"only choice to leave the country".......and go where exactly? I know houses are pretty cheap in Detroit but who wants to live there?

Of course I agree with what you are saying though you didn't go into the machinations behind the expansion of bank debt which underpins the property boom and how it's all been borrowed from overseas.

Perhaps repost your list of 10 ideas for reform and who knows what might appear from further reflection on that?

Bernard,

I cant thank you enough for getting the message out there into the mainstream media - that is the first step, ACKNOWLEDGE a problem exists. Most of what you say is true, if its a bit sensationalised thats cos you have to do that to get noticed - its hard to appeal to people's intelligence when they are either asleep (lots of Gen X/Y) or hostile (boomers).

So to all the boomers out there. Either give us a fair go or look forward to a future where your only companions will be octogenerians with English accents, Chinese students or tourists.

Hey Bernard, thanks for telling it like it is.

I've worked out that my wife and I could own a house in Auckland OR have a family. We can't have both.

Although NZ is and always will be our home, probably no matter how financially squeezed we get.

Maybe the swine flu will do us old coots in and save the day!

so tell me Bernard,what good is the increased value of our homes to us "greedy" boomers.Surely you`re not suggesting the boomers are capitalising their homes to spend up large.Seems X and Y have spent ,not saved,had their trips after recieving a tertiary education ,that the older boomers didn`t have the chance to have .Their parents had been of the depression generation.So the boomers left school ,got jobs,married,had family,saved by mortgaging themselves into a home.Now the greedies are calling them greedy.Surely a bit of a cheek.

That first house wasn't as easy to get for us boomers as X & Y's think.
My first house was a 2 bedroom flat in Mt Vic (when Mt Vic wasnt as desirable as now. The house beside my Flat was a Black Power Pad that burnt down a year before I arrived, the Island Family behind us killed pigs in the backyard when they had celebrations and the resident at the half way house unsuccessfully tried to kill himself in the backyard)
I paid 20% on the first Mortgage and 22% on the second.
I had a flatmate to help pay the mortgage and had $40 a week to live on.
You didn't walk in to high paying jobs in your 20's because pay was based on seniority.
Didnt need much because there were few Cafes, no cell phones or ipods.
Cars cost a fortune and you didn't grab-a-seat for a cheap holiday.
You could go to Fiji to buy a stereo and pay 140% duty and 100% sales tax on it when you brought it home.
Entertainment was choosing which of the 2 TV channels to watch. But at least everyone knew what program you were talking about next day at work.

Bernard - nice letter to X and Y, how about you do one to The Boomers - but in a way that is not going to be divisive, yet help communicate the need for change. Some info below.

"The discussion progressing here underlines this observation, yet again. We need change that does not embitter two generations toward their parents and that generation. If X & Y don't have to leave NZ to get ahead because they can stay here with high-wages derived from a higher value-add, broader economy, then maybe they'll not also begrudge the tax to be paid to allow "˜boomers' appropriate retirement, who funded X & Y's education and healthcare. BUT, who don't seem capable of a suitable "revolution" in mindset, and trust, to allow policy change that would see high potential X & Y'ers prosper - hence my term "˜economic cannabilisim', which in the end may also devour the future of "˜boomers'." See:

http://www.interest.co.nz/ratesblog/index.php/2009/05/28/opinion-this-bu...

"Will maintaining the 'status quo' change things for the better, for your children - Gen X and Y?" See:

http://www.interest.co.nz/ratesblog/index.php/2009/05/19/opinion-the-cas...

"I'd rather see this leave NZ than the talented X and Y folk that can't make life work here." See:

http://www.interest.co.nz/ratesblog/index.php/2009/05/19/opinion-the-cas...

"I think a good few "˜boomers' would see the sense of appropriate change as well and would support it. No one wants their kids living at home forever, or simply moving offshore as soon as they can because they have zip future here. The debate would tend to gravitate toward that around the generation gap issue sure, but, the solution IMHO is rebalancing the economy, and Matt, there is a raft of appropriate stuff on this site, that could taken as the core issues. [Mainly in the things I say, only kidding. Wish I knew how to do those smiley things, but at 94 it's struggle just seeing the screen.] See:

http://www.interest.co.nz/ratesblog/index.php/2009/06/09/opinion-why-wes...

Cheers, Les.

PS - sorry it's a little linky....

Bernard, despite being a 'boomer' I am in general agreement with your analysis about a coming clash of the generations. Indeed, back in 2006 in an article on the insanity of the New Zealand housing market, I offered the following lamentation:

"Of course, the irony is that a huge proportion of young married couples, as well as single people who would like to buy a modest first home, are now excluded by the 'rampant house price inflation phenomenon' that has brought so many 'smiles on dials' to those already on the housing ladder. All these new 'untouchables' - whose only shortcoming was to be born a few years to late can do - is to think and talk about a house, because they have scant chance of buying one!"

Isn't this the essence of the problem, a situation in which boomers simply gained an illusory prosperity - because their tenure coincided with conditions of exponentially 'easier & easier money'. The final abandonment of 'sound money' had surely been signaled by Richard Nixon's cessation of gold convertibility in 1971 and, ever since, we have seen supplies of fiat currency grow dramatically round the world. Naturally, this tsunami of 'money' has found its way into real estate and, as always, it was those who could access the new money early who did well. Those born much later were, of course, excluded because house prices were bid up to ridiculous multiples of income before they had an opportunity to buy and the 'smiling boomers' contented themselves that they had become rich. In reality, if New Zealand were getting richer, then the ratio of house prices to income would have fallen to reflect the genuine growth of purchasing power being enjoyed. Sorry fellow 'boomers' - despite the nominal increase in our house prices we have actually become poorer and that is why we must mortgage our children's future to pay for our pensions.

Surely, the real answer will be found in returning to some form of 'sound money' and, although it is probably not practicable to return to a formal gold standard, I suspect a type of precious metal backing for currency will eventually be needed. Sound money would be far more effective in ending our insane obsession with property than any capital gains tax and it would, of course, make it much more difficult for politicians to make spending commitments that cannot be afforded - except by indenturing the next generation. Small wonder that politicians and bankers fear gold!

Hi Bernard i notice you didnt mention generation Z,When the baby boomers move on ,the new blame game will be the Zds bad mouthing the XYs ,so whats your point God forbid that any red blooded Kiwi has to depend on a pension,your whole web site is directed towards self suffiency and at least you should be encouraging self suffiency not berating the baby boomers.PS i hope you wont be depending on a pension handout.

Jimmy

First home buyers are rarely on the Median income and rarely buy Median priced houses. They buy the best small crappy home they can afford in a crappy suburb. Save every cent, do without then 5 years later buy a better house. (or hit up their boomer parents for money)

Jimmy

Your reference to crap houses just confirms my view about X & Y's.
Live for today, make no effort, bugger off it get too hard.
Too proud to have to live in a crap suburb.

You must remember that while we have the student loan to pay off and over priced houses to negotiate the reality is that when we become pensioner we will not be able to rely on the nanny state to look after us.

Gen Y and X if you are counting on getting a pension when you turn 70 - think again - IT WILL NOT HAPPEN !!!!!

Thanks Bernard,

Finally a voice of sense thats willing to tackle this subject head on.

Thats why i'm in the UK. I'm not planning on coming back until i can afford that little slice of NZ. I would not have been able to afford a house if i had stayed in NZ, i can afford to save for a house in less than ten years being here. If i was in NZ i would be a slave to my house!! I'm all for a CGT on property.

Maybe you can do something about the student loan debarcle as well.

Babyboomers are now in their 50s and 60s their children have long left home (except for those in their twenties still living at home) so working for families isn't helping them, its helping gen XY. Stopping contributions to the Cullen fund makes good finacial sense as for John Key promising that superanuation payments/age won't change, woopy doo he won't be around in 10-15 years time when that decision will be made so he can make all the promises he wants, the fact is there won't be the money and we allways follow Australia's lead and they have raised the age allready.

