. Is that what you want in New Zealand?
To keep on lowering taxes for the rich, turning a blind eye to tax avoidance, and creating and maintaining an economic structure the aim of which is to make things harder for the majority of its people and then blame everybody except the economic structure itself for the hardship people are suffering is just soooo dim.
It's difficult to pass down and increase wealth between the generations if one of those generations decides it all belongs to them alone.
Parents teach their kids to be frugal and productive, their ultimate duty to leave the next generation in a stronger position; those kids live frugally and productively and dutifully teach their own kids the same lessons in life; On it goes, the family, community and society getting stronger with each passing generation...until one arises with the attitude and mindset of our own beloved "Baby Boomers".
The previously accumulated and accrued wealth is frittered away in an orgy of cunsumeritis, "There's No Tomorrow" and "It's All About Me!" syndromes, so the whole thing must eventually begin anew. That will take time, of course, since the "Baby Boom" type generation failed to teach its own kids to be frugal and productive. It's down to the sensible few to get the ball rolling again.
Bit of a shame really, don't you think?
Amalgam:'The previously accumulated and accrued wealth is frittered away in an orgy of cunsumeritis, "There's No Tomorrow" and "It's All About Me!" syndromes, so the whole thing must eventually begin anew. That will take time, of course, since the "Baby Boom" type generation failed to teach its own kids to be frugal and productive. It's down to the sensible few to get the ball rolling again.'
Loss of intergenerational wealth has been going on since time began.
Figures from the Family Business Review suggest that only one-third of family firms survive into the second generation, and just 12 percent survive into the third. A mere 3 percent of family businesses make it to the fourth generation or beyond.
All the children in families I know who have BB parents stand to inherit considerably more than any previous generation before them - even with property prices falling. Personally I have always believed that it is up to me to make my way in life and that I am not owed a living/lifestyle by my previous generation, most of whom came here as immigrants with no more than £10 in their pocket.
Why do we need to leave an inheritance of wealth to the next generation? All I have is what I have worked for - no inheritance - all parents still alive in their 80s and 90s. I find it arrogant to believe that I should inherit financially in any way, from the previous generation - it will not make my life any richer in meaning.
Ones ability to save or not is part of our personality. Within families you will find spendthrifts and spenders.
The problem is not that people believe they are owed a lifestyle by the previous generation. It is that they believe they are owed a lifestyle by the next generation. The issue is not about whether we should leave an inheritance of wealth to the next generation, it is about whether we should leave them an inheritance of debt.
........... Oddly enough , I don't feel that anyone or anything owes me a brass ra-zoo . I wakes up in the morning , scratches me gummy nuts , and wanders out into the world with an open mind to how events will unfold ............... And I'm a BB ! ............ Weird wee sod , me .
Hmmmmmm...some people are fit and hardy at 70 even 80...others in trouble at 45 even 40...and then there are the smokers and boozers.....some have kids some not...some even have heaps with many different partners and skip the support payments....who pays!
Means and asset testing... avoidable by many, making it a costly exercise in greater waste.
The real problems are the size of the state bloating the fiscal hole. NZ does not earn enough to pay the bills. Earn more and cut the bills. Incentivise effort and thrift. Discourage waste and laziness.
Going after one sector will not solve the problem. Cabinet needs to ask: "Do we really need this department of govt..or to spend this much on that...or for this many in that department..." Currently govt is playing the wait and hope with greater spin and BS game. They have not really made a start on sorting out the bloody mess left by Clark and Cullen and earlier idiotic govts.
In this way, she says, Western governments have implemented laudable notions like the idea that everyone should have a roof over their head, receive access to food and be supported in old age
by pensions. These have led to unfortunate outcomes in terms of capital, labour and productivity, the key ingredients for economic growth.
It’s not just the US. “There are tons of examples of UK and European mistakes,” she says. “A classic one is pensions. That’s obviously not an America-specific thing. The British and European economies are suffering under the weight of what is to come. The next great Ponzi scheme after Madoff is probably pensions. Also, it’s not just the United States where performance is declining in a very detrimental and rapid way in maths and science and reading. It’s also very much a problem in the UK.
“And if you compare 1950-1980 with 1980-2000, in terms of GDP growth in the US and many European countries, it’s been exactly the same. Yet between 1950 and 1980, people were living in pretty protectionist regimes and between 1980 and 2000 there was much more capital and trade flows. In addition, real wages have been relatively flat in the US and Europe, so taken together you have a question about whether globalisation, which is another great idea on paper, has actually worked in practice. Has it helped Americans? Has it helped the British people?”
Kate - personally I can't fathom the logic of your comments that the 25 - 30 y.o's at the time of the 1987 crash are in denial. I was one of those BBs, indeed I was in finance at the time, and that period taught me a great lesson about not always living for the day, as many of us were back then, and sadly many/most Gen X/Ys seem to be today
I have lived more cautiously since then, accumulated income earning assets (not real estate) and will live my retirement years sole from the income from my investments. I will be leaving 100% of that portfolio to my children.
There can be no doubt that us BB's are largely responsible for the over inflated assets and associated debt that exists today in the western world. During the mid 2000's we found ourselves in the position of having debt free homes,good incomes,cheap assets out there to snap up and readily available cheap finance and we went for it. We climbed over each others shoulders to get those assets and they went up in value in leaps and bounds. Not long ago we read of the elderly lady from the Bay of Plenty who had fifty odd rentals in Hamilton and about $10,000,000.00 in associated debt and she was moaning about losing the right to depreciate them if I am correct. Why did she have so many rentals. She did not need so many of them presumably to to live off in retirement. I have no doubt she has contributed in some way to the price of houses going up in value the way they did in the 2002 to 2007 years. Now Hamilton has over 1000 empty rentals on a daily basis. It had to happen when such crazy growth in property values was pushed up by silly levels of borrowing and not savings. This has happened all over NZ. No wonder the younger generations are pissed off with us BB's. We were greedy and we were silly. The debt associated with such investing now has to be repaid. Property values of such rental shit boxes are now steadily declining and they are becoming more affordable for the generations who have been effected by it all. I hope that continues to happen for years to come as the younger generations have not caused the economic problems we have to live with today.
I think it's great. The X Y and Z generations now have someone else to blame when they run out of money or lose their job or have to go to war or get sick or need a reason to refuse to pay family support or get told their mortgage rate is going up or can't afford a mcmansion or a boat or an annual holiday overseas or to buy their drugs or booze or have student debts to go with their degree in handicrafts or a new 3d lcd led 300 inch tv or a new hybrid.............
Imagine if there were no BB generation....how different would the economy be...and would there be any gen x y or z.....probably not!
It is interesting that some bloggers go on about BBs owning rentals and being the cause of all the economic woes for the younger generations.
In my extended family the only ones who own rental properties are the <30yr olds. None of us BBs own one let alone multiple rentals. Without exception, of all the ones who own rentals, none of them have been to university. They left school at the end of usually 6th form and went in to trades and by the age of 21 they all had one rental, some of them two. They don't live in the cities and they bought in the areas they live in.
Many BBs help their kids in to thier first home/business etc and I have often wondered if those who moan loudest on this blog, about the 'problems' left by BBs don't have a chip on their shoulder as they haven't being on the receiving end of family BBs assistance, or are not in the position to assist their own.
Ageism seems to be alive and well in some bloggers minds. Blogger '28yr old now 29' is a <30 PI yet I don't see him/her coming in for criticism for having chosen to be a professional PI and being the cause of rising house prices - that is left to the BB PIs.
ex-agent - Easy credit has more to answer for than BBs. Without easy credit for both BBs and younger generations there would not have been some of the problems we see now. You only have to look to the farming sector to see what happens when the banks tighten up on lending criteria - values start to fall to realistic levels.
I remember now....that's his middle name....Alan 'easy credit' Bollard....he picked it up from the bum that warmed his seat before him.
Cheap and easy is how we like it...more please...give us more....bugger the consequences...feed us the credit and we will spend more and splurge and make everyone happy happy....
Casual Observer it is also my observation that the majority of the property investors are people who have not been to university and have got into property as a means of getting ahead as they are generally on pretty average incomes but I have to say the majority of the ones I have dealt with are BB's. I agree some are from the X and Y generations but the BB's had something to start with such as a debt free/near debt free home. The problem is that most of them had no deposits to put into their shit boxes as they do not have the income in the first place to save such deposits. Now we are paying for their stupidity as a lot of them did not know when to stop buying and borrowing. A lot of them should never have bought rentals in the first place.
All this labeling and finger pointing at various generations strikes me as particularily pointless and unhelpful . Who acts as a generation? We are all individuals that make independant decisions based on our individual circumstances guided by the laws and incentives in place of the day.
What IS important is what we are going to do about it in the future. Getting a govt in place that is prepared to grasp the nettle and address this looming demographic timebomb and not just kick the can along the road is the first priority.
Cullen to his credit made a start.
I am of the opinion that we need to look seriously at making Kiwisaver compulsory, even at a low rate for starters. I know that would create hardship for the lowest paid but im afraid needs must.
I agree with the maxim that the measure of a society is how it treats its oldest and most vulnerable citizens. We need to make sure we are able to treat our retirees to a superannuation that allows a dignified if modest liveable income. Clearly there is not going to be enough wage earners to allow this under our current policy settings and demographic projections.
I dont favour means testing as this is unfair on the prudent and as Wolly points out easy to get around.I dont deem it necessary to payout to someone still working after the age of entitlement. Perhaps a lift to 67 if necessary but definately I see a need to force people to save ahead,its the only real option in my view.
Sometimes Sundays are devoid of things to laugh about...if you're feeling that way...have a read of this and you too will split your sides.... http://www.bloomberg.com/news/2011-01-08/yellen-says-fed-s-asset-purchases-to-create-3-million-private-jobs-by-2012.html.....the greatest, the most awesome and incredibly idiotic load of bullshit....just what the American peasants love to hear.
A cry from another country, but luckily soo far away :
http://www.youtube.com/watch?v=xolubVusMN4&feature=email
Yes - I think we have to make Kiwisafer next to other "things" compulexplosive - oh my God people, where does the money come from with the current way of thinking/ living of the people and government policies ??????
As for me – I need a break- there is too much of a “WeCannotDoIt”- mentality in this blog – good as gold, muddle along - just going around a circle - no visionary, comprehensive, long term sustainable ideas to turn our economy around – bye for now.
You've hit the nail right on the head, iconoclast. Where are the numbers; that was exactly my reaction to the BS that BH wrote above. Presumably he didn't want to include the facts or he prefers to remain ignorant of them himself because if he had of informed himself he wouldn't have written such a load of utter tosh.
As I have said in the past on this blog, if media commentators, politicians, doctors, anybody for that matter can't or won't stump up with the numbers then you can treat the veracity of whatever it is that they say with the contempt it deserves. On matters of such importance there should be no room for laziness.
My views on National Super are already recorded on this blog and I'm not going to bore everybody and myself by endlessly repeating them every time the topic comes up. But let me add a couple of little facts into the mix. Hopefully that will counter some of the anti-BBmer bigotry and sheer utter ignorance that is running rampant on this thread.
What percentage of NZ’s GDP do you think is currently been spent on National Superannuation? Why hasn’t Bernard given us this figure? Surely that is one of the most important determinants in assessing the cost of National Superannuation and whether or not it is sustainable now and or in the future? What is it projected to rise to in the future as the BB retires? How do these figures compare to what other countries are paying? Why haven’t those on this board who are hysterically claiming that National Super needs to be immediately and drastically cut back in order to save the nation from penury quoted such figures to support their arguments?
In the current year ~4.5% of New Zealand’s GDP will be spent on National Superannuation. That is about the same as it was costing in 2000, but is up slightly on 2005 when it cost about 4.1%. Without any change to its current entitlement levels, it is projected to rise to 6.5% of GDP in 2035 by which time all the baby boomers would be on it and the beginning of the baby boom generation will be dying off in droves. And if anyone in here tries to tell me that an annual commitment of 6.5% of this nation’s GDP is unsustainable, then give yourself an uppercut, because seriously, you’re the big kahuna of stupid.
New Zealand’s underperforming economy nevertheless grew by 40% between the end of the Asian Financial crisis and 2007. If it had performed like other countries did, then that percentage of GDP spent on National Super would have been much less. Who knows what the size of our economy will be in 2035? Sadly though as the best predictor of future performance is past performance, for the New Zealanders ability to make money that does not augur well.