Maybe you could tell us where we are suppose to go to? Australia, Canada, USA, Europe, Japan? they are all facing the same problems. The golden years of babyboomers are coming to an end, they have had their time in the sun. Retirement isn't going to be easy for them because Gen X are fighting to have their ow time in the sun.

Good on you, Bernard. Stir the buggers up with some cold hard truths. We are going to lose the best and brightest of our X & Y generations because of the selfishness and greed of some in the "Boomer" generation. As a late 'boomer (1960) I don't want a "Gold Plated" superannuation. If anything, I want the government to nick off, and let me plan my own life, without them blundering in with their "we know what is best for you" attitude. And a good start would be to scrap the idiotic vote buying bribe, "Working For Families", which is costing us a small fortune, to favour a select group. Scrap that, and the tax cuts originally promised are affordable, and given to ALL !

Anyone who can't see what the baby boomers have done to this country must be blind. They have bought multiple properties cheap and rented them out. Now rents are ridiculous for what they are and houses are overpriced for what they are. I'm off to Indonesia where I can live cheap.

There is only one solution, NZ needs to work out a way of earning more from overseas. Whether it be exporting stuff, or exporting knowledge, or tourism.That way we can actually afford to pay what we are currently enjoying. When we spend more than we earn, it will eventually catch up on us.

Also the current tax system is inadequate at fairly taxing people because the rich have worked out ways of tax minimisation, using trusts. These rich people are however the same people who make the major decisions, so they won't be wanting to chnage things the negatively affect them.

An epitaph for the 'boomers' and their bankrupt ideas from William Playfair's 1805 masterpiece - "An Inquiry Into The Permanent Causes Of The Decline And Fall Of Powerful And Wealthy Nations".

"As in the hall, in which there has been a sumptuous banquet, we perceive the fragments of a feast now become a prey to beggars and banditti; if, in some instances, the spectacle is less wretched and disgusting; it is, because the banquet is not entirely over, and the guests have not all yet risen from the table".

Rob : There is another solution. Reduce the size of the government. Labour expanded the non-productive gov't sector by 50 % over 9 years, 1999-2008. The central government controls nearly 40 % of the country's GDP. Add in local councils, and we're near 50 % of our GDP into the unproductive bureaucracy. No wonder our GDP growth stalled under Labour, and on every economic factor Australia surged ahead of us. We wallow and wail, whilst they grow and prosper.

Bernard

I'm 5 years older than you (and therefore a BB) and you are so FOS. In the 1930's property ownership was an aspiration, now you act like a whinging 5 year old thinking that property ownership is a birthright, strangely a lot of gen y's will have BB parents who will (if not seduced by socialist propaganda) pass these rights to their children, Property (of all types) will stay at the value of those who will shell out the readys to pay for it (and as for the retard above who complained about our cold houses...spend a winter in Wisconson)

The point is that gen x and y are not getting what they deserve, they are getting what they have settled for, they have made their choices, participated and enjoyed economic growth so to now transfer the blame to some sociologists generalization of an age group is simply populist drivel.

Neven

Rob - as Roger says, that too - even bigger pie! There is lots that can be done that would mean we do not have to sink into generational clash, hatred, war. Don't fergit y' Mum and Dad ain't the enemy, likewise, y' kids ain't the enemy - dull thinking is, the enemy of both.

NevilleWC : you mean Monty Python's " four Yorkshiremen " skit. 'Ee by gum, we 'ad it tough. There were 120 of us living in shoe-box in middle of road !

Les : we produce plenty of GDP per head of population. If only the pollies kept their stickie fingers off it, there'd be more for them that do produce ( individuals and businesses ), and we would grow the economy too. Make the "pie" bigger. (not Georgie Pie, of course. )

NevilleWC - hey good points man
although I think Gen x and Y has been shafted up to a point, you are quite right that there are variations within each generation

"As people get older they generally get better off.
A struggling 25 yr old sees a well off 55 yr old but does see the struggle of that person when they were 25."

True- My aunt who is an early boomer (she's now 61) had several kids in her late teens and had it really hard for a good 15-20 years. Her and her husband now live a nice,comfortable life which they worked bllody hard for.

Also I like your comments about the fallacy of predicting futures. People hardly ever get it right.

I always love Bernard simply because he keep saying thing in negative way and half story. I always come to read Bernard's news first and then go to other sites to read same story in different way or whole story. It may be silly, but I love to do it.

Being a baby boomer lived in overseas for many years, I should say you have every rights to say whay every you like to say, it is democracy even though it may no true.
My experience from my parents, my generation and my daughter is the housing is getting easer and easer, beter and better.
My parents saved seven years, purchased a 2 beds(74m2) as FH;
I saved 5 years and purchased a 3beds(94m2) as FH;
My daughter saved 3.5 years, bought a 3beds(120m2).

So my thought is life is getting easer. Sorry Bernard

there are gen y's living in tents in the bush because they can't afford a flat.

I agree with Bernard, about the issue, but I agree with others ie its not going to be that easy to go elsewhere....this problem to a greater or lesser extent is in other countries as well...however the Cullen fund could have blunted that pain, instead the BBs in and supporting National just did for that.....like duh....

As the end tail of the BBs, and having bought my house in the late 90s, I consider Im lucky....As Bernard says, house prices have gone up tremendiously....my house is now easily twice what I paid for it 12 odd years ago....I couldnt afford this house today even though my salary has gone up substantially, so X and Y are miles behind, yet talking to them they are paying rent at crazy levels for a similar house in "cheaper" areas.....

I had a semi-subsidized education, many older BBs seem to have paid little if anything for their tertiary education yet now they wont pay for the next generation, even though there are more BBs than X and Y....so sorry I agree with Bernard, it isnt fair...

It gets worse though, as Bernard says the BBs have substantial political clout and guess what as they age Grey power is only going to get stronger politically and their demands for healthcare etc more strident which means even more costs get dumped on X and Y....

And of course the BBs grew up and matured in times of plenty; plenty of oil, food and jobs....this changes substantially in the next very few years....energy is about to get very expensive....crippling even....and those living in the cheaper areas, areas that usually mean further commutes are X and Ys....

With less energy jobs are going to get and stay scarce, they are also going to be less well paid.....all this on top of crippling tax paid to look after the retiring BBs....many of whom have saved inadequately....

However I think X and Y will get the last laugh, right now BBs assume that their rising property portfolios are going to appreciate, so when they come to sell for their retirement they will be well off......trouble is it will be supply and demand, the BBs are more numerous so they will be selling excess property into a limited market and all of them will be (relatively speaking) selling at once, prices will drop substantially.....too many houses, too few and poorer buyers.

NevilleWC: ""Which forecast in 1975 predicted 2009?" M. K. Hubbert predicted peak oil around 1998~2003 decades ago....so there's one thats going to hurt...

"NZ found vast reserves of oil"....even if we became another Saudi and could do 9million barrels a day, we alone couldnt keep peak oil at bay. In fact since it would take 8~16 years to get to 9million a day, getting back to peak oil (which was around 2003~july 2008) aint gonna happen....The statistic is, to keep oil where it is now we would have to find another Saudi every 4 years....so far there has been only one Saudi....and then was "found" about 1948...no other substantial discoveries like Saudi, the best was the North Sea which is also now in serious decline....

regards

Thank you Bernard. It's putting what we know into words and letting others know how the X and Y Gen feel about the situation. This is why there were so many leaving overseas.We export human capital. The BBs did have it sweet, compared to housing today (while I sympathise that it was difficult back then). Still, I do find it difficult to understand how the BBs will share their assets other than passing them on to family. We are affected by small market factors and they're not going to make people sell off their investment properties - which would be seen as anti-capitalist, or dare I say something else. However, if something is not done, then there will be a lot more people leaving...

Neven911.. I wouldn't have thought it was necessary to start calling people FOS, when he is just trying to make a point and push from an angle. X&Y are not necessarily whinging. X&Y have accepted that fact that we have paid for half of the BBs public health bills and super.. and will continue to do so, because BB are our Mamas and Papas. And when it comes our turn, we'll pay our own way privately too. If I FO today, I will get more money and better cheaper housing. I'm staying to pay off the bills. Have some respect, or did they not teach you that in the 'old' days. Keep going, Bernard.

Steven - whilst I generally agree with your comments we need to be a bit careful not to overgeneralise.

You say:

"And of course the BBs grew up and matured in times of plenty; plenty of oil, food and jobs"

Lets not forget that for periods in the 70s and 80s unemployment was high - over 10% at times if I am correct .Quite a few baby boomers also lost out when the sharemarket crashed.
Also NZ was a pretty ugly place IMHO in the 70s and 80s - very inward, it was all meat pies, DB beer, TAB etc. not much diversity etc

I think the issue that many people are missing is not that the BB's had it easy, but rather that its the current environment that is of concern. No one doubts that BB's found it tough to buy housing, had high taxes and did it tough, nor that Gen x/y want it now. The issue though is that the advantages the BB's now have are too one sided in all respects, and their are more of them.

Its not just about the house prices, the lack of attention to the super age, but also the fact they will use their power to maintain the status quo. Unlike previous times the bill for the previous generation is getting bigger while those who can pay is getting smaller...we just ask for more fairness.

And sure while we can't always predict the future, the fact is the BB's are getting older, more expensive and going to cost more and the taxes are only going to come from one place. And if we decide we don't want to pay then why not. Somewhere in the world there is always another option.

Bernard,
Well done. It's good to see this subject reaching the mainstream.
I don't know whether you've read this, but if not I strongly suggest it explains the reasons for our current situation, and suggests sensible solutions.

It does require a significant paradigm shift, and so an open mind.

White Paper on All the Options for Managing a Systemic Bank Crisis by Bernard Lietaer
Center for Sustainable Resources,
University of California at Berkeley
http://www.lietaer.com/images/White_Paper_on_Systemic_Banking_Crises_fin...

I have tried to get this message into government, but unfortunately my attempts have failed. The response I received unfortunately reflected the difficulty in understanding this unless it is approached with an open mind, and not with the restriction of current thinking.
An opportunity missed :(

When Bernard Lietaer's idea becomes mainstream we might have a chance.
Steve

Bernard, you were mentioned in a question in parliament today:

http://www.scoop.co.nz/stories/PA0906/S00383.htm

Hon David Cunliffe: What does the Minister say to the 73 percent of New Zealanders identified in a Research New Zealand poll who think that his decade of deferrals to the New Zealand Superannuation Fund in Budget 2009 has jeopardised the entire future of superannuation; and does he agree with Bernard Hickey that generations X and Y need to wake up to the massive intergenerational theft that is happening before their eyes?

Hon BILL ENGLISH: I would tell them that the intergenerational theft occurred when the Labour Government mismanaged this economy so badly that it left us with a legacy of 10 years of deficits and a doubling of public debt even after the best efforts of a competent National Government.

There seems to be some agreement that high house prices create inter-generational unfairness but that a land tax/capital gains tax are in political terms "dead on arrival" due to baby boomer numbers.

In these circumstances there may be a number of ways to achieve the same goal of reducing house prices but in a more politically palatable way.

One way might be to severely and permanently clamp down on credit for housing. This could be done by empowering the Reserve Bank to set low maximum household income to debt multiples (the Financial Services Authority in the UK has recently suggested this in a report), maximum loan to value ratios (i.e. bank's can't lend above 85% in any circumstances).

In conducting monetary policy the Reserve Bank could, in addition to targeting inflation, be tasked with identifying and preventing bubbles in asset markets (e.g. house price bubbles).

The above could be achieved as part of a package in response to the financial crisis and is consistent with proposed changes elsewhere in the world. It also appeals to peoples seemingly innate comfort with tinkering with an existing system rather than trying and bring in more radical changes.

The Govt could remove the tax treatment for losses as per 'Right On's comment above. This is politically tricky. But could the Govt set up a an independent commission to look into the 'fairness' of this tax treatment (would a labour/Nat cross party consensus to abide with the conclusion of the 'expert commission' provide cover for this?).

Finally, there may be a number of smaller measures that could be taken which would reduce the cost of a 'new build' and consequently all housing (within the confines of good urban planning and without trying to create too much sprawl). Are there things that can be done to reduce material costs? labour costs in construction? relax zoning? increase maximum building density? Have central govt pay infrastructure/reserve contributions.

All of the above are small individually but may combine to have desired effect in longer term.

Because house prices have been going up the baby boomers are transfering wealth from generation x and y..????? AND the term theft is used...!!!!

I find this report a little bit flakey, in my view.......

I have read a few Demographic studies.... The baby boom generation have a huge impact on demographics...Bernard mentions the impact of that on Pensions ...but not the possible impact on housing, in the future..??

Then there is the impact of an inherently corrupt Monetary system... Where money is created ...just like monopoly money... Each year more and more money is created, which depeciates the value of money already in existence..
You might find that over the long term house price growth simply mirrors money supply growth.

Then there is the impact of a really unfair taxation system ... PAYE personal income tax is a terribly unfair form of taxation.
This is part of the reason for the long term trend of concentration of wealth in fewer and fewer hands, in the western world.

Then there is the huge growth in non tradable inflation... Apart from monopoly industries, this is symptomatic of the massive growth in non-productive government type agencies and local bodies.
I kind of get the feeling that alot of these agencies have morphed from simply being regulatory bodies, providing simple services, into Money hungry Businesses.
How much has the cost of a passport gone up in the last 20 yrs..?? A drivers licence..?? COF for a truck..?? Council rates..?? Power cost..??? ACC levies..??
AND this is not even tax..

And then there is our incomes.... Has NZs' average income kept up with things..???
How does it measure with OECD ..??? How does it measure with money supply growth..??

I could go on.....

If we want to talk about transfer of wealth.... how about the $10+ billion that gets shipped offshore each year.. this is the interest payment on our debt..and the profits that foriegn investors make....

There are different forces , over the last 20 yrs, that have lead us to the present.
NZ has not coped with Globalization very well, ..in my view.

To simply blame things on the baby boomers... because they buy houses... is missing the underlying issues...BIG TIME...

To finish... Does anyone know of anyone who has managed to save money in the bank, earn interest... and then live off those retirement savings...????
The baby boomers have learnt that investing their money in a bank ( or a finance company) is a losers game... that over time it really does lose its purchasing power....
They have learnt that Real Estate is the best medium to protect their wealth.
There is nothing wrong with that.... is there..??

Right on - yep, that's a major problem. We should deal with it head on and not keep skirting the issue because it's not just damaging the prospects of X & Y when trying to buy a home, this 'subsidy that got away' (from 1984) as I call it, also warps and distorts our investment behaviours in general and what's worse actually weakens our core wealth generating sectors - the very sectors one assumes it is meant to protect and support:

Capital gains tax to aid young farmers

http://www.ruralnews.co.nz/Default.asp?task=article&subtask=show&item=14...

"It's a long-established tradition among dairy farmers that they don't make a profit," said Prof Locke.
"The return on assets was a negligible 2 per cent, but the appreciation in land prices had been significant.

"Now we're getting to a point where land appreciation just isn't happening, and that, coupled with growing problems in servicing debt could lead to a real shakeout in the sector." See:

http://www.interest.co.nz/ratesblog/index.php/2009/05/27/fonterra-slashe...

"With land prices no longer buoyant, the days of low-margin sheep and beef farms getting by on capital gains from land values alone are over for the time being." From:

Change or lose out, meat industry told

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1058...

You see, untaxed capital gains in what is an 'asset tax haven' (New Zealand) is very much part of the business model supporting our core sectors and those very influential sectors that support them.