Perhaps it would interest people in here to know another little fact, and it is straight from the Retirement Commission’s mouth but New Zealand now has one of the lowest cost pension systems of the OECD. In 2005 the only countries that were bigger misers than us on our old people were Canada, Australia and Ireland. Rich, successful, non-economically stressed countries like Japan, Germany, and Switzerland for example all paid over 8, 11.5 and 12.5% respectively of their GDP in 2005 on age benefits. Even the Poms shelved out over 6%.
So what percentage of GDP should stingy New Zealanders be paying for National Super? I don’t know. Is 6.5% to high? Should it be reduced to 6 or 5%? That is the debate we should be having. And it needs to be grounded in facts.
As always , if you wade long enough through the sludge you finally find a post that is the voice of sense, as is the above post.
blogging ,like talkback radio, is largely a celebration of uninformed opinion and BH knows this so he just provides the fodder for the "x-spurts" to prevaricate on.
thanks David B for such a cogent and factual posting.
While it's true that the cost of NZS as a percentage of GDP compares pretty well with other OECD economies, the fact that others are heading for very deep poo does not really make it better that we are only heading for deep poo.
Further, NZS is not the only cost that the current generation is set to impose on future generations. On current trends and policy settings, healthcare costs are also expected to rise as a result of the ageing of the population, and crucially the cost of financing the national debt - that is, the money that this generation has borrowed - is expected to rise from about 1% of GDP to about 7% by 2050 (this is from the Treasury's Long Term Fiscal Statement). All of these factors together will reduce the proportion of GDP that is available for the support of younger needies or for the whole.
Yes, perhaps future generations of taxpayers will be ready, willing and able to pay more and expect less. But perhaps they won't, in which case those who are now being encouraged to assume that other people's money will always be there for them may be in for an unpleasant shock as their old age approaches.
but who's in for the shock?
Right now I think the % of OAPs is about 12% rising to 26%.....so double "grey power" votes....and the Pollies will be of the same age.....and how often to Pollies visit OAPs today v youngsters?
Its easy to vote yourself someone elses money.....especially when you wont be around to worry about or pay for the debt..
Maybe we should be considering that if <18 is too young to vote >70 is as well.
regards
David B
So no problem then?
So why is the Retirement Commissioner calling for a delay in the retirement age and a change in the formula?
http://www.retirement.org.nz/news-media/media-releases/2010-media-relea…
And why does Treasury think we have a problem?
And you miss out the health care costs. It's not just the 6.5% for pensions.
cheers
Bernard
So no problem?
Well not to the extent that you describe in my view.
So why is the Retirement Commissioner calling for a delay in the retirement age and a change in the formula?
Without trying to sound cynical that’s their job. If the Commission put out a report that said everything going forward is fine, there are no problems, how long do you think the Commission would last for before it was shut down as surplus to requirements? They’re not going to do themselves out of a job are they? Modest problems that require modest solutions may suddenly loom very large in importance in the Commission’s mind.
For the treasury, they might know a thing or two about economics, (although some would even argue about that!) but when it comes to predicting what NZ’s future population will be they are about as useless as tits on a bull.
And you miss out the health care costs. It's not just the 6.5% for pensions.
That area does concern me. Research shows that for most, the bulk of the State’s lifetime healthcare spend will be done in the last 18 months of an individual’s life. More people dying means a bigger health spend. And old people die in droves.
But I want to talk about National Superannuation and its sustainability here, and not health care. But any savings on National Superannuation that are made should be applied to the health care of the elderly, so that overall the amount spent remains fiscally neutral on the Crown’s finances. Whether the health industry will cooperate and allow that to happen is a moot point. But I wouldn’t hold my breath.
Anyway let’s cut to the chase. This is all about one simple thing. The ‘problem’, as you put it, only arises if you swallow the population projections of the Department of Statistics (and as used by the Retirement Commission and The Treasury in their work), and I don't. The Retirement Commission has already said that NZ has one of the lowest spends on age benefits of any country in the OECD. And that is the position we should be starting from, and asking what could possibly justify making further cuts to National Superannuation when the system is already affordable, and when even without cuts that spend would only rise to a projected 6.5% of GDP?
Here’s a question for you, Bernard. Why do you suppose it is that the Treasury’s various reports on this matter fail to make clear mention that the Dept. of Statistics uses more than one model when they make their population projections? Each model (series) makes different assumptions (e.g. birth rate, migration, life expectancy etc) and therefore predicts different outcomes (numbers) about the future. The Retirement Commission also fails to make clear mention of this. You don’t suppose this has anything to do with the Commission and the Treasury exercising a bias and selecting the numbers that best makes its predetermined case, do you? That does sound awfully like politics, doesn’t it? Or maybe it’s just an unconscious bias because ‘everybody knows that’ and the author won’t deviate from what ‘everybody knows and expects’. Investigator bias, it's very dangerous thing!
Interestingly, the variation between the highest and the lowest of the Dept. Of Stats self-confessed conservative projections about our future population differ by almost 2 million people by 2061. That is huge. Which scenario do you think that the Treasury has used when projecting future National Super costs to the country, the series that projects 5+ million New Zealanders by 2061 or the one that projects ~7 million? And we are not talking about 2 million 65+ year olds here either. So what’s that going to do to the projected and much feared dependency ratio?
Yet the Treasury and the Retirement Commission have focused on only one set of numbers and have presented those and their consequences to the public as absolutes, when in fact they are anything but! In fact the figures the Treasury has used project that NZ’s population will struggle to increase by 1 million people over the next 50 years. 1 million in 50 years! Do you find that credible, Bernard, because I don’t.
The problem with assumptions and projections is that they are often wrong. Rather than sticking our heads in the sand and saying there’s nothing we can do, oh the calamity, cut super, cut super, cut super, let’s confront the real issue and make a stand. Mr Key, Mr Goff, and everybody, GROW THIS ECONOMY!
Careful David...you just poked Sir Humphrey in the eye...nice call that...growth give us growth..err didn't you mean immigration give us immigration...bigger is better right...not always so....wealth can come from a stable population that is prudent and thrifty and determined to be educated skilled and qualified......the pop is not stable....it sure as hell is not prudent or thrifty...and let's not go into the question of skills etc..too shameful by far.
Oh boy what a signal...Bill English has a new spin doctor by the feel of it...his blurb in the herald at 5.30am today is all about setting the thinking straight..YOUR thinking..hahah.
The tweak and fiddle blathering over the last two years is explained away as good planning and a sure footed approach to govt.....only a meltdown in China or a bond war in Europe can dislodge the countries rise to recovery and beyond....and maybe bernanke doing QE3...and 4.....and 5
Sadly he has not mentioned once the real problem within this economy. There is not a single word about the property ponzi scheme and the FACT that the banks are busy sucking the potential savings from the economy in the form of mortgage debt payments every week, either from households or landlords who just pass it on from rents or govt handouts that come from tax or borrowing.
Savings WILL NOT improve very much in this environment where property is seriously unaffordable. Punters can be sure that if there ever is any growth in the economy, it will be used by the banks to tighten their hold on the mortgage market. The last thing they will allow is a decline in mortgages as people pay them off and stay away from borrowing but opt to save first before buying property.The savings are coming from a sharp drop in consumption. We know that from the retail pain. The layoffs will follow. The tax revunue will not.
Here's the reason for the 5.30am from English!
"Since mid-October, German 10-Year Government bond yields are up .64%. In the same timeframe, Italian 10-Year Government bond yields are up 1.04%.
The flight-to-safety divergence increased starting around December 16, 2010. Since then, German bonds yields are off .16% while Italian bond yields rose .14%."
http://www.marketoracle.co.uk/Article25452.html
Bill must have been phoned on Sunday and warned by Bolly....trainwreck coming Bill
From a reader via email
Dear Bernard
I've just read your article Sunday Herald article 'baby boomer burden starts'. You write about the burden that children born between 1945 and 1965 will be on future generations with such conviction and self certainty that I need to ask if you know many people in this age bracket very well and are you luckily enough to know many people in this age bracket that you love and respect?
Have you talked to them about their stories Bernard, about their financial situations, and have you listened with an open mind? Please forgive me if I underestimate your breadth of research on this subject but I have to ask the question because I for one felt that your article was an unbalanced representation of the situation and as a so-called baby boomer I believe that my opinion is worth something.
I hear opinions like the ones you express on a regular basis. Most of the time I just listen, thinking to myself that the person expressing these opinions has a lot to learn, but I also feel dismayed and concerned about the condemnation of baby boomers with such apparent impunity.
Bernard, what facts do you have to back up your bold statement that my generation has not prepared for retirement and that we would not delay retirement by choice? You also say that my generation will pass on an awful lot more debt to the generations that follow. I think these statements are too general to represent a well balanced view on the subject.
I for one do not owe a cent to anyone due to hard work and good planning and I do not intend to start racking up debt any time soon. But the same can't be said for younger generations who have sadly been drawn into the 'have it all now and pay later' marketing campaigns designed by people in the same age brackets to seduce their own kind. Or to be more specific I should I say 'some of the younger generation' because it is generalised broad brush statements that motivated me to write to you in the first place.
Bernard, you say that John Key is remarkably confident for someone in a generation that will spend the next 20 years paying taxes to fund pensions, hip replacements and cancer treatments. What has changed that sets John Key's generation apart? What on earth do you think my generation has spent the last 20 years doing if not exactly that, funding pensons, hip replacements and cancer treatments, as well as supporting a younger generation who would feel extremely hard done by to have had to cut their education short at 15 to go to work to pay for the debts of their parents as we did in the late 60s and early 70s.
Bernard, the fact of the matter is that many people of my age (57) support elderly parents, support themselves, contribute to the economy, and also support adult children in every way they can, including financially when necessary. We pay increasingly higher private health care premiums as we age and all of this while also saving for retirement so as not to be a burden on our grown up children in our old age. So it's not unreasonable to feel insulted when we are read the plethora of articles in the media denigrating our hard work, disregarding our contributions to society and insulting our financial planning ability?
I think you are underestimating the baby boomers Bernard.
Kind regards
Clare,
Many thanks. I am generalising so I'm sure there's many baby boomers who have individually prepared.
But many have borrowed to pay up for property, which pumped up prices beyond the reach of younger New Zealanders and forced those to take on enormous debts just to afford a house.
Here's a chart showing how much housing debt has risen over the last 10 years.
http://www.interest.co.nz/charts/credit/housing-credit
Here's a chart showing how much foreign debt was added over that period. It's about NZ$100 billion.
http://www.interest.co.nz/charts/economy/overseas-debt
Now ask yourself. How did I save money? Was it in the value of my house? How much has the value of that house risen? Would I be relaxed if the government introduced policies to make housing less attractive as an investment?
That's the test of how much baby boomers are willing to sacrifice to ensure the next generation don't have to take on ruinous debt to own a house?
If you're comfortable with a land tax and a capital gains tax then good on you.
If not, then think again.
cheers
But many have borrowed to pay up for property, which pumped up prices beyond the reach of younger New Zealanders and forced those to take on enormous debts just to afford a house.
Bollocks Bernard , mass immigation after the 2001 terror attacks did more to pump up property prices then ma and pa investors . Which more then explains the rises in the main centres
And Europeon Economic escapee's and the rising Asian and Indian middle class looking for a better life will continue more of the same coming into this decade
I'd be interested to see the Stats. indicating just how many BB's racked up debt, bought rentals etc versus the general populace who just carried on with their everyday lives...saving,exisiting, educating kids etc.
i bet the PI's etc would be in the minority!!
BH..i think your sweeping brushstroke that BB's are all self-centred pricks is just that...sweeping.
try matching the BB stats. to the irresponsible borrowing habits of Gen Y/X/Z...they don't care about saving for tomorrow 'cos to them there isn't one !
I'm one of Rob's mob , Hickster . You're making gross generalisations that BB's are doing this or that , on anecdotal evidence ? The debt charts aren't broken into age demographics , nor into years of residency .
Is this just further evidence of the sloppy hack journalism , prevalent in NZ & Las Vegas ?
hell knoweth no fury, Bernard, than a Gumbo rising !
..and he's a-comin' for ya..
it's far worse than Creedence Bad Moon Rising, i can assure you......give us the facts, the stats. to support your hyper- hypothesis that the BB's are responsible for everything.. incl. Wolly !