I don't like the agression and divisivness that is getting into this debate regarding the future of X & Y being munted by the Boomers, however, one can understand the forceful tactics that seem to be coming into play and the frustations behind them, because the forces ranged against change of the status quo are very, very significant.

Good luck with the bidding!

C - useful contribution. Dismal eh, but Bill E did have a point. Apart from the enetrtainment value of that whole article (it was better than going to the zoo!) I found this exchange quite interesting:

"Hon David Cunliffe: Why, if the Minister is concerned about the current account deficit, did his Government axe the research and development tax credits and reduce funding for New Zealand Trade and Enterprise, both of which would have assisted New Zealand firms to innovate and gain new export markets?

Hon BILL ENGLISH: The previous Government had the mistaken notion that a Government could buy its way out of economic problems by applying taxpayer subsidies to whatever the problem was. Actually, those days are over. Overseas lenders will not lend us the money to do that. From here on, New Zealand has to earn a living, not pretend it is earning a living by buying it with taxpayer subsidies."

No pithy comeback as we might have hoped. Anyway, I had been led to believe it was axed because Bill English and co. thought it was too complex to administer and it would be a rort for tax accountants and lawyers - so it ended up being reconfigured into some election promise about tax cuts. (Remember them....)

"New Zealand was once at the bottom of the OECD in terms policy support for R&D spending, this change will put us back in last place. At a time when other countries such as Australia are about to increase their support for innovation New Zealand firms will once again be at a competitive disadvantage in this respect." From:

One step forward, two steps back, 8th Oct 2008, at:

http://www.mea.org.nz/pdfarchive.aspx#pressreleases

Other countries can get R&D tax crediting to work, why can't we?

I guess if Bill E actually saw the R&D tax credit as buying our way out of economic problems by "applying taxpayer subsidies" he'll soon be onto those who "pretend it is earning a living" by simply holding property assets for capital gain - and paying no tax on that unearned income. Best beware, eh?

I sometimes think some policy is made deliberately for the purpose of thwarting any ascendency of a new more effectively shaped and dimensioned economy.

I wonder?

(PS - check on through that Scoop article supplied by C and see if you can guess Bill and co's formula for structural change of the deficit - I think you could be right, yet again, Iain Parker. It's dumb, double-dumb.)

BERNARD
Unlike other esteemed contibutor on this blog I am not well versed with economics and I must declare that I am not a speculator or a property owner as people who give differring opinins are often attcaked personally. I see things from a real life perspective,average citizen.
This is the worst ever piece of financial journalism which diverts attention away from the real probelm and is nothing more than scapegaoting. The is extremely divisive and based on overgeneralisation.I do not suggest that some of the issues highlighted are real but the approach taken to highlight it is like dirty politics. It will increase the traffic on this site and perhaps as the house price crash is not attracting enough attention this is an easy populist way to maintain a high profile. The systems shape people s behaviuor, do not blame individuals,it wont achieve anything. In scientific reaerch one can control any number of variables except BIAS, and many so called experts are only seeing things that fits their view of the world. is it just coincidental to see Bernard on ASB website. it is sad to see to degrade the whole geneation ,Baby Boomers , I am not a baby boomer but I find this article is over the top. by blaming BB you are not empowering the youger generation. Ian raise good points and hopefully ypu would respond to that

"Effective asset taxation"

Les, sounds good but will it work?

Shifting taxation away from internationally mobile bases like skilled labour and corporate profit and moving more towards immobile bases such as land won't really advance the tradeable productive sector.

Tax is a cost that tends to be passed on; hence the transfer in tax will merely circulate throughout the economy, drive up local inflation, with increasing expenses coming back to hurt our tradeable productive sector. Ultimately, damaging our international competitiveness.

The most effective way to reduced taxes overall is to increase overall incomes. The more we all earn, the larger the tax-take, hence the less we all have to pay to maintain current levels.

To achieve this we must increase local productivity and offshore sales.

Profits hinge on good leaders - New Zealand loses $2.6 billion a year in potential productivity:
http://www.stuff.co.nz/business/industries/2521480/Profits-hinge-on-good...

Property investment isn't the problem; it was the excessive short-term offshore funding that enabled it to bubble that created the current imbalance. Property investment should be treated equally but the best way to deal with a problem is to attack it at the core.

You say: "You see, untaxed capital gains in what is an "˜asset tax haven' (New Zealand) is very much part of the business model supporting our core sectors"

Yes, but as you can see, those day are now gone. By the way, why was capital gains untaxed? After all, it is taxable in New Zealand.

Hi W. Kunz,
Yes, I've seen that video. As you may have guessed the idea of sound money is a pet subject of mine :)

roelof.
"Then there is the impact of an inherently corrupt Monetary system"¦ Where money is created "¦just like monopoly money"¦ Each year more and more money is created, which depeciates the value of money already in existence..
You might find that over the long term house price growth simply mirrors money supply growth."

I believe you do:
http://neuralnetwriter.cylo42.com/node/340

jimmy : without high immigration, who is going to milk all the cows we now have ? Bravo the el cheapo Filippino slaves !!!!!! Mabuhay.

Well, I'm Gen X and I worked bloody hard from a young age to build up a property portfolio while most my mates were tripping around the planet. I always lived very cheaply, had cheap cars and never took on any debt (credit cards, HPs, etc) other than loans for property. I've now travelled extensively and own a very nice house and a nice car, but I waited until I could afford those things.

Bernard - "The dream of baby boomers is to keep buying rental properties and renting them out to generations X and Y" - myself and many other investors I know are Gen X, and our baby boom parents are living in retirement villages with their equity now in fixed interest.

"Do you realize they voted themselves Working for Families so they could have children and afford to pay the high mortgage costs of their borrowing to buy property?" - ummm, I think it's Gen X & Y that have young kids and are benefitting from Working For Families, not baby boomers!

"Did you know you will be slaving away paying high taxes in your 40s and 50s to pay for their pensions and health care?" - It's been well known for years that the pension won't be around in the future as it can't be afforded, which is why some of us got off our behinds and have been building our own pension plan.

Every generation thinks the previous generation somehow had it "easier". It doesn't matter what laws, taxes, subsidies etc are introduced, the same people will be wealthy and the same people won't because it's more about individual attitudes than anything else. It doesn't matter what the rules are, it's how well you play the game that counts ;)

P.S. I think this is one of those stories which is more about generating clicks to the website than anything else. And still I couldn't resist posting twice... damn it!!

Wow

Some rich comments coming from the BB here, glad we have inherited the debt based consumer economy, i guess i should be thankful.

Left NZ for the very reasons Bernard suggests. Impossible to save and impossible to get into the housing market.

2 years on, I have my student loan paid off, and enough for a 20% deposit on a house.

Give it another couple of years, and I will be in a position where I can afford to go back.

There are a lot of comments about how there are Boomers doing tough, and who have done it tough. This is true, my parents for example. Plenty of people in their 50s and 60s who are renting.

There are also people of my generation who have managed to get investment properties and have saved every single penny to do so. They are now rich, and think that everybody can do the same - despite the fact that they are now part of the problem, with their rapidly rising house values.

The point is not a generational one - although that is a worthwhile way to stir debate. There are losers and winners from both groups. The problem is that it is a system that locks out those unable to acquire or hold onto enough wealth to get into the property bubble. It's a perverted system. But Labour and National and ACT and United Future all hold to the same neo-liberal economic paradigms, and all endorse it. Not Labour are given ultimatums by their voters will we see a change (the right will never challenge the current system, and Labour likes how things are).

Murray Says:
"Well, I'm Gen X and I worked bloody hard from a young age to build up a property portfolio while most my mates were tripping around the planet. I always lived very cheaply, had cheap cars and never took on any debt (credit cards, HPs, etc) other than loans for property. I've now travelled extensively and own a very nice house and a nice car, but I waited until I could afford those things."