If you're comfortable with a land tax and a capital gains tax then good on you.
If not, then think again.
Bernard, I would add to that as:
If you're comfortable with a land tax and a capital gains tax, coupled with lower income tax rates - then good on you.
It's this combination that I believe will bring needed relief to youth and the adult generation locked out of an opportunity to accumulate wealth/assets under the present tax/economic system.
The reader responds via email
Hi Bernard, just to round off the conversation, I haven't saved money by buying up, or buying and selling for profit, although by age 57 I have lived in a few different houses over time. Two of those houses were bought and sold for the same price due to a drop in the housing market both times and the share market crash in '87.
I also owned one of the first leaky homes built in the early 90s at a time when denial was the default position of developers and builders not to mention total denial and disinteredt by the Master Builders association. I had to fight hard to get the problem acknowledged, aided by Brands NZ and fought the case in court and had the developer ordered to repair the house in full. To my great dismay the problem was swept under the carpet and other leaky homes continued to be built despite the year long battle I fought and the people I alerted to the issues. Developers and builders built and sold, shutting up shop after finishing a leaky development and starting again under a different name. They are the people you should be targeting Bernard and there are one or two Government policies there that need to be changed.
Getting back to how I saved my money, I saved money by saving more than I spent. I worked myself up through the ranks in jobs I didn't consider to be 'lifestyle choices' but they paid well so I did the necessary as so many of my generation did. Having said that I'm not denigrating younger people who would rather follow their dream than sit at a computer. I love that they can do that while they are fit and able. But I have to say that many of them can choose lifestyle over high paid jobs because parents worked hard to make life easier for them and that's fantastic in my book. It gladdens my heart. At least there is some payoff for someone.
But I agree that many greedy people of my age have borrowed to purchase rentals etc pumping prices up but so have younger people. Greed is not exclusive to baby boomers. And banks lending more than 100% exacerbated the situation - overall a completely unsustainable festering pyramid of greed.
I welcome Government policies that level the playing field. But dear God let them be intelligent policies. Land taxes and capital gains taxes pitched at residential property owners are not the solution Bernard. Yes I own property. I own two well maintained family homes tenanted by families who I make damn sure are happy in those homes with heat pumps and good insulation. These properties are not in LAQCs. In my opinion LAQCs perpetuated and possibly created the house price hike. I am glad the Government changed the rules on LAQCs but they didn't go far enough in my opinion.
Anyway, let's leave it there Bernard. As a well respected media commentator you have the power to influence public opinion and change perceptions so I ask you not to tar us all with the same brush. Old people are not generally a burden to society. If we were, I think a number of intelligent compassionate baby boomers might consider euthanasia. My mother believed in euthanasia at age 60 specifically so as not to be a burden on anyone. Unfortunately she died of leukemia at 58 - still working full time at that point I might add. My father decided he had learned a lesson from her early death and retired early to try to get some time to enjoy the rest of his life. He was also 58. Unfortunately he was hit by a bus and killed some months later. The upside of all that being, I guess you have to say, that neither of them became burdens on society.
Kind regards
A reader
Many thanks for your reply.
I'm not saying people have deliberately set out to push up house prices to make it difficult for young people to buy.
But now it's happened they can do something to make it easier for young people to own their own homes (as opposed to apartments).
The hard choice comes down to this: Are you willing to see the value of your property drop to ensure those young people can afford a home to buy (rather than rent) and not leave the country?
I appreciate the conversation.
cheers
Bernard
The reader responds --
Hi Bernard - I didn't think I'd be writing to you again but here I go.............. some baby boomers have pushed up house prices, but so have people in all age brackets, inlcluding foreign investors, banks etc etc. Giving baby boomers all the credit gives others an easy out to carry on mindlessly, and its also very frustrating for the likes of me.
To state the obvious, some of the reasons for the house price hikes have been: easy access to money and all that drove that strange logic, LAQCs, the seductive but unsustainable nature of LAQC tax breaks encouraging people to invest in property, the lack of confidence in the NZ sharmarket and very simply, the choices people make - have a great lifestyle right here right now or save, work long hours, say no to your mates and stay home and have no fun.
Many 30 year olds who are now at the age where the rubber hits the road over choices they made - lifestyle over saving. Some baby boomers chose saving over lifestyle as I did. Incidentally I don't think I'd do that again. I might do what some people do now - give myself time to live and possbly blame someone else for the sorry state of house market.
As you say, the hard choice comes down to this: As a baby boomer am I willing to see the value of property drop to ensure young people can afford a home to buy (rather than rent) and not leave the country?
Well the thing is that I didn't invest in property for capital gain. I invest in property to generate an income over time from something tangeable that also, in turn, provides homes for others. The plan is to support myself in retirement for this income. Sure, tax takes a considerable amount of that income because I haven't 'geared up' so do not get tax breaks but surely that means I am a contributer, not a burden.
Having said that, any policy changes designed to make houses more afforable need to intelligent, fair and well thought out solutions rather than quick fix political positioning.
I'm sure I must be boring you Bernard so I'll close. But feel free to use me for feedback if you wish at any time. I feel I can see different sides of the argument as I've experienced quite a bit over my life.
Kind regards and all the very best for 2011 Bernard.
Many thanks for that.
You missed another choice for the 30 year olds. That is to leave the country, or more accurately, not come home.
I lived overseas for 10 years and the decision to come home was a tough one. The financials are brutal.
Lower wages (much, much lower) and very expensive housing make it difficult for many to come home.
About half of New Zealand born graduates are living overseas at some point in their 20s and about a third of those in their 30s are still living overseas.
This is why I think we need to fight harder to make housing more affordable for young families.
Enjoyed the chat
cheers
Bernard
We need a new political voice , to shake up the incumbent wastrals in parliament :
the " COME HOME" party ! They could promote affordable housing , as well as getting young kiwis to return from overseas .
......... Hugh Pavelitich would be a starter . You up for it , Bernie ?
" Come Home " would be more beneficial to the country than the current crop of idiot minor parties combined .
I've lived most of the past decade overseas...and not Oz or the UK. Came back 5 months ago....I won't be here in 3 months time. Snap shot of where my NZ born friends live and work - they are all educated in NZ, and have excellent jobs. Canada, US, Scotland, England, Sweden, Singapore, Qatar, UAE, Saudi, Sierra Leone, Israel, Thailand, Indonesia. The above is prevalent amongst NZers I meet by the way, so this isn't just isolated to my experience.
We all know people who live and work overseas but I wonder if the majority of (older) peoples friends live predominately overseas? This is not meant to be a smart arse comment either - just interested. What I see happening is that the people we need to live here are leaving / gone. There's a generation thats voted with their feet...I don't see anyone on the street asking why that is, or appreciating the consequences down the line?
Ging - are you married/ have partner and/or have kids? If so is your partner a kiwi?
Two out of 3 of our kids have non-kiwi partners from different continents, and they are quite ambivelent as to where they will eventually end up. Daughter would like to come back - for family reasons/lifestyle for her kids, son is not against returning to partners home country later in the future. However in his case he can make substantially more here in NZ farming than he can back there.
I don't have any BB friends who live off shore but the MOTH and I have lived and worked in a few different places in the last 6 years, mainly due to our kids being based offshore. Though we do know many kids who do live overseas - not in Oz. We don't pay any more now in relative terms, for air travel than we did 30odd years ago when we did our OE. With technology today and faster planes, having kids living overseas isn't the drama it used to be.
I do wonder if many of the kiwis overseas would struggle to find jobs here as we are only a small country and do have a saturation point for professionals. What we need aren't more lawyers, accountants, financial whizz kids, but entrepeneurs.
I know a kiwi physio in the UK who was looking to come back - they now have UK citizenship - but the physio scene here has been decimated since the free ACC visits have being scrapped. They are now staying on in the UK.
Does anyone have the stats on whether the percentage of young kiwis offshore as per their cohort, is any greater than what it has been in the last say 15 - 20 years?
Anyway off to the Coromandel and camping.
Hey CO - married to a kiwi with two terrors. Out of 5 siblings, 4 live in either europe or middle east. Totally agree with the ease and cost of travel...makes it very easy to disappear and come home often...for a holiday and see the grandparents. Agree on the saturation point re' professionals but was thinking more along the lines of them bringing back their dough (send it home when the rate is good anyway) and starting businesses etc. I know we've always been a mobile bunch...it would be interesting to know when this apparent 'hyper mobility' started or if its just always been.
I've got it! I have figured you out Bernard. I have often wondered why you are so unbalanced, and divisive on this issue compared to your usual objective, analytical self... it's that 'no such thing as bad publicity' kick isn't it, you are just filling the vacuum left by Paul Henry, the master of nasty, arn't you! It's ok, you can tell us... we wont breathe a word.
I hope you let the Americans know the BB tribe are the real cause of the GFC, they still think it had something to do with a force-fed credit bubble! (nudge, wink...)
Don't take it too personally Bernard. It is nice to hear there is at least one sensible BB out there but it is my experience that the BB's had a lot to do with the boom in property values in NZ.. I had a talk with a close friend last night who has a big law practice and it was his experience that the boom in property values in the early 2000's was largely instigated by BB's who had the equity to borrow against when they bought their rentals largely with debt. Very few people put anything into their investments as they just did not have it in the first place. X and Y got involved when they saw how the BB's had done it. Unfortunately too many got involved too late when prices were peaking in 2006/2007 and when interest rates were much higher. There is no doubt all the so called generations were involved in rental investments but the BB's were predominant in my mind simply because they had the equity behind them and in some cases the savings.
Then you would have to conclude they also have the losses either booked or yet to be booked against them! The greater part of the 100 billion in foreign debt must belong to BBs.....and back we go to my argument that the banks and the govt and RB are acting to keep that bubble intact.
Is it the BBs or the others who are responsible for property being seriously unaffordable and for the banks being able to milk the wealth from the economy.?
Why is my house worth what they say it is...
Do I expect to recoup my interest payments?
Improvements?
Location...
Do plasterboard and paint improve with age?
Does the gutter replace itself?
We need to see through this...
A 'cultural' blindspot.
It cannot be worth more than original cost plus improvements .... though I'll take the money anyway...
Interest for the Banks, a steady drip, a daily milking.
I am talking to people every day Rob including my friends and to a person it is hard to find someone who is not concerned about the economy at the moment. It does not sound like the managing director of B&T is talking to anyone or certainly he is not admitting to that fact otherwise he would not have put out the tripe today that everything is okay with the housing market in Auckland. Just drive down the east coast bays road and the reality of what is happening out there hits you in the eyes immediately. People are more than happy to talk to me as they are realistic and they are concerned where we are at currently. I hope the politicians get back to work soon and start showing us some leadership.
Lol - Spot on Rob. I know people like ex agent - the "mine is better then yours type". Using stories about their "friends" to get one up on other people.
Even more annoying in real life. I think people are being polite when they talk to him, I doubt they are happy to talk to him. Mind you being an agent and a BB he seems to be riddled with self hate.
I am sorry if my views are not agreeable to you Shorts. I cannot help if they are realistic about the current state of the economy but that is understandable as you sound like a typical PI who cannot cope with the current state of play which is that property values are generally dropping as each month goes by except maybe for the central suburbs of Auckland. And that is not even taking inflation into acount on top. I hope you are not negatively geared as that means you are really going backwards cash and capital wise. You should have sold in 2007/2008 but not everyone had the commonsense to do that. Property always goes up.It doubles in value every 7 to 10 years.
Anyone who bothers to study the long term trends will know that houses are a poor investment , as is Gold ! ......... They have spurts of price growth , followed by long lulls , or even full-blown crashes .
Only the negative gearing and tax-free capital gains add some lustre to housing ......... And for how much longer ?
........... But of course , you can't lose with property , mate .........'cos this time is different .
The pimps on Manchester Street seem to find that their women are a good investment . ........... If not , the girls " swim with the fishes " , if you know what I mean ...... none of them are craving , to go near the Avon ............
[ no hotel in the Phils , just some bamboo huts and hammocks , set up deside Jurrasic Park Beach ........ but it'll do , until Labour & National have finished rooting NZ's economy . ........... Then I'll bring a bag of pesos over , and buy up large .... ]
No need to be sorry old chap - I find your constant reference to "friends" both annoying and amusing. My "friend" purchased 100 properties in 2007 and sold them all last year for a 2000% profit maaaate and is now richer then everyone. I on the other hand sold my rental for a $80K profit after only owning for a year and our first home for a $100K profit after owning it for couple of years. We did by in 2008 in East Auckland, but have no debt so are doing just fine. Wife can even stay home and look after the sprog.
I think the problem is one of expectations.....I would suggest you get a video series "who do you think you are" out of the library to see just how tough it was in the 19th century for many....and compare that to the BBs time.
The BBs seem to be thinking that tomorrow will be better for the next generations so its OK to leave them your debt....sorry but to my mind each generation should be or have been more or less self-sufficient. So what really happened was the BBs paid for their parents OAP needs and were not that heavily taxed because of their numbers....now however that is reversed....so the tax for the BBs should have been a few % higher and the Cullen fund(s) should have been busy packing away the $.....that didnt happen....it was by and large wasted on bigger houses and better lifestyles and any Pollie who said different was voted out.....and then that was compounded by excessive debt....So while we cannot say an individual BB is or was irresponsible for raping the planet of oil and minerals to party up we can certainly umbrella that / this generation with being collectivey irresponsible....and indeed it looks likely that they will continue to do so into OAP....
regards
don't be daft, Steven...nobody was consciously leaving anyone generational debt !!!.
we have just been through the biggest credit bubble over the last decade in financial history...it was never a housing bubble..it was a credit one!
your statemen t" The BBs seem to be thinking that tomorrow will be better for the next generations so its OK to leave them your debt..." seems to imply some selfish debt frenzy by the BB's when in reality they just took easy money offered by the banks and invested in property which was the safest bet at the time.
like all age groups, there are the rich and the greedy but to imply all over 45 year olds are like that collectively is bullshite.......and you know it !
RofN - I'm assuming that the BB (along with everyone else for the sake of not generalising to much) who took advantage of the cheap money / debt frenzy weren't investing in property for the good of all man? But you can't blame people for wanting an in
Talking about inter-generational debt, not to happy about the size of the defaults and non payments on the student debt front! Pay up people!
Fire destroys a primary school in Auckland, probably arson, said to be an economic waste that cannot be afforded by the economy, insurance involved..............earthquake destroys school in Christchurch, said to be GDP positive and job creative and good for economic growth, insurance involved..........go figure.
Someone once said, "A rising tide floats all boats." So, it must also be true that a tsunami sinks them all too. Those nations at the outer periphery: Italy, Japan, Spain, Ireland, et al, will suffer the consequences of the Ponzi social planning that guaranteed a good retirement for those first in before the scheme collapsed.
Fortunately, we have a lot more room to maneuver than most other nations. We can raise the retirement age (pretty much a given following the next election) or require employer/employee contributions to supplement retirement funding, like plans found in Canada and Australia.
If push comes to shove the State can always withhold key health care for seniors, cut benefits, promote "planned death" by legalising euthanasia and confiscate the estates of the dead through taxation and inflation.
So long as retirees have the vote, gray power will dominate the political landscape.
Well done Doug...long may the BBs rule over them all...careful now or we might see a BB backlash...the exodus of the capital...already the two wealthiest Kiwi live overseas and pay no tax...it would not take much effort to create a retirement haven in the Pacific out of the reach of the IRD but just a quick flight for a visit to the family. I see this as a serious matter not a joke. The Cook Islands would welcome an island full of loaded oldies wanting some warmth for most of the year. The pension payments would continue.
NZ would be left with the oldies who have nothing and depend on the State for care.
Exactamondo, Doug !
the burgeoning wave of BB's coming through will soon represent such a huge voting lobby that no Govt. will have the cojones to tangle with them... as they'll suffer the result at the ballot box.
what you will see is continued DPB dropkicks breeding kids to be the workers ( hopefully) of the future and the immigration mix loosened to allow more workers in....all to increase the tax take at the base to fund the elderly hordes.
if any of you have aging parents i urge you to bump them off now and help your countries future....it used to be " save money, shower with a friend"..now it's " save money, execute ya grannie"...eh, Gumbo !
Odd question.
How many 'generations' expect to 'inherit' wealth.
Can it be banked upon?
A few posts on this subject during last week. Just wondering if it is another one of those 'cultural' things I don't understand (like 'buying rentals' to fund retirement).
Always look on the bright side of life !
.......... If life seems jolly rotten............ There's something you've forgotten
And that's to laugh and smile , and dance and sing
...........When you're feeling in the dumps......... Don't be silly chumps
Just purse your lips and whistle , that's the thing !
............
..........[ How about it , Bernard , a little whistle on your next presentation . Come on ! You know you want to ]
As a GenX, there’s no point in debating whether or not BB are to blame for the increase in house prices or every other ill in the world – a past time of the bitter or idle. It’s a fact of life (and yes they do have something to answer for!), so your energy is better put into figuring out how to do well and proposer. In my view it’s a simple formula, albeit one that takes time, effort and planning.
I look at people on the average wage and wonder how they will ever get ahead in life, own a house and give their kids a foot hold in life. Unfortunately, without education they won’t…unless you’re an entrepreneur of course. The choice is simple, choose to be a low wage slave, or do something about it. This is not news, it just fact. We can blame the BB and moan, or just get on with it.
Like many of my fellow GenX, I came to the conclusion along time ago that we had to look after our own futures…no one else would. Unlike some of the BB blogs here though, I have an ingrained sense of duty to ensure that my kids have all the advantages that I never had in life – this doesn’t mean a silver spoon. May be it’s an inter-generational thing, but making sure that my kids are taken care of is top of the agenda.
Ging
(30 something).
And now we have the beginnings of a true political movement - Houses For All
Sod all the infighting... Build 'em cheap, build them well, and build lots. Don't expect to profit. Don't expect to rent it out. Close it up when you go overseas....
Suck all the mortgage debt out....
We'd all support this - and what a place we'd be with all the money available to invest sensibly... Why would anyone leave.
We've got the food covered, we've got the water sorted. The sun shines.
Sorry PDK - got carried away.
Of course all this speculation about the BB's living the high life in retirement while the X's (like me) and Y's pay for it, really depends on the willingness of the X's and Y's to pay.
Just like we will likely see sovereign defaults this year, you may also see intergenerational defaults at some stage.
If you are a BB then don't plan on getting that hip replacement for free in the future.
Me, well I don't plan on free healthcare forever, my insurance against this is maintaining my personal health before my financial.
The greys may have even more polictical sway in the future, but will there be anyone left in the country paying taxes? Wage slaves aren't going to be able to cough up to much to keep the greys in the manner thay have become accustomed too. Theres enough skilled people leaving / left now....burden them to much in the future and they'll just leave again - they are the ones with the options to go and live somewhere else. Another type of inter-generational default?
This "discussion" (if you can call that) reminds me of a time long ago, when one day at lunch-time, while wandering up Wakefield St in Auckland, a rather corpulent middle-aged Pacific Island lady just ahead of me, was snapping the aerials off every car she passed, with particular gusto if it was an expensive car. It conveyed a sense of have-nots versus haves. Why should they have it if I dont?
I'm confused by this whole debate and the anger at the BB generation. The assumption the BB generation are responsible. Can someone please explain the following? The current explosion in property prices didnt occur until the new millenium, after 2000. Were the BBs the only beneficiaries of this explosion. Were the BBs the "main" beneficiaries of the explosion?. Were the BBs the cause of the explosion? Given that the BBs went through (a) the experience of the 1987 market crash, followed by (b) the 1990s recession, and (c) by the year 2000 they would entering the twilight phase of their working lives. Without facts to back it up, it is difficult to accept they were the exclusive driving force behind the rise in property prices. The property price bubble began in the US and spread from there. I would be more inclined to look at the genX and GenY me-too generations for answers. Not looking to shift or assign blame. Just looking for honest, genuine analysis.
Assume baby boomers were between 35 and 55 in 2000 dependent upon the definition used. I don’t have the numbers for NZ at my finger tips but for the sake of argument we’ll use the UK and assume approximately the same applies in NZ. By 2004, the UK baby boomers held 80% of the UK's wealth and controlled over 80% of personal financial assets and more than 50% of discretionary spending power (Walker, Duncan (Sept 16, 2004).
A good start.
Iconoclast, Hear, hear!
This thread reminds me of some common sayings from the bb's parents' era.
"I wouldn't be dead for quids." "Don't be late in the morning."
" Keep your powder dry." "Keep up the pills and ointment."
What defines the x,y,z generations attitudes?
"Spend now, pay later." "Take anything you can get."
"I'm alright, to hell with everyone else." "First in, first served."
Generalization, I know, but, what's happened to us? Sad!
I'll go with the spend now pay later part but I think you'll find that this applies to all and sundry...purchase of investment houses with no or little equity ring a bell?. Secondly, where do you think the younger generations attitudes come from? They must have been learnt from somewhere...are our older generations not going to take responsibility for the way they brought up their kids? As my Mum says, I blame the parents!
Debt levels are a part of the problem we're dealing with here, but the other half, which is often referred to as "ageing baby boomers" is actually a declining birthrate. The inverted population pyramid is caused by a massive change in reproductive norms across the developed world. This includes:
- Fewer children per reproductive woman
- Later onset of child rearing
- Greater numbers of couples/singles who do not reproduce
If this were not occurring, then superannuation would be sustainable in it's current form, and economic growth would actually occur (as opposed to time shifting purchases via debt).
Prior to the 20th century, welfare was a matter of having enough children/siblings to look after you in your old age or misfortunte. Family-based welfare missed out quite a few people, so state welfare was introduced to provide a safety net, and to socialise the cost of retirement and health care. Unfortunately this (coupled with a sexual revolution) inspired the idea that children were no longer necessary for ongoing welfare, and the birth rate plummeted. Now we are rediscovering that it is necessary to reproduce at higher than replacement, or there won't be enough resources when you retire.
The deregulation of NZ economy really changed attitudes across all generations that followed. Those in their 50s were often treated very badly at the time and a more self centered attitude developed.
The 1991 recession also hit very hard the now older part of Generation x who are approx 40 ish now as they were just entering the work force. The social framework that has developed under labour subsequently is a rather foreign concept to what they have faced. This group coming through had no security it was simply up to you.
I know about dozen who have retired in the past six months, some have few savings through to several with several million in liquid assets. All can't wait to get their super if they need it or not. Most is saved and they keep doing what they were doing, working as GMs or running a business. All feel no need to look out out for their children regardless of their circumstances and hope to spend all the money they have accumulated in their life time.
One of the most wealthy offered to do some work for me to stay active however was only prepared to do it for cash while he picking up the pension and tells me(as a joke) to not stop working otherwise who will pay for his pension. It is rather funny for an intelligent guy still reflects individuals with no feeling of community responsibility.
Note I'm note underestimating that large psychological hurdle that as you retire you realise your earning years are coming to a close and what you have accumulated is what you have for the rest of your life....however the way society has developed how can it collectively work?
"As my Mum says, I blame the parents!"
This speaks volumes! Some one to blame? Personally I don't blame anyone, just feel rather sad about it all. However, you've acknowledged there is a difference in attitudes between the generations. Perhaps the first step towards a change?
Arghhh...my Mum is probably your age? It's not about blame, it's about self / family responsibility or the lack of it. Should we blame the government for all the worlds problems. There is a difference in attitudes, no doubt, but not skewed in the way you think. Self reliance, hard work, looking after your kids and family, and some more self reliance is the order of the day. What I don't like is those who haven't made the most of what is on offer - this cuts across all generations.
Japan's major problem in terms of trying to recover from its property bubble is its demographics. Due to its highly insular immigration policy its population age has caused the greatest deflation in property and the economy since 1989. Japan is in fact a forward example of what Bernand is talking about. If in fact other countries take the same approach in trying to stimulate their economies they will make the same mistakes. In fact Japan has the ultimate aging problem and the rest of the world is following behind. Japan has spent so much money for no value it is now bankrupt. New Zealand is now looking down the barrel of similar situation. In terms of BB providing for those following you have a generation that introduced welfare spending and associated dependncy on the majority of the populace. If you were in the extreme minority and made your own way you have plenty to leave your offspring. if not you are in the invidious situation of leaving a burden behind. I have always said that until this country goes broke there is no future as it will take crisis to wake up the people and it wont be pretty.