Thankyou, a wise, sensible Gen X person wiling to stand up on his own 2 feet, and take responabity for his own life...

"Every generation thinks the previous generation somehow had it "easier". It doesn't matter what laws, taxes, subsidies etc are introduced, the same people will be wealthy and the same people won't because it's more about individual attitudes than anything else. It doesn't matter what the rules are, it's how well you play the game that counts "

And having the cumption to start again if/when things turn to custard.

As my Grandfather said back in the 60s....
"If you want something you will get it....If you dont get iyt you didnt really want it in the 1st place..and dont waste everyones time just talking about it"

"Never try to do you best, just do your best, those who just try are trying ppl"

My two kids have grins all over their faces thinking about what they will eventually spend their inheritance on.I am sure there are a hell of a lot of other Baby Boomers kids thinking the same thing.

AB good one, original

I don't believe the theory that house prices will be out of reach forever, this doesn't take into account how quickly appartments can be quickly built, and more land can be freed up to build on.

Also I'm not against a capital gains tax, but I think they should probably wait to see how the current property cycle goes, and bottoms out before thinking about bringing it in.
Things are too unstable for it to be a good idea bringing it in currently, give it until this mess is played out first.

Although we do currently have capital gains tax on people that trade houses anyway.

Good point George, who's bright idea was it to let anyone with the cash from anywhere in the world buy NZ land and property??

Yes, let's talk about the planet, what's left of it. Are the forests, rivers, oceans, lakes, soils, air molecules etc in a better condition today than in the 60's-70's? I think not. And who is primarily responsible for this degradation of the planet?

How can property be the cause of, and solution for, all our problems? Try focussing on our real problems - low productivity and a reliance on commodites. Cgt won't fix these

People should understand Bernard's business module is to create arguments then he get more clicks on this site, after that he will be paid more by all links.

"If there is a generation x backlash against baby boomers who looted the treasury and made the planet uninhabitable, imagine the backlash of brown-skinned x'ers who find themselves in power and having to support pakeha whose assets were built through plundered colonial wealth."

your not a member of the "Green" Party are you Doug?

It's worse than that:
http://www.timesonline.co.uk/tol/comment/columnists/dominic_lawson/artic...
Make your hair stand on end, if you have any. hehehehe

steptoe, when I left school I couldn't get a job because of the 80's recession, despite "doing well" getting a B Bursary, so I went to university and slogged it out more, I paid $30k for my education and worked on weekends housemaiding in hotels, when I graduated I still couldn't get a job because of the 90's recession, except for cleaning toilets that is so yeah I've had it real easy. There are reasons I didn't go overseas like everyone else. I have stayed in NZ to my own detriment.

dunedinite - Come to the Cook Islands, its a "recession free oasis"
http://recessionfreeoasis.com/

I've been to the Cook Islands, two things that stood out for me were: you can't sneeze without standing on someones land, so that leaves the beach and the road (as far as I remember) and the other was that the locals strip the lagoons of anything big enough to be eaten.

dunedinite Says:
"that has to be a joke"

You have never seen a newspaper (jobs vacant) from the late 60s...Then tell me the difference between then and now is a joke...

Chairman - I think the answers to your questions have been adequately dealt with in other threads on Interest .co.nz over the last month or so, with discussions about John Whitehead's advice to government, Neville Bennet's articles on the need for a CGT and possible use of an LVT, and then Bernard's on what the present tax review should recommend, where Bernard passed on the IRD calculation that flat tax rate of 23% would be revenue neutral if an effect CGT is included in the mixed. (Yes, I understand we have what amounts to a CGT now, but it is ineffective - as everyone knows, in particular property investment speculators!) In those articles we also discussed the present oversized public sector and with appropriate pruning it seems we could achieve 23%, or better. This would really help NZ, particularly now and if a flat rate could be lower still, would low 20's be so bad as a target rate for CGT (effective LVT) under an appropriate phasing-in programme? Extra supporting arguments and research are given in the articles quoted below.

Asset Tax and Productivity - updated, 26 Nov 2008, here:

http://www.mea.org.nz/media/outlook.aspx

Overcoming Obstacles to Investment in Productivity Growth, 10 Oct 2008, and,

Is New Zealand Ready for a Capital Gains Tax, 6th Oct 2006, both here:

http://www.mea.org.nz/media/viewpoint.aspx

NZ has 2nd most unaffordable housing "“ time to balance the tax system, 26 Jan 2009,

but as Bernard knows, we are up agin it though:

People don't like tax reveals Peter Dunne, 27 Jan 2009, and,

Government ignores advice and clings to the past, 4 Jun 2009, both here:

http://www.mea.org.nz/media/pressreleases.aspx

As for management and leadership training, yep, all for it, especially if an appropriate portion is targeted at new product* introduction.

(* Wool, wood, whey, washing-machines, wireless, widgets, websites, Wetas - got m' drift - pluralistic like.)

However, just focusing on such training alone while ignoring structural problems in our economy (nevermind the just the deficit, Bill!) and in particular the imbalances between tradeables and non-tradeables, means the pie will ever shrink with neither the numerator or denominator of the affordability ratio being effectively addressed - and that simply equates to rearranging the deckchairs and playing soccer with the ice blocks!

Referring back to my earlier post, June 27th, 2009 at 8:58 am - Question, will the export subsidises being applied in the US and EU dairy sectors make those producers more competitive and productive in the long run, or less so? As Gerry Eckhoff argues, subsidy of of operations that are not profitable doesn't actually help. That's why NZ removed many (all but one it seems) back in 80's. [This is a different dynamic to tax crediting 'winning behaviours' in productive enterprises, - eg. R&D - where the enterprise's OWN money, that IT GENERATED from the PRODUCTIVE ENTERPRISE, is reinvested to do more of the same - AUSTRALIA and others get this to work, why can't we, Bill?]

Cheers, Les.

PS - I think this XandY/BB discussion is worthwhile, but difficult enough given the possible divisiveness it could carry, however, it is will be made all the more difficult and unpleasant if contributors decend into racist orientated comment - I suggest it stops.

Christopher : " the woes mankind faces " are what, in your opinion ? That we have a shite rugby coach & two assistants looms large on my list of woes. That the parents-in-law are even more skint than me is another. That the nation's new government is as pathetic as the old one we chucked out is another of my woes. Pray tell, dear heart, what are your woes of mankind ?

As a conversation Bernards thoughts (while having some validity) will contribute nothing to the well being of NZ's future. Inter-generational blame is no more worthwhile then blaming previous political parties for todays woes. Today the housing bubble gets the blame - and BB's seem to have more then their fair share of property, sure...but all bubbles eventually return to their start point and guess who'll be hurting most then. Theres an old song by the Seekers "there is a time for every season.......". Both the BB's and the probably larger number of younger 'investors' were simply caught up in circumstances made possible by easy money. Google 'property bubbles' and you'll see this is simply a strange crazy happening that repeats itself every few generations.

@ Janet, no income tax paid due to the length of time the property had been owned by my ------wait for it---------LAQC !!!!!!!!!!

It is great to see a few beginning to look through the cover. Very frustrating to see the usual osterichs with their heads burried in the sand, hanging onto their busted ideoligies, in a trance like tribal alegiance. From what I have observed the permanent reinstatement of a Debt Free BASED Monetary System would deliver anyone of any ideoligy what they are seeking. Provided they were not among the slaveminded corrupt few that have infiltrated or inhabited most every sector of society since the age of reason. The increased regulation in society has come about from the increasing world wide disparity of wealth. A recent OECD report puts NZ at ninth worst for disparity between the very, very rich and the rest of us. The controllers of disparate amounts of wealth promote increased regulation to maintain the status quo, at the same time promoting regulation to keep the commoners in check from revolting as they lose hope and start to act like they have nothing to lose as they are reduced to an animal state of survival.