BERNARD !!!!! .......... I've had a stroll through the comments posted to your article at the NZ HERALD .......... They don't hold back , do they ! ....... And before we ritualistically have you hung-drawn-and quartered , a snapshot of the readers' postings :
Aura : " Bernard the Baby Boomer Basher " ........ makes you sound alike a bovver boy thug in Doc Martin boots ........... so cool , that one . And another :
Dunedin : " Bernard , do you really hate NZ so much that you rubbish it and its people at every opportunity " ............. stomping on the flag there , big guy ............... and lastly , from Granny , sweet that she remembers you......
Granny : " Shame on you , Mr Hickey ! " .............. but I reckon you'll still get the hand-knitted cardigan she's doing for your birthday .
............ and there we have it , Bernard elevating the debate on retirement , so elegantly , just prior to his being tarred & feathered ................. ahhhhhhhhhhh !
What was it someone told me the other day, when people are the most embarrassed they are at their most defensive. So really Bernard you should take it as a complement that people have retaliated so much as you clearly hit the nail on the head. I know we all thought so, but obviously a fair number who would normally just put their heads in the sand felt sufficiently embarrassed by the accuracy they had to retaliate.
I hear this is the next big must have for baby boomers. Anyone have one? Are they any good?
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10698808
Heard quite a few people buy them and do the great australian treck... A friend of mind purchased the top level one which cost as much as a small house and set off for a year going around Aussie, lasted four months before he became bored. He said it would keep its value at the outset, even said it was an investment...however he let it go from the yard six months after return to NZ, never told me what he sold it for :-)
Like all things speckles, you don't need state of the art...but you do need system security...proper self containment...large water tank...large greywater tank...reliable hot water system...ditto the batteries and recharging options...and a huge bin type 12v fridge freezer and the aussies make the best of those...nothing wrong with a properly converted bus.
Straight up Kakapo, I get a good 9ks to the litre in mine..better in a tail gale.
You will get more fun from an older diesel 7m coverted bus than any flash bang job. $40K will get you good one...leaves money to hitch up a trailer unit with tin boat if you wish. In aus you will want aircon but not NZ. Bigger the unit..bigger the parking in town nightmare...and you will end up in towns.
Best driven well below the 90k limit on them in NZ. Allows others to pass and you to pull over and saves heaps on fuel.
A well maintained reliable unit is better than a flash paint job.
Well I don't know what iconoclast has to say on it, but based on what you have written above you wouldn't expect any less. What you have failed to do is to show that this is in any way different from any previous generation of 40+ year olds of any era who are at the peak of their earning powers, but have yet to retire. All you have done is to state the obvious, which age group within society the bulk of the wealth is to be found. Hardly a revelation.
I mean where do you think it is going to be found, amongst student defaulters with their large taxpayer provided interest free loans?
And you still haven’t come up with any credible evidence that BBmer’s alone were responsible for the increase in house prices in NZ. You aren’t seriously suggesting that the only people between 2002 and 2007 who were buying properties in this country were aged between 38 and 61 are you? That’s farcical. What about the substantial numbers of migrants that came to NZ during this time? Their increased demand for housing and the pressure this placed on the market had absolutely nothing to do with it at all, right? The law of supply and demand doesn’t apply to housing, is that what you are saying? And the housing market is not cyclical in nature and has been for centuries? Nonsense.
Just fodder for the discussion Iconoclast was looking for - stating the obvious of course.
In terms of buying property during 2002 - 2007, BB weren't the only ones buying property obviously, but one has to assume that because they had the largest ability to purchase? Did all BB just sit on their hands? No wonder super is an issue these days missing out on making all that money when times were good.
In terms of ages, if it wasn't mostly 38 - 61 then who was it? The 25 - 38 age bracket who could afford it were in the game...but are you saying that they had a purchasing power greater than the BB and brought more property? Must have been the retirees or people who were verging on retirement then.
May be it was all the immigrants and NZers returning after 9/11 that brought all the sht boxes to rent out or get into the capital gains? Immigrants were obviously competing with someone in the housing market on their return - or were the numbers so great that they alone were responsible?
No doubt its a complicated issue and there were many drivers for rising house prices. But I still haven't seen anything from BB to back up the assertion that they had no part in it?
I'll trow out the obvious, you educate me with the facts and figures.
Do not make assumptions. Read my first post carefully. The beginning of the BB rump went through the 1987 crash, followed by the 1990s recession (the first time in living memory property prices went down) . While they may have "had" the buying capacity, I'm of the opinion that those experiences would have dampened their enthusiasm. If I could obtain the statistics I would be inclined to the probability that the BBs were the sellers in 2004-05 and were unloading onto the next generation. In my game, among my clients fall into two groups. Those who succeed and those who fail. Over 20 years of working with these clients I have carefully analised those who have succeeded. They all had one thing in common. They were young, they had no responsibilities, had some working capital, had a huge risk appetite. Once they got married and took on responsibilities their risk profile changed and they struggled. Those clients who were older or retired had a different risk profile that got in the way.
As to "who caused it" I have some clear ideas on that but that will be another article for another time. As to the main thrust of it, I've not seen anyone getting even close to it. And that includes your favourite scribe Bernard Hickey.
“Don’t make assumptions” – like myself, isn’t that all your basing your musings on as well? If we had some figures then there wouldn’t be anything to debate. 1987 crash, most GenX were still at school or didn’t have the capacity to be involved in the housing market. They didn’t reaps the rewards of the good times or lose anything. They left school, uni and or entered the work force in the 1990’s depression. The majority therefore were just happy to get a job and survive let alone save enough to buy a house. Buy the 2000’s, one would have to assume that a deposit was saved and they could buy the houses of the BB generation. What where BB selling, their family homes or investment properties? If it wasn’t investment properties, then they had to re-enter the market. May be BB were down sizing and buying lesser homes at that point to make it worth while? Up sizing? The other side of the coin is that BB had long enough to build equity in their homes and during the 2000’s were in a position to start buying investment properties, holiday homes etc also. No doubt risk profiles change with time…but don’t sell BB short. I’m sure they were taking the opportunity to secure their retirements by being involved. One hopes they were!
Hickey is not immune from that defect ...
In politics there is a saying that when formulating an election program remember "Wealth is a legitimate target that can be attacked and ridiculed, Poverty cant" or "Wealth can't be defended while Poverty can" which is code for saying "The wealthy cannot defend their wealth, they are easy targets". The problem we have is the absence of reliable information. Pity is the Tax Department with its computer systems has the capacity to produce meaningful information as to income distribution accross age groups, the percentages of those 65+ that have an income in addition to super, which could be corelated to the Social Security Stats, the numbers taxpayers with investment properties producing either income or losses, together with an age distribution of all of that. Then the discussion could get really meaningful. The data is there. The government needs it to furmulate policy. Wonder if Bernard Hickey's article was simply an attempt to ram a red-hot-stick up the backside of the politicians. What I object to is the want of the news media to tell us "how to think", and "how we should feel" and Hickey is not immune from that defect, as demonstrated by his article.
Whether BB were responsible for the housing bubble or not is a mute point, but its fun getting a rise.
The issue for younger people I believe is - have the older generations done enough during there life to support themselves in retirement. I think you'll find the answer in general is no. During my lifetime, the message has been you have to look after yourself because the state won't be able to afford it. What galls younger people, is that the older generations have preached self reliance and the state can't afford it, but haven't done anything / enough themselves. That my friend is the ultimate ME attitude. Just pulled up NZ institute / Skilling / Waldergrave / 2004 - out of date but still gives a snap shot...
2001
10% 60 - 64 had no or negative wealth,
50% had less than $200k
30% of 55 - 64 still had a mortgage liability
Bottom 8 income deciles of people over 65 80% of income from superann,
Bottom 6 income deciles 92% of income from superann
I'm in my 30's and have got my sht sorted already....whats their excuse?
Those figures are pre-bubble and for pre-boomers, so I'll bet they're dramatically different now. The percentage in the 55-64 age group who have a mortgage liability has probably changed - but how it's changed would depend on what the balance is between those who borrowed to buy investment properties and those who finally paid off their home and became mortgage free.
My thoughts: The 80:20 Pareto Principle I have quoted elsewhere on another thread. Its "too easy" to throw those sort of statistics around and heres why it demonstrates the application of that to my question is "flawed" The 80:20 distribution was true in 1900, true in 1950, 1960, 1970 and so on, and it hasnt changed. Its a truism. Which implies the transfer of wealth from one generation to the next is perfectly linear. My question was "The property bubble occurred in 2004-2005" how could the one demographic, the BBs, represent 80% of the recipients of the wealth created, and it doesnt begin to explain if the one demographic caused of it.
Pareto's rule states that a small number of causes is responsible for a large percentage of the effect, in a ratio of about 20:80. In 1906, Vilfredo Pareto (1848-1923) an Italian economist, observed twenty percent of the people owned eighty percent of the country's accumulated wealth. The Pareto Principle states a small subset ("vital few") affecting a common outcome tends to occur more frequently than the remainder ("useful many").
But there is something that's changed to alter the previous pattern of wealth transferring from older to younger generations, and that is demographics. Specifically, the rapid "baby boom" expansion in birth rates has been followed by a falling birth rate, which means that the number of old people compared to the number of young people is rising dramatically. The proportion was 18% in 2000 - that is, for every 100 people of working age (15 - 64) there were 18 over-65s; it is projected to be 42% by 2050.
So if the BBs expect the same deal as their parents got in their old age - that they will be paid NZS out of younger contemporaries' taxes - then they are imposing a heavier burden on the next generation than they have borne themselves. Add to that the increasing cost of healthcare which comes with old age, and the future cost of financing the debts that are now being run up, and it begins to look as though what is being bequeathed is not wealth at all, it is debt.
Just did some googling to see if there's any historical precedent for this kind of demographic profile, weighted towards older age groups, even on a localised scale due to events like the American Civil War, or WW1 and the influenza epidemic. Couldn't find any, and according to the UN there is no prededent. It's uncharted waters.
Doesn't make sense. Just assuming NZs population will be 5 million in 2050 (currently 4.4) and 42% are designated BBs, then those BBs will comprise a total of 2.1 million people, assuming they all make it. In 1965, after they stopped producing BBs, the population of NZ was just 2.5 million. Doesn't work.
Treasury:
These assumptions produce projections of our population growing from 4 million today to 5 million in 2050, a 25% increase in 45 years. The projections also show changing shares in the total population of the young, those of the traditional working age, the old (65 and over) and the “oldest” old (85 and over).
The number of people over 65 is projected to grow almost three-fold, while those 85 and over will grow six-fold by 2050. Under this scenario, the working-age population grows until the mid-2020s and then contracts (it shrinks from 66% of the total now to 58% by 2050). Overall population growth slows down until the mid-century and then falls below zero.
One way of looking at the changing demographics is to chart the so-called dependency ratios of people 65 and over and those under 15 to working-age people aged 15 to 64. The aged-dependency ratio climbs from 0.18 in 2005 to 0.45 in 2050.
Put another way, in 1900 there were 15 people of working age for every person over 65. Today this has shifted to five people of working age for every person 65 and over, while by mid-century there are projected to be only two.
@ Ging
Trying to pick what New Zealand's future population will be is like trying to pick next week’s lotto numbers out of your $#@&&!
The projections that Treasury made early last decade for what NZ's pop would be today is already way out. They underestimated it by 150K ! In only seven years they are 150,000 out? That's 21,500 people a year! Continue that for another 40 years and you're out by 860,000 people.
This country has been growng at a rate of almost 900,000 every 20 years since the 1950s, and you seriously believe that that gain is now going to suddenly shrink back to only 250,000 every 20 years (500,000 over the next 40 years). Oh pluzeee! Well at least you’re good for a laugh!
I guess we'll have to base our decisions on your wisdom then. Feel free to ring them up and the government while your at it and explain your brillance to them. I'm sure they will be pleased to base all fiscal planning on your chestnuts. I'm interested in how you came to conclusion that treasury projection figures are that wrong? Never seen a projection that is spot on mate...thats why they are called projections!
Don't forget that a huge percentage of them state that they won't leave anything for their kids --- "I had to work my bum off to pay nothing for the houses I inherited so my kids will have to work their bums off to pay for the houses I inherited!!!! And they can pay market rates!!!!'
This is stuff you hear them saying all the time, things like "Why should I leave anything to my kids? Why shouldn't I spend it all on me now before I die? I earned it!!!!"
Most seem to buy into the 'fact' that price of houses are too expensive in NZ.