For those osterichs who need it laidout all in the one place from irrefutable sources, the ever mounting evidence now provides many. I give you this from one of the best I have seen in my decade plus of indepth research. Most on this thread are aiming their blame many levels below where it sits;

This is the link for entire Globilization section of website - http://www.globalresearch.ca/index.php?context=theme&themeId=2

This is a sample of articles -
The real winners are the big banks - the ones left standing, that is. Recessions generally involve structural changes in the economy, and the big gain for the financial sector this time is consolidation. We have been left with a handful of giant financial behemoths like Lloyds, which alone has one-third of all UK mortgages and 40% of retail banking. We already had banks that were too big to fail; now we have banks that are so big, they can make the government fail........We are emerging from this recession with a new kind of economy: a banking kleptocracy that has captured government and regulators. After a two-year financial crisis, largely of their own making, the banks have been rewarded by massive public subsidies, freedom from regulation and the lifting of anti-monopoly rules. No government will stand up to banks for fear of precipitating another crisis, such as the one that followed the collapse of Lehmans last October. Talk about moral hazard. The banks can return to their gambling table again, confident that the government will bail them out, should they lose. Notice how few bankers lost their jobs and how rapidly bosses of even nationalised banks like RBS have returned to paying themselves multi-million-pound bonuses again.
http://www.globalresearch.ca/index.php?context=va&aid=14061

America has a legacy of failed public agencies as well as regulatory and legislative reform - for lack of teeth, oversight, and most important because financial and other industries end up self-regulating, consolidating, and growing more powerful at the expense of the public interest. Giving the Federal Reserve more power lets banking giants make their own rules, decide how and whether to enforce them, and thus mainly operate as they wish because no one in Washington dares challenge them.
Michael Hudson agrees in his new article titled: "Instead of Real Financial Reform, Obama's Plan capitulates to Wall Street." He explains that supposed reforms promote "Wall Street's 'product,' debt creation, at the expense of the economy at large, and lets financial chieftains continue to self-regulate the debt industry - and by the way, to keep all their gains from the past decade's worth of fraudulent lending, scot-free....(He) achieved what no Republican could have: rescuing the Bush administration's pro-creditor policies that fostered the Bubble Economy in the first place."
The plan is laden with a "false diagnosis" and "fatal flaws," so clearly what's proposed are "wrong-headed cures (but hardly) by accident." If it's largely accepted as is, Wall Street will get precisely what it wants - a veneer of regulatory cover to keep wrecking the economy and stealing the public blind.
http://www.globalresearch.ca/index.php?context=va&aid=14057

Why is America so important to us? The US Federal Reserve is the current back office of the International Central Banking Network from who we rent our money supply!

Les - That site is a goldmine of irrefutable information that you will not see in the mainstream media. Here is some more. I challenge anyone to refute legitimacy of its insight as many high up officials are beginning to shine the light on institutes they have attempted to reform from within, without success. The first one is especially for Roger and Mark;

President Obama's plan to give the privately-owned and unaccountable Federal Reserve complete regulatory oversight across the entire U.S. economy, which is likely to be enacted before the end of the year, will officially herald the beginning of a new form of government in the United States - an ultra-powerful banking dictatorship controlled by a small gaggle of shadowy and corrupt elitists.
The new rules would see the Fed given the authority to "regulate" any company whose activity it believes could threaten the economy and the markets.
This goes a step further than the centrally planned economies of the Soviet Union or Communist China, in that the Federal Reserve is not even accountable to the U.S. government, it is a private entity that according to former Fed chairman Alan Greenspan, is accountable to nobody but the banking families that own it.
http://www.globalresearch.ca/index.php?context=va&aid=14063

Last month, it was revealed that Summers, whom President Obama appointed to essentially run the economy from his perch in the National Economic Council, earned nearly $8 million in 2008 from Wall Street banks, some of which, like Goldman Sachs and Citigroup, were now receiving tens of billions of taxpayer funds from the same Larry Summers. It turns out now that those two banks have continued paying into Summers-related businesses.
http://www.globalresearch.ca/index.php?context=va&aid=13813

I then add a link I have previously posted from Finsec clearly highlighting the interconnectivity between the events outlined above and good old little NZ. If a few more don't begin to connect the dots shortly I have not a clue what it will take and even less hope that it will be in time to do a damn thing about. Stop smiling Roger Douglas and John Key;
But in among all that mutual ownership are two big American banks with significant shareholdings (on behalf of their customers) in all four Australian banks; JP Morgan Chase and Citicorp.

JP Morgan Nominees is the largest shareholder of Westpac and CBA with 17.09% and 9.60% holdings respectively. It is also the second largest shareholder of NAB with 10.32% holdings, and its affiliated company, Chase Nominees, is the second largest shareholder of ANZ, with 13.26% of the company.

Citicorp Nominees is the fourth largest shareholder of all four Australian banks with between 2.56% and 6.36% holdings in each bank.

"There is a perception that New Zealand's banking industry is largely owned by Australian banks. That remains true, but the story doesn't stop there. We need to be aware of the international financial influences on those four Australian banks. The Australian banks are not big fish in the world money markets." Said Finsec General Secretary, Andrew Casidy.
http://www.finsec.org.nz/flash/flash_0805/following_the_money.aspx

André - "The fact is that there is no decent investment vehicle for the average non-financially trained New Zealander." Good point and it too reinforces NZ's property investment dynamic as you say. One simple answer might be, Kiwi's need to be more financially literate. True, but equally important is appropriate regulation to avoid the kind of rorts we have witnessed in the fin.co sector over the last few years, AND, a more diverse range of investment opportunities. The latter would come with a more diverse economy, in particular more dimensions in the productive sector. Which leads on to why asset taxation would be useful in making that happen, so please see my comment at June 28th, 2009 at 4:59 pm. Given the limited investment landscape in NZ, if introduced here asset taxation would have the effect of restraining asset price inflation, (why do you think people are so agin it?) BUT, more importantly other investment dimensions could emerge - see comment I have referred you to. That said, we do need appropriate regulation in the fin. sector - to stop people, ripping people off.

Iain - "Stop smiling Roger Douglas and John Key." They may well be. I forget where now, maybe here on Interest .co.nz, I saw some commentator imploring Bill English not to waste the talents of Roger Douglas and invite his assistance.

Question for people then - if JK and Bill E were to get Roger Douglas involved, do you think he would try to catch 'the subsidy that got away'?

I don't think so. No doubt with Roger D involved we'd end up doing some useful pruning here and there, maybe more, (like his idea for a 'Two-tier' welfare system, where you would have the choice to opt out and pay as you go while you get a reduced tax bill,) but I doubt the nettles we have discussed in the blogs on Interest.co.nz would be grasped.

To that end Bill I'd advise, forget Rogernomics, meet 'Bloggernomics' and grasp the nettles.

One of the biggest distortions that becomes a "disincentive" towards savings is the fact that Money is a depreciating asset.
Even Bollard spoke about this.

If inflation is 3% and the deposit rate is 4%... and tax is 30%..

THEN.... each yr the dereciation rate on money is 3% so the real return is 1 %.
BUT.... we are taxed on the nominal return of 4%

eg. $100 at 4% the tax is $1.20 whih leaves $2.80 profit ...BUT the total amount has depreciated by 3% which then leaves the investor with a NEGATIVE real return of - 20 cents.

WHY ON EARTH WOULD ANYONE CALL SAVINGS IN THE BANKS AN "INVESTMENT".

When you hear Bollard and others talk about us all needing to be "savers"... he is being two faced.

Will they ever allow a "depreciation" allowance for savings..????
I don't think so.... but over the long term this has led to distortions in how people invest their money..

you NEVER... hear of people becoming well off thru simply saving and earning interest.

OF Course people are going to put their money into asset classes that go up in value ...(and even have depreciation allowances)

AND I pull my hair out when I hear High level peolple suggesting that the solution to the distortions that we have from a low savings rate ... is to have a "Home Equity Tax".

http://alt.economics.scoop.co.nz/?p=320

Bernard,... the topic of depreciation allowances for savings would be a far more useful debate than the interview you gave above.... You seem to have access to the likes of Bollard... Why not ask some hard hitting questions...????

Well said LES RUDD what an indictment,its every investor for themselves and **** the consequences,for them, the investors

roelof, quiet right. Better to put some cash into gold and the rest into NZ commodity stock with 100% imputation. That way you can sell the stock for a taxfree capital gain when it rises and take the dividends with no tax to pay. Sell the gold when it peaks each year, as it does if you study the trends and buy it back on a dip. Why pay tax?

Well, well, the return of Sir Bernard and in the nick of time, i thought you had sold out a while back, but thats more like it Bernard(good for the site too) the points you make have been festering for years without being addressed let alone aknowledged by those responsible for planning for future generations. It is unfortunate that your comments will be polarizing and may even generate resentment toward a hard working middle class but necessary none the less, much like a slap to shake us from our stupor. I myself am a boomer and can honestly say I've worked my nuts off raised two kids largely on a single income and have recieved the benifits of cheap and affordable housing and have capitalised on it to secure the future for the frail years to come. Inevitabley all such property and wealth shall pass to them and while I'm ok with that it isn't necessesarily a good thing. The children 32 and 29 have attitudes that reflect what your comment outlines and so yes we need to address these issues sooner than later, on the down side I know in the back of thier minds they believe our passing will be their beginnning and that corrupts the fabric of the need for self determination. Even in possession of our wealth you can just about bet it's going to be squandered because their overview is why wait?, have it now. Our fortune as the boomer generation will very well turn out to be our misfortune as we shift the goalposts, steal their ambition. So good for you Bernard ,but now you have picked the scab you should seek to excise the infection, not just leave it to fester.

To all
Another thing about the baby boomers being hurt the most by the collapse of finance companies and the recent stock market collapse.
To put this into context. This series from the RBNZ http://rbnz.govt.nz/statistics/monfin/HHAandL.xls
shows that Housing values rose by NZ$321 billion between 2001 and 2008, while there is about NZ$6 billion frozen in finance companies and various funds. http://www.interest.co.nz/deepfreeze.asp
The amount invested in domestic stocks, foreign stocks, life insurance and pension schemes was unchanged at NZ$72 billion over the same period.
The scale of the increase in household wealth because of the explosion in house prices was extraordinary and utterly dwarfs what happened elsewhere.
Whoever owned a property in 2002 or managed to get in before 2005 is now wealthy beyond their dreams or mortgaged to the absolute hilt and cannot handle it. Most of the equity gains went to those without big mortgages.
Mortgage debt rose from NZ$79 billion to NZ$175 billion over the same period. So mortgage debt rose NZ$79 billion while home equity rose from NZ$168 billion to NZ$393 billion. That NZ$225 billion growth in home equity values over those 7 years gives you an idea of the intergenerational wealth transfer.
cheers
Bernard

Bernard,

I have challenged your impartiality before so will congratulate you on the interview which to my mind was a warning shot to the entire nation about the peril we have greated in systematically pushing unproductive debt into the next generation, without their permission.

Les you seem to think it's divisive and so do a lot out there but the debate is a great one to have.

Gen X & Y are not stupid and neither are the political parties. Whoever gets in behind this issue (politically) will attract a lot of support and I can't wait for that day.

Typically things that are good for generation X & Y are magic for the productive economy.

As a boomer I am ashamed of our generations behavior. We will go down in history as the single most selfish generation to every walk this planet. We have used more resources than any proceeding generation, we have acquired more assets through embedding self-interested policies at the expense of future generations and economic sovereignty. Worst of all we lobby day and night to keep everything exactly the same to ensure we die as wealthy as we can at the expense of our children, grandchildren and the planet.

Come on Gen X & Y find your voice and use it wisely. A well structured productive economy works to shift unproductive capital (typically tied up in land and building tax havens) into figurative mills of productivity, that create jobs, opportunity and hope for this nation. We have to stop the stupidity of pumping up the value of assets we already own (as a nation) on the pretence that we are getting rich. It's the biggest lie ever sold to the populous but look at how much money is invested in marketing that lie and who is behind it. As a country it has taken us to the brink of financial collapse and yet the marketing from the banks, real-estate institute and varies vested bodies continues.

The small quiet voice of reason can hardly be heard above this mass of paid media. When my property speculator friends turn around and say"¦. "Selwyn you are right we really do need capital gains tax" then I know we are past the point that this is just a political issue, it's a sovereignty issue we are fighting for.

Bernard, in regard to your link.

There is no doubt that a land tax will increase government revenue. However, at the same time it will increase inflationary pressures on the economy at large. Tax costs tend to be passed on therefore how can it raise substantial sums without damaging the rest of the economy?

Unlike California, New Zealanders wealth is largely tied to housing and has grown as house prices increased.

Could the reason why many parts of Australia have lower price to income multiples than here is because their incomes are higher?

Of course introducing a new tax is broadening the tax base, and the fact that it produces very predictable returns merely shows that it taxes regardless of what your land returns faiing to compensate for a slowing economy.

The flaw here is that although the supply of land is very inelastic (without bank created bubbles) and its value does not fluctuate so much if the speculative element (which keep in mind is also created by banks lending practices) is removed, a land tax would also hurt landlords and tenants as well, who would then pass the burden on to the economy at large.

The fact a land tax is easier to collect merely exposes one of our current problems, far too much tax has become easy to evade. Introducing a land tax is merely letting off those that abused the system to begin with.

Surely, with today's technology (and stringent terror laws in regard to financial transaction) it's not by lack of means?

We currently have productive landowners struggling to survive. How does taxing other landowners more (which will drive up local inflation only coming back to hurt the productive sector) going to help them and entice more to join them?

Banks and their lending practices create debt bubbles. If you want to address debt bubbles then you will need to address the problem at its core.

A land tax would lower the price of rental land by making it unfeasible to own, thereby reducing demand whilst creating further residential problems. Or it would drive rents so high that the local inflation created would merely make productive land harder to capitalise from with higher rents also adding to current residential problems.

Bernard did say that some of the X & Y generations will inherit their parent's estates. And if, as statisticians opine, the average couple has only 2.4 children, the kids each get 40 % plus of their folks accumulated stash. But as many BB's can expect to steal oxygen until they're 80 y.o. or more, the kiddies will be 50 y.o. plus, before the loot arrives. Perhaps the BB's will skip that generation, and will it all to the grandchildren..................Bugger !........ Ask Prince Charles, he knows how that feels.

I agree with your comments Robert, the sight of all the cheap "kwila" outdoor furniture at certain retail outlets used to break my heart. I was born in Borneo and practically all the forest is now palm plantations. The amount of wildlife lost is staggering. Anyone who wants to know should read "the birds of Borneo" published in 1962.

Follow the money.

In general, it wasn't the baby-boomers that ripped off the young; it was the fact that in our ignorance we allowed a few locals along with a few foreign investors to rob us all blind.

Who owns most of the country's wealth? And where did the rest of it go?

Not all baby boomers are well to do. There's quite an imbalance in the nations wealth, not to mention (over the last few decades) the large amounts of corporate profit that's been heading offshore.

Anyone care to point out which western country is best placed and most likely to emerge from the depression leading by a country mile?

Les,

Agreed re profits going offshore. Nowhere is this more evident in NZ. CA deficit close to 0 in early 90s. Now 8.5%-10% (depending on which way the wind blows). We have actually become more productive over this period. What has changed is the amount of interest payments we are making overseas to foreign owned banks - investment differential makes up the lions share of our blow out. (Brian Gaynor has done some good articles on this). This is not just a transfer of wealth from young to old, its also a transfer from NZ to overseas. Why are we focussed so much on increasng productivity when the solution is a lot easier - prick the housing bubble. We're spending hundreds of millions to produce higher grade fuel and forgetting to apply some sticky plaster to the tank which is leaking heavily. Budgeting involves increasing incomings AND reducing outgoings. I think the govt has forgotten that - or just does not care.