There are any number of towns/cities in NZ (not obviously Auckland) where you can get a reasonble first house for less than $250,000. And if the median price is say $250,000, then logically half the properties would be less than that.
And Seek analysis of current wages, presumably full-time, sees national average at $69,140.00 (more in Wellington and Auckland). When one realises that historically at least 1/3 of pop don't buy property (on benefits or lower pay), those who do traditionally buy, especially 2 income couples, should be able to do so, given their wages and price of a house [ unless they insist in buying in likes of Auckland ].
So your saying that if we ignore 25% of the market (Auckland) as being too expensive, the rest is affordable to a first home buyer? I'll pass that on to my family, who at the same age that I was buying my first home (and being able to afford it on my one wage and having the luxury of contemplating a family), are still contemplating paying off their tens of thousands of dollars worth of student debt.
Only for those who could do better by a different route Ging. For the system it is a fools game where they hike the costs knowing the students can borrow the capital and then they justify spending and using the money.
look at it this way...why build a lecture theatre that holds 50 when you get a better return on 300 bums on seats and who gives a rat's if half fail the course when you planned on 150 at stage two etc etc. The system came to value bums on seats.
Wish I could remember where it was, but recently read something about inflation in USA tuition costs spiralling in the 2000s because it was hitched to the amount of home equity credit that parents could draw down, rather than being limited by what was available in college fund savings and discretionary income. Everything conspires to make new debt slaves.
Having rich parents who are willing to pay their way would be the easiest option, or failing that forward-planning parents who start saving at birth. Too bad that's down to dumb luck.
A wide range of scholarships would be good, targeted at those with ability and motivation, but not the means, and not necessarily only through corporations or large organisations. How would sponsoring the Wolly Geology Degree Scholarship grab you?
There's other ways and means, but all come with disadvantages. I was one of those unlucky Gen Xers who left school just in time for uni fees, loans with interest, and no allowances, decided that it wasn't worth it for a BA, did a one-year polytech diploma instead, and entered the workforce with the intention of doing a degree part-time and paying for it as I went. So then I had all the fun of finding a first job in a recession, with the low wages and lack of options that come with that, and a continual shower of bullsh1t from the media about how we were supposedly all 'slackers'. But it worked well, even though it was a slow grind and delayed graduation by years, and I think a few years of post-school living and maturing are an advantage in higher education.
I really feel for anybody leaving school or uni and entering the workforce in the next few years. But a positive side to the experience was learning a lot of good survival skills for living frugally and resourcefully, and find that's the case with a lot of my contemporaries, though I wouldn't claim it's common to all. It's stuff our Depression-era grandparents would have seen as normal, but our parents wouldn't dream of doing. The other day I taught a 19 year old to darn. He was walking around on holy socks, because for a student with no holiday job living on $150 a week student loan, even a pack of made-in-China socks from The Warehouse is too expensive.
That's the problem - Sallies are really hardline on their rules, overprice stuff (more expensive than new), and won't allow the staff to knock a few bucks off for people who really need it. I used to volunteer in another place, and we had the freedom to use a bit of discretion and give a discount (sometimes 100%) to people who were down to the last couple of bucks, or kids spending pocket-money.
Happy New Year......you wonderful people out there in cyberland !!!!
just in and out again so no time to chat...darn it...anyhoo Kakapo tell me where you are n I'll have a word in the necessary ear in regards to you bad buys from the Sallies it won't be the policy it will be the shop manager sweating budget targets......
Happy day all...i'm still catching good snapper and just don't want it to end...whooohoo!
Its a good system for those who use it properly...unfortunately its getting rorted by those who don't pay it back. For many, stumping up the fees out of their own pocket is a no goer, so I'm all for the facility. I didn't expect the tax payer to pay for my education so was appreciative of the chance to access the dough. Apart from being an entreprenuer these days (and where does the capital come from?) can't see to many options. Seem to have to go to tech to learn the most basic of skills...always thought the best place to learn was from the guys onsite. Go trades, but have to start your own business to make any decent money - this is relative of course. To access the higher paying jobs (and there are always exceptions) getting a degree is the key to the door mate. Fact of life.
It was also rorted as an explosion in providers sort the easy loot providing 'training' in every possible cranny and left the economy with the massive govt student loan liability and heaps of kids qualified to do nothing of any value.
The German trades training system is far better. So now we are stuck with a Kiwi do it yourself mess. Who cares, as it seems to fit nicely with the mismanaged economy!
Not saying ignore Auckland, am saying why live there if you don't need to eg I have a daughter in mid-20's who had an excellent business based in Tauranga, her partner could have got a teaching position in Te Puke (good school), but they want to be where the social action is at in Wellington, so she has relinguished her contracts and they have shifted to there- both quickly got good jobs but cost of buying a house at Te Puke would have been at a much better price than Wellington. Problem is that my generation and those younger want to live where 'it's all happening', ok but there is a cost. And even in Wellington, with average wage there of $74,300, it 's not expensive for a couple to buy an entry level house.
I don't know much about Wellington property, except have a sister who lives in Khandallah and it is a dump of a suburb, blows like hell more often than not. Got good views though, she may have been able to see you on your boat Wolly, presume the wind one day got up and you ended in the Marlborough Sounds. But back to main point, the price of entry level housing even in Wellington is certainly not bad relative to what people earn there, and in general it is not that expensive to buy a place in Aotearoa.
Not sure whether median wage is that relevant given the bottom 1/3 earners traditionally don't buy property, so we are really talking about the wages of those who do, and my observation is that the price to buy an entry level house for those is pretty good. A single young nephew has bought in the Hutt for $225,000 and he works as a manager on $70,000. Haven't seen the place but it's evidently quite presentable, albeit on small side. There seems to be a bit of an assumption that property prices for your average house is way out of line with what people earn, but people need to look more closely at such assumptions. As for the merits of living in Wellington, well that's another issue
September 2010 Earnings
Classification Average
Hourly
Earnings Public sector $32.61 Private sector $23.72 Males $27.26 Females $23.93 All NZ Employees $25.71
- The average NZ male employee works 38.0 hours per week with an additional 1.1 hours paid overtime to earn $1,069 per week.
- The average NZ female employee works 35.9 hours per week with an additional 0.4 hours paid overtime to earn $868 per week.
Last I looked the median wage was about $49k and the median house about $349k. So of course, your nephew is doing the right thing by earning an above median average wage and buying a below median property. But isn't it interesting that he is just doing what I, and my peers did, when we got going? Buying at 3 times his average single wage! That's what all New Zealander have to look forwards to in the not too distant future.
Had a chat to him over the New Year. He would have bought a bigger place if he had a partner. But, rather than buy a more expensive place which he doesn't need, he has now saved a sizeable deposit to buy another place to rent out, which he intends doing this year.
Another nephew is also buying investment places but he is on around $150,000 salary, says there are good buys available at present.
NZ Stats:Median Age 1901=23yrs; 2004=35; 2045=45 http://www.stats.govt.nz/tools_and_services/services/schools_corner/act…
If you like playing with spreadsheets: http://www.stats.govt.nz/browse_for_stats/population/estimates_and_proj…
What will the young of 2045 say of their elders. Or will it be like the words of Mike and The Mechanics:
Every generation
blames the one before
And all of their frustrations
Come banging on your door
http://www.treasury.govt.nz/publications/research-policy/ppp/2006/06-01/08.htm
Figure 10. Based on that I'd say that they will be saying thank god our parents and grandparents have gone...good times to be had!
Why such malice Bernard? You seem to be trying to stigmatise individuals born in a particular 20 year period... you imply that individuals born in this period are somehow lesser human beings than people, such as yourself, who had sufficient accumen to be born in other, more meritorious years.
It may be worth noting that though the forthcoming (inconsiderate) increase (that you are so indignant about) in the number of elders will be costly, greed fuelled sub-prime, no-doc, low-doc lending, the controlled explosion of financial candy floss and subsequent collapse had a great deal to do with our looming problems.
Until relatively recent years,the cost of state pension/super has been born by current taxpayers, so no change there... and those that you seem to revile are the first to contribute en mass to the cost of their own retirement benefits (Cullen fund, kiwisaver) while also funding their parents', and see the elegibility age increase (from 60 to 65). Fair enough in the circumstances, there is no doubt that we have a problem, and we all need to be a part of the solution.
Terms like 'demographic', 'generation' and 'baby boom' are statistical constructs, and are useful as such, but they do not imply anything at all about individuals... changing the grammar to 'baby boomers' and using emotive negatives to describe 'them' makes it personal and offensive.
The potential of your campaign is to help change the Zeitgeist view of our elder parents and grandparents from love and respect to bitterness and resentment through xenophobic ageism. What are you trying to achieve?
You could well be right amalgam, statistically speaking. I was born in 1956... are you talking about me personally as an example, or a statistically signficant number of those born within ten years of me? Do you have the same opinion of those who have acted in the same way, but who do not qualify as a baby boomer by virtue of their birthday?
amalgam : If you think that " a single generation locked up so much wealth for itself , to the cost of the folowing generations and the nation as a whole "... then you truely are a frigging idiot !
There is no " generation " acting in unison . Simply lots of individuals , making individual decisions ............. And London-to-a-Brick none of them thought , " screw the country , f*ck the next generation , this is what I'll do ...... "
I thought Bernard toned it down this time around...
June 26, 2009
Bernard Hickey talks to Alison Mau on TVNZ's Breakfast about looming clash of the generations
I learnt I was a Gen Jones last time...
Me too , KW John : I've been slopping around the planet for 50 years ......... only to find , quite recently , that I'm " Generation Jones " ............. No wonder that my shit does stink , whereas everyone elses is as sweet as roses .............. My goddam fault for choosing to be born in 1960 ................
............. Feck it all Gummy , 0 years old , and already you're making poor decisions ......... Plonker ! ............ Little wonder that the next 50 years have involved me doing some struggling ......... Should've flopped into the nearest WINZ office early in the piece , and saved meself all the effort .
Bernard they don't know what they are talking about as they have not been involved in the property industry. I am a BB and I was involved in the RE industry for some years and very successfully and there is no doubt that the BB's went for it in the mid 2000's and bought a lot of rentals. The lady from Tauranga in her 70's who has fifty odd rentals in Hamilton with a $10mill debt on them is not unusual. I know of an elderly man in Palmerston who has sixty plus rentals and this is just part of his portfolio. The BB's have had a huge part to play with the growth of asset values in NZ. They had the equity,the time and in some cases the greed to buy far more than they would ever need. I agree some X and Y have done the same but on the whole the BB's have had far more influence on values as the ones I dealt with and the ones I know of tended to be extreme and never know when to stop.
During the last umpteen years the govts that manipulated and mismanaged this country, put in place the structure and incentives for people to invest in property using cheap abundant credit. Most of the incentives remain. The entire banking system is now propped up on property and the principal policies of the Reserve Bank and govt are aimed at protecting this unbalanced shite of a property ponzi scheme. All of this is the fault of the BBs! go figure.
Hey Wolly why do you and others refer to a "property ponzi scheme" as opposed to a bubble? Isn't it incorrect to call it a ponzi scheme because houses are sold on a comletely open market?
http://en.wikipedia.org/wiki/Ponzi_scheme
Look at "similar schemes - bubble" about 2/3 down the page. It explains the difference.
Nope...not in my mind...ponzi because it's orchestrated and in NZ fully supported by the RB and Govt. Wrong to just blame banks, media and peasants. About the only declining input to this 'game' has been nett migration recently but if you read the media hype on migration it is easy to see they are all in favour of heaps flowing through the gates. A rise in immigration is reported as GDP positive!
Ponzi because the game requires a constant supply of morons borrowing to buy in a rush to make the gains. This aspect remains a permanent feature of the economy. Property is still an area where the Ollys of this world can make a killing taxfree. Indeed they are encouraged to do so by govt policy.
As I have pointed out before...not once have any members of this govt said housing is seriously unaffordable!....and to date govt policy remains aimed at protecting the banks as they farm the wealth from the people and the land.
But none of that defines it as a ponzi scheme.
Heres a segment from the definition of a ponzi scheme from wikipedia dealing with similarities to a bubble.
A bubble: A bubble is similar to a Ponzi scheme in that one participant gets paid by contributions from a subsequent participant (until inevitable collapse), but it is not the same as a Ponzi scheme. A bubble involves ever-rising prices in an open market (for example stock, housing, or tulip bulbs) where prices rise because buyers bid more because prices are rising. Bubbles are often said to be based on the "greater fool" theory. As with the Ponzi scheme, the price exceeds the intrinsic value of the item, but unlike the Ponzi scheme, there is no person misrepresenting the intrinsic value. With the greater fool theory in mind, some may invest even though they believe the securities are overpriced due to a bubble.
It is debatable about govt, RB, banks and media hyping the market up. But lets assume for arguments sake that is all true.That still doesn't make it a ponzi scheme.
The fact properties were sold freely between parties and independant valuations from a 3rd party were available means that there is no person misrepresenting the intrinsic value.
Thus it's not a ponzi scheme.
Im sure you disagree but good debate anyway.
You don't get it ex agent. You are talking about a minority, though a statistically greater number of people, who intentionally set out to make as much money as possible out of the longest period of property price growth in anyone’s memory. Some were "very successful", including yourself by the sound of it - by promoting the ponzi scheme and profiting from the transactions. Like a sub-prime mortgage lender.
Of course those born in the baby-boom years will be over represented in these stats - they were established, their children were independent, or nearly so, and were in their prime earning years. You could call that lucky if you see it that way, but it is ridiculous to suggest (as you seem to in your generalisation) that children born from '45 to '65 were predisposed to excessive but latent greed that manifested in unison from 2003 onwards. Any population sample at the same stage of life, and exposed to same opportunity for easy wealth creation would show the same stats indicating a higher aggregate level of single-minded greed...
But it is wrong to tar individuals who are unknown to you, perhaps a quarter of the population, with the greedy brush - as in Bernard's classic "intergenerational theft", and your, "the BB's went for it".
I was born in 1956. Do you think I greedily "went for it in the mid 2000's"? If you say, no, I can't think that because I don't know you at all, then you have to admit that you cannot rationally think it of anyone else who you do not know or know about... whether they were born in the baby boom years or at any other time. If you say, yes, you greedilly went for it, because you are a baby boomer, as you imply in your post, you are either stupid, you haven't thought it through properly, or you are racked with the guilt that is your own self-imposed birthright.
Similar irrational generalisations result in prejudice of all kinds, and encouraging intergenerational bitterness tears at the fabric of society.
SN I do get it. In 2002 there was a perfect storm. Cheap assets,cheap interest rates, easy access to finance and the desire by many people to live in NZ as terror had created fear in the northern hemisphere. Who was best placed to take advantage of all this. The BB's of course. They generally had unencumbered assets behind them,incomes and less committments than x and y as their children were either off their hands or were getting close to it. It is my experience that the majority of NZers who really went for it during the 2002/2007 years were the BB's. They had the desire to set themselves up for retirement and they had the means to get the easy finance. Farm accumulation was not different. The BB's got really involved there also as they had the existing farms and the experience that banks wanted. Now in 2010 we see a proliferation of farms and rentals on the market as a lot of people borrowed too much thinking it would go on forever. 2007 was the time to sell. I do not know when the time to buy will be again but it certainly is not on the horizon.
I agree with most of what you said there ex agent, apart from the (admittedly toned down) way you keep saying, the BB's did this, the BB's did that. Some BB's did, some BB's didn't.
'The baby boom' is a statistical construct, not the name of a tribe.
It's the vitriolic generalisation and divisiveness I have a problem with, it leads to prejudice. Like this from Matt in Auck - "the f#$## baby boomers [...] the selfish bastards will truly screw their children and grandchildren"
You did not address my post at all ex agent, have another shot.
ex Agent, I don't actually know any 70 year old woman who has bought 50 odd rentals, so think you might find she is an exceptional case. Think more older ones got sucked into the likes of Blue Chip property developments, and Wolly that would qualify as a ponzi scheme!
I do know quite a few who are age group following BB's who have got into property rentals because they don't believe national super is going to be around like those who currently enjoy it and are trying to be self-sufficient for later on. And that should be encouraged as the country won't be able to sustain it's social welfare 'entitlements' for ever.
Oh dear oh dear...and I thought muzza was making progress..."and that should be encouraged"..hehe...think again muzza...the last trend you would want to encourage is investment in property...and I don't doubt you are right that some X&Y are planning on property portfolios to provide for themselves in an age without a universal pension...sadly such a trend will only serve to reinforce an unbalanced turdlike economy. The investment must go into areas that earn wealth...some sort of export type enterprise...
Govt and RB must stop protecting the bubbles to fatten the banks to ensure banks fatten the credit supply to maintain the bubbles to bloat their profits to boost more lending.
Sorry Muzza there are more oldies in rentals than you think. I can think of two more I know of. One in his seventies who owns thirty odd rentals just in Stratford. You can imagine what that did to prices there. Another immigrant in his late fifties who started off with his small home and built up to 36 rentals as valuations went up. He nearly lost the lot when interest rates went up but hung in there but is finding them hard to sell now. The lady from Tauranga was actually in the national papers moaning about tax changes. Blue Chip is small change when you compare it to propery investment and what has been borrowed for rentals. Younger BB's such as teachers,policeman,fireman and nurses have got into rentals as their incomes are not that great. Who could have blamed them.
He's right muzza....you can't blame them...they were and still are encouraged by govt and RB policy...fools if they don't to be honest...especially if they can scoop the rentals now at 02 prices.
All that hoopla about encouraging saving investment into export industry is just so much poop.
mis-direction, sleight-of-hand, deception, say it often enough it becomes true
quote ex-agent 12 Jan, 8:07am
The lady from Tauranga in her 70's who has fifty odd rentals in Hamilton with a $10mill debt on them is not unusual. I know of an elderly man in Palmerston who has sixty plus rentals and this is just part of his portfolio. The BB's have had a huge part to play with the growth of asset values in NZ.
quote ex-agent 12 Jan 11:20am
There are more oldies in (owning?) rentals than you think. I can think of two more I know of. One in his 70's who owns thirty odd rentals just in Stratford.
quote bernard-hickey 2009 video with alison mau
The property price bubble has resulted in ALL the BBs controlling ALL the wealth. I kid you not. Go and watch it.
Ex-Agent. Your mistake is, they are not BBs, they are pre-BB's, yet you propagate the Hickey proposition.
Here's a story on the British 'King and Queen' of rental property investors. Read the linked stories in the sidebar too, which go from them laying down their rules for those aspiring to follow in their footsteps, to the situation where the debt is growing, the portfolio is collapsing, and they're trying to escape without completely destroying values in the area where they bought.
http://www.guardian.co.uk/money/2010/mar/06/buy-to-let-fergus-judith-wilson
Estimated births, deaths by sex: 1876–2008
http://search.stats.govt.nz/search?p=Q&srid=S2%2d6&lbc=statsnz&ts=custom&w=births&uid=686722203&method=and&isort=score&af=ctype%3astatistics&srt=30
Your question? NO. If there are going to be 2 million aged 65+ by 2050, where are they coming from? They arent domestic so the difference (and it's the bulk) must be from offshore-imports in the form of immigrants. This steers towards the probable conclusion that the real problem is an immigration policy problem. eg. a recent epsisode of Border Patrol had a segment showing 2 permanent arrivals 40+ age. They weren't farmers or agronomists or pastoralists. They will be 65+ in 20 years time. NZ is importing the problem. NZ is never going to be an industrial giant so its immigration policy needs revision. I have stated elsewhere NZ should close its borders altogether until the current global crisis is settled and the level of debt is addressed.
Does this help with the sums? There were of course many others who came...
By 1971 the number of English-born in New Zealand had risen by over 66,000 from 1945
Populate or perishSorry iconoclast I got a bit loose there on the definition thing but the point I am making is that people think X and Y are loose with money but it is my experience that the BB's and pre BB's can be just as bad and even worse when it comes to speculationg and borrowing. In my years of real estate selling it was the older people with assets behind them who had the biggest horsepower to bid over the first home buyers at auctions and tenders. It makes sense really as they have worked longer and generally had less debt.
Those of us who have businesses and have a few rentals for additional monies make our contribution, irrespective of the campaign against that run by some on this site. And those who are lower-mid paid but busy professionals like police, nurses, teachers haven't time to own and run a business, so owning a few rentals is like their having a bit of a business. And surely being more self-sufficient by the time of their retirement is better than those getting national super now and expecting everyone else to pay for it, nothing better than bludgers if that's their expectation (I appreciate that some retirees have made good personal provision and don't rely on the super )
Like those professionals who do not get paid that much I can only presume your business is not in a position to pay you much either Muzza and that is why you need to have those lovely depreciating rentals. When you look at NZ the incomes are pretty pathetic on the whole and therefore it is no wonder we have such a strong love affair with property. The problem is the whole industry is built on debt rather than savings and now it is pay back time and that is going to take years to get through. Values will continue to drop until incomes come up in NZ and inflation stabilises.
1) I'm more into investing and supporting businesses now as a Company Director, and actually 2010 was pretty good.
2)The whole property industry is not built on debt, just some. Never have been interested in negative gearing and don't owe anything on any property except a little on one. There are a number who are in that predicament but they are a distinct minority. Similar situation where some people are maxed out on credit cards but actually the majority are 'freeloaders' as the banks call them, always pay in full each month.
3] What is absurd is when people put all their monies into their own home, why live in a million dollar house if that is all you've got? (dead money). And if there is a targetting of investment properties, guess that will simply 'encourage' more and more to have 'bigger and better' personal homes instead, fat lot of good that will do .
Muzza I do not agree with you. Ask any accountant lawyer banker or agent and they will tell you. A large number of PI's have considerable debt on their rentals. Some have used their homes as security so hide it against them. Incomes have always been too small in NZ for people to save for their rentals so a lot have borrowed even the lot. And that is one of the causes of the current downturn in prices.
I agree. Muzza needs to get out more, I have three properties in NZ positively geared with three different banks, each bank manger is startled that I'm positively geared and one of them suggested I was the only PI client in his entire branch in that situation.
I have an interest in a practice which I will not go into too much details except to say the financial profile of all in that practice are negatively geared where applicable i.e PI investors.
Why do you assume poeple on low-mid income are the ones motivated into PI. Why not higher incomes? The main motivation is to accumulate wealth tax free, leverage off other peoples income(rent), that has no relationship to income.
In a small narraw commercial environment like NZ there are not many opportunities to generate serious wealth accumulation unless you are very enterprising through your own business. Tthen you have to be able to sell it/spin it off to release the equity.
Tax and high cost of living are a major problem.
Take a typical small business sucess story earning say 300K gross, say 100k to tax/other compliance costs , 100k family/mortgage/cost of living and possibly 100K to invest per year assuming it an't lock up in working capital. An't going to get very far on that formula given the valuation of investments currently are we.
I know a lot of small business people although that would love to be in that situation.
OK, seems as if more people carry a debt on investment property than I was aware of. Some may of course have been intentional to offset when tax rate went up to 39%, and now with recent tax change they will pay down the mortgage more. Having said that there are figures I've seen that a lot of properties have no mortgage on them (guess they are largely owner ocupied), and the average of those with a mortgage was around $70,000 (am relying on memory here so could be wrong). Would be interesting to see what the figures are for rentals, but as you point out that would be difficult as some have put a mortgage over their own home. However remember that some mortgages on houses are actually to finance people's businesses, in fact quite a lot of small businesses are financed this way.Those who call for a collapse of property prices would find some unexpected repercussions for NZ business, and the government will be mindful of that.
And, yes agree it can be a limited range of ways to get ahead in NZ, but there are some good little businesses out there. I know of one (which I'm familiar with shall we say) where the shop made $300,000 profit in 2010, after all expenses, wages, rent etc paid and allowing for depreciation but not counting provision for tax or any reinvestment of capital.
There are several essential dimensions missing from the "debate" in this thread. A trawl through the 200+ posts and one concludes that none of the respondents here have any progeny, or, for unstated reasons have chosen to remain silent, and therefore unable to offer any feet-on-ground insights. Are all your progeny homeless?, out on the street?, living on struggle-street?, up to their eyeballs in debt? No assets? No wealth? Tranferred or otherwise? Interesting that it has remained un-mentioned.
Since I still don't really understand where iconoclast is coming from or what s/he thinks is missing from the debate, I am not sure how s/he would expect the debate to change if people brought their children into it.
Should a (say) 50-year-old with children be more, or less, likely than her childless twin sister to be ready, willing and able to pay taxes so that her own parents can continue to collect NZS (no matter how wealthy they are)?
Should she be more, or less, happy than her childless twin sister that in fifteen years' time her children will be expected to pay tax so that the sisters can both collect NZS, on the same basis as their parents are doing now (and probably still will be then), no matter how wealthy any of them is and despite the fact that for demographic reasons the burden of funding NZS will be far greater, per child, than it is now for the twin sisters and than it was in earlier years for their parents?
Good questions, Iconoclast. A while ago I also asked who amongst people espousing on this site were finding it tough, and not many put their hand up. My children are still a bit young to answer your questions, but I have nephews who are doing rather nicely and currently building up a property portfolio- having said that one is on a salary around $150k, and he isn't living overseas, nor in Auckland or Wellington
It's an online " trial " wife , to see if a bachelor can cope with the real thing : ----- e.spousing . ...
.... Your computer nags you incessantly , and you're forbidden from " booting it up " , even if it goes down on you .
.. [ e.spousing : derivation of " electronic spouse " . ]
Iconolast/kakapo:
We have told our kids(now mid - late 20's) to avoid two things - kiwisaver, and buying a house unless they are actually going to live in it. Our kids have been investing in shares since they were 10years old and have done very well from it. They pooled their financial resources to buy minimum share parcels in the likes of Contact and Auckland Airport. This working together to help each other financially has stood them in good stead as they have got older. While their peers were buying 'toys' they were buying shares. The MOTH and I were not in the finance industry - we are farmers, but could never see the value in our kids spending their $ on the latest stereo etc when they could put their $ to good use.
The MOTH and I between us probably have an extended family that is fairly representative of a cross section of NZ.
Between us we have 4 siblings - of those 4, one is farming, one owns a rural servicing company (having left school at the age of 14), one owns an engineering importing company servicing the marine industry, and one is a retired bank manager.
The children of all of us are in mixed occupations. Farmers, trades, IT, fashion industry, health professionals, teachers, resource management, hotel industry marketing managers, truck drivers.
None of the younger generation have had problems finding jobs, even when coming back from OE's. Only 3 of them are married and the majority of the rest of them have partners.
4 of them had rental homes by the age of 21 - one had two. None of the homes are sh.t boxes, they are all well built homes in 'family friendly' suburbs. They are now in their mid-20s. They had hefty deposits through goal setting, working long hours in their jobs and a good saving ethic- You won't see the latest and greatest technology in their homes. These particular ones embrace technology grudgingly and you will never see them playing computer games. Some of these ones have also had up to 12mth OE's.
2 other nieces/nephews have bought their own homes - one only last year after returning from 2yrs OE. They are both married.
2 others have lived in the UK for several years incl my daughter who is married to an Englishman, and has kids. My daughter and husband own (with a mortgage) their home.
Two have a share in a holiday property (rent the place they live in) - they say they would probably not get their money back if they sold their shares, but it is in a popular holiday spot and they rent it out and cover costs.
The rest have no financial interest in property ownership. These are the minority.
One is about to set up an agricultural business operation will cost approx $1m to set up.
Some are still doing OE's.
Except for the 4 who are university educated, all have undertaken some form of tertiary study - apprenticeships, industry specific training programmes etc.
3 live in cities - Auckland, Wellington and Tauranga. The rest live and work in the provinces.
Those who grew up in the urban areas seemed to have the most problems deciding what they wanted to do and had problems managing money - even today they have a 'spend now' mentality. In contrast, those who had a rural upbringing (even if the parents weren't farm owners) were/are much better at setting goals and attaining them. They are willing to 'go without' to reach their goals. It's not a generalisation of the urban/rural divide, but it is noticeable in our extended family.
There is one thing that is very strong in the extended family - family values which create a strong sense of family. There are also 4 generations alive today on both sides of our family so there is also a healthy respect for the elderly. If kids know their family history/heritage it gives them a greater sense of where they come from, who they are, and they are much stronger for it.
Perhaps the angry younger generation members on this site need to go research their family history and spend some time living in the country, to workout just what really is important in life. ;-)
Casual Observer it sounds like some of your family have not had a lot of fun while growing up. You only live once and you cannot reverse the time you have lost. There has to be a balance between saving and having fun surely especially when you are young. Sounds like there might be too much emphaisis in your family on money and security and work. What is wrong with electronic gadgets and appliances. What is wrong with playing games. I have a son who has just got his accountancy degree and plays in his code for NZ, he does have some shares but he still tries to catch eels and he plays on his computer. Balance is the key and some of your family do not seem to have it. You can have all the money in the world but still be miserable and boring. We play golf several nights a week my son and I. I hope that is okay in your eyes.
Shorts, the words biggerer,betterer,smarterer,tougherer,richerer and handsomer. Are they new words in the english language as I do not seem to have heard them being used before. My son is a good all round kid who has enjoyed a balanced enjoyable life so far. I just wish they did not have to grow up so fast and move away for work.Unfortuanately he will be moving overseas for work and sport as the opportunities are greater overseas in both areas. This country just keeps driving them overseas as we are so fixated on short term things such as property and not on businesses that could employ our educated children.
I'm not sure I'd call that a representative cross-section of New Zealand. That describes a fairly privileged, middle-class, wealthy background. For a true cross-section of New Zealand as a whole, that sampling would need to include recent refugees still learning English, long-term unemployed (such as those in small towns where a factory or freezing works closed down, and was never replaced by anything), factory process workers (those that still exist), minimum wage service and retail workers, supermarket workers, cleaners, labourers, invalid beneficiaries, the majority of the population who haven't been through any tertiary education. All people who, if represented in any way on this site, are keeping very quiet about it.
Actually ex-agent/kakapo we are first and second generation NZers whose immigrant forebears came here with nothing and had no family help and for whom none, was English their first language. I guess that helps to instill strong family values and a work and saving ethic. In our wider family we have a mix of various cultures, due to partners in my kids generation. While we may now be considered middle class, in no way were we or our kids 'privileged' outside of a strong family ethic.
As for the kids not having a work life balance - they would say they have had a wonderful upbringing. All except two families lived a rural life, so the outdoors was their playground. In their younger days when most of the families had tight financial situations we still had family holidays of the sort that didn't cost a lot -extended family camping holidays at areas such the beautiful Te Urewera National Park, Pureroa Forest, tramping trips doing great walks such as Able Tasman, Waikaremoana etc. Extended family groups also sharing hired holiday homes when the kids were slightly older and now 3 of the families have beach homes/sections where tents a plenty can be found in the summer. In later years some of the families have had boats so water skiing, wakeboarding have been added to the list of achievements. (This summer some of them decided to see if you can 'wakeboard' using a snowboard, complete with snow boots - you can!). Those that live near a waterway can frequently be found down there with a boat after work. Hunting and/or the great outdoors are the great loves of my kids generation. My son turned down the opportunity when in the higher end of high school, to play regional representative sport, because it would interfere with his hunting.:-) Several of the kids have done well with sports and other 'hobby' pursuits. We have a henake that is put to good use and smoked eel is a family favourite.
One of our BB members has faced redundancy, some of the kids have student loans, and all the businesses have been built up from nothing. Nothing wrong with gadgets ex-agent - I'm considered the family Nerd and in the wider family there are definitely the geeks. With my kids all living in different continents for more than 4 years it was thanks to technology that we were able to keep in contact and keep the family ties. During this time the MOTH and I have got to spend a significant part of each year offshore mixing family and leisure. He retired at 44 and to break the routine will on occassion take a paid job offshore on contract for a few months.
I am the only BB to have had any tertiary education - and that was as a mature student and no one in the generations previous to me had tertiary training.
All the neices and nephews (incl our kids) except one who is still at Uni, have had OE's (not to Oz) and worked offshore for varying periods from 6mths - up to 4 years, so they have hardly had all work and no play. Two of my kids generation are over 30 (just) and the rest are under 30yrs old, mainly in their mid 20's. Some of the kids held minimum wage jobs while at school.
Our kids have cashed up almost all their shares - they got out at the top and are now well set up to persue whatever they want to be.
Our motto to our kids - you can be whatever you want to be, if you want it bad enough; follow your star, BUT you mustn't forget to have fun along the way. Their motto is more simple Work Hard, Play Hard. Some of them have had the most amazing experiences, some still are having them.
you said:that sampling would need to include recent refugees still learning English, long-term unemployed (such as those in small towns where a factory or freezing works closed down, and was never replaced by anything), factory process workers (those that still exist), minimum wage service and retail workers, supermarket workers, cleaners, labourers, invalid beneficiaries, the majority of the population who haven't been through any tertiary education. Except for long term unemployed and invalid beneficiaries, I could show you someone who has at some stage in their lives meet one or more of your criteria above, with in my wider family. Just because someone is successful now, doesn't mean that they haven't had a few bumps along the way.
I applaud you and your son golfing together - life is not just about money - take money/material assets away and what have you got - family and friends, they are the true gems in life.
When you start on zero assets the only way to build a good life is by hard work and saving. There are plenty of ways to have a good balanced life that doesn't involve spending large amounts of money along the way. As I mentioned we are a 4 generation family - as all my grandchildren's great grandparents are still alive there have been no inheritances. I have been told our family is a lucky family as our kids have had a such interesting lives, especially through their travels/pasttimes. You make your own luck, life is there to be lived,but first you must build the foundation.
I am duly impressed, your family seems very well sorted financially, but it leaves me no clearer as to whether you do or don't think it is OK for people now coming up to retirement to expect financial help from younger people so that they can maintain their living standards in that retirement.
BH will enjoy this...... http://www.marketoracle.co.uk/Article25546.html
Thanks Muzza, Kakapo, and Casual Observer. That's what I was looking for. My post this morning was an indirect invitation to ex-agent (a BB himself) who enthusiastically supports the Hickey proposition, citing anecdotal evidence of his greedy clients, without giving balance to the debate by citing the case of his own BB, X, Y and Z dynasty, which one can only suppose would contradict his position.
Yep, referring to Wolly's reference above, I been reading John Mauldin for a while and he makes some very good analyses. Would appear that if NZ maintains a good immmigration policy we should keep a reasonable population demographic which will be needed to avoid longer term stagnation and decline. Certainly those who sustain theories about the impending decline of USA, should have a closer look at demographic patterns and realise USA will be better positioned than most.
And your evidence about immigration to USA v NZ is???
Immigration is more than just sustaining '' a mouldy old property bubble" (what a value statement!), it is about having the demographic profile to sustain the whole economic growth which is needed if you wish to maintain expenditure on health, education,welfare especially for the increasing elderly component. Did you read the link Wolly gave to John Maudlin, it is quite instructive NZ is well positioned and attractive to have a good managed immigration policy.
M d M: I believe in the basic tenet that younger generations should be prepared to take care of their elders in their old age.
Give the young the choice - have their parents live with them and care for them as it used to happen, and does happen in Asia, or pay taxes to enable their elders to live independently of the young generation. Given the choice I would say the vast majority of young would be happy to pay for them not to have to live with/physically take care of their parents. Such is the way I see our society today.
I am a BB or some say generation Jones. I could have around 15years as a taxpayer before I collect any National Super, so it will not only be the young contributing to my super, so too will I, as a taxpayer for the next 15 or so years.
I don't think (hopefully) that theres many young people who don't want to take care of the elderly, sick etc down the track / now...if this is the case, then we as a society are in big trouble. Times change (quickly) and it appears that a fair few people coming up to retirement will rely on super annuation to get them through...over their lifetime its been the norm and is still expected. Fair enough, can't change the rules at the end of the game.
I've seen on BH blog in the herald alot of elderly people saying that I've paid my taxes etc all my life and contributed, and now its payback time. I don't disagree with this, but what about the future punters who will pay taxes, work and contribute all their lifes (as well) and in return will get zip? Not much thought goes into to this aspect.
May be the paying taxes and contributing line wears a bit thin (not because it isn't true), but because it's just another thing that has to be paid for out of their own pocket? The rules have changed massively for younger generations...but not to many people acknowledge this fact. For those who choose a career path that requires a teritary education the reality is simple in this low wage economy. Study, incur debt, work and pay off the loan, work and save a deposit, try and buy a house, have a kid or two. The later part of the puzzle doesn't happen during their 20's as it use to....it gets pushed further and further out....mid 30's is now the norm. This has its own complications which are very relevant to this debate.
Explain to the younger generation why after paying taxes all their lives they wont they get anything - why is this going to be fair?
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