Roger - I agree- Aus is looking well placed to come out fairly rosy.

Bernard,

I've thought a little more about this comment and the poll you are now running:

"I'm not necessarily in favour of a capital gains tax. I think it's clumsy and expensive to administer. I'm keener on a land tax. It works well in Hong Kong."

Why should land/property users bear the brunt of an asset tax? Why should stock/shares investors get away with not paying tax on their capital gains, and continue to be subsidised? I don't buy the "clumsy and expensive to administer" reasoning, that kind of thing gets trotted out against any suggestion for change in the area of taxation, monetary policy, etc. far too often. I think that aspect should remain for futher analysis and discussion rather than isolate particular types of asset tax too early in these kinds of discussion, simply because some have decided certain options are too hard, without full consideration of the cost/benefits.

In this case I think your poll would serve the general debate much better if worded, "Should New Zealand adopt asset taxation?", rather than predicate outcomes based on your personal preferences.

How about reword and start the poll again?

Studpid question? Well, are loaded debate arguements that useful to us on this important issue?

Cheers, Les.

Matt - yep, hard to tell how things will pan out. As for cash being king, what currency? Again, hard to tell. Maybe there won't be any, then what....

Yes, yes talking around the circle again - around - around - around it goes. Almost like having to many glasses of Pinot combined with some smoke from the West-coast.

Urgent solution for the NZ problem:
Increase real production people - create real wealth - bring skilled Kiwis back- develop niche markets - avoid debt - live a more modest life- style and at the same time get rid of the monstrous Real Estate industry.

27.6.09 12:31am

Bernard - your comment about a land tax is interesting.

You've used Hong Kong as your example, but I wonder whether this is good grounds for comparison with respect to New Zealand.

Hong Kong is amongst the most densely populated country/territory position number 5/238 compared with NZ at 201/238.

Do you have any better examples - that compare with NZ with respect to population density, composition of the economy ?

whew! I've just read the postings for the 29/30 and a cracking good read I must say. Bernard you have not only opened up the worm can you have got them all over the floor. I think a number of subscribers have missed your point about not being in favor of a capital gains tax and that has fueled their debate from a selfish standpoint of course but understandable given that 1. we the middle class normo's feel we have worked hard and gone without to secure our future, but got a little lost on when enough was enough . 2. that forecasts for our pensions kept having the goalposts moved and so we kept revising our security portfolios. 3. that I truly believe there is a lack of trust on our (boomers) part to endow our offspring with a share in that wealth while we are living, partly for reason 2. but mainly because we are petrified they will blow it, and that's the bit we are stuck on.
This has given me cause to rethink the whole inheritance thing as for the most part I agree with the intentions of your comment, and although I intend to be (stealing air) as one blogger put it,I would welcome a change in our thinking provided that a transfer of wealth to gen x/y whilst we are still alive does not undermine their ambition or need to be self determining.
You see we started with nothing so we KNOW what nothing is, and it's just bloody hard to let that go ,yknow?

Matt - I have about 95% of my equity in property and only about 5% in cash in the bank. I would be quite nervous if it was the other way around! Banks do go belly up, and if they do it's better you owe them money than the other way around.
Properties rarely disappear, apart from the odd fire, flood or earthquake for which you would have insurance. This is where the saying "safe as houses" comes from, and why banks like them for security.

Perhaps the insurance company could have disappeared too, but even in that unlikely situation you still have the land which is often half the value or more. Mind you, there have been some earthquakes where even the land has disappeared in to the sea ;)

Obviously the more gearing you have, the riskier it gets, and people that borrowed 90% + a couple of years back have been burnt. The median might have only dropped 5% or so, but most the mortgagee and distressed sales have been much more than this, so if you buy carefully at the moment I wouldn't expect too much downside risk. We bought one in February for 15% below a 2006 valuation, so I wouldn't expect it to drop much further. There is more risk at the moment of interest rates steadily climbing.

Les,
Here is the problem with that solution right here: "This solution would make about 60% of taxpayers worse off"

Tax cuts are not as much a stimulus as some make out and the fact that it will make 60% worse off is not a good starting point for change, well not in that direction.

As I've said before, tax is a cost that tends to be passed on. It's inflationary; therefore it's those at the bottom that carry the full burden "“ the ones that can't pass it on.

Alternatively, tax cuts for the top end tend to be consolidated and in many cases head offshore.

So, although I agree in what you're saying (using taxes to our advantage) I disagree with this specific direction.

The government is picking winners in its current shake up of Auckland, how are tax changes going to prevent that kind of carry on?

Janet,
But what if there was a way to make the omelette without having to break so many eggs? There are alternatives.

We all want a decent omelette but it seems we disagree on the recipe.

And when it comes to dishing out medicine, we have to ensure we are actually treating the root cause of the disease.

Chairman - "There are alternatives." Outline a recipe that you believe would work please? Cheers, Les.

RE: Bernard's blog at the Herald

http://blogs.nzherald.co.nz/blog/show-me-money/2009/6/30/ten-ways-baby-b...

In my opinion he has left out an absolutely critical point, which is the reformation of planning rules.

He talks about opening up to mass immigraiton - fine in principle, but to be frank that will just add to our housing cost woes unless there is accompanying freeing up of planning regulation to respond to the extra housing demand created by such immigration.

Ponder this:
Many companies have been paying out most of their profits as dividends (with a lot of those dividends heading offshore) failing to use the capital to reinvest.

Will a tax cut see more capital reinvested or will it merely see dividends continue to grow?

Keep in mind; the more capital that heads offshore the more it affects our balance of payments.

Chairman - we are going around in circles:

"However, at the levels we are talking about more Kiwi business just might survive, grow and change that dynamic - especially if we added in some tax crediting to support "˜winning behaviours' in productive enterprise - maybe adjusting such against the number of Kiwi's owning or employed in the business? "

Cheers, Les.

Les,
On a lighter note:

The economy functions in a circular motion.

It is the month of August, on the shores of the Black Sea . It is raining, and the little town looks totally deserted. It is tough times, everybody is in debt, and everybody lives on credit.

Suddenly, a rich tourist comes to town.

He enters the only hotel, lays a 100 Euro note on the reception counter, and goes to inspect the rooms upstairs in order to pick one.

The hotel proprietor takes the 100 Euro note and runs to pay his debt to the butcher.

The Butcher takes the 100 Euro note, and runs to pay his debt to the pig grower.

The pig grower takes the 100 Euro note, and runs to pay his debt to the supplier of his feed and fuel.

The supplier of feed and fuel takes the 100 Euro note and runs to pay his debt to the town's prostitute that in these hard times, gave her "services" on credit.

The hooker runs to the hotel, and pays off her debt with the 100 Euro note to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.

The hotel proprietor then lays the 100 Euro note back on the counter so that the rich tourist will not suspect anything.

At that moment, the rich tourist comes down after inspecting the rooms, and takes his 100 Euro note, after saying that he did not like any of the rooms, and leaves town.

No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism.

Unknown

Les : Geeeeeez, it doesn't take much for us boys at the back of the class to get the master to blow a gasket !!!!

The Chairman : Good point you make on maximising profits by reducing costs. A common refrain from me, too. One instance is fuel excise. That tax flows through our entire system, it is a burden to consumers and producers alike. The only tax on fuel ought to be the GST of 17.5 % ( I raised it unilaterally, a citizen's initiated reformation ) .

I do like the idea of raising tax on consumption, and reducing it on production. And churches too, those rich prats connected to a certain Vatican City based fiefdom oughta come clean and pay their fair whack too.

@ The Chairman and also in a lighter note,
"Suddenly, a rich tourist comes to town." Why? What if a band of destitute theives came to town instead?
August; Black Sea? Better off, well pretty much, anywhere else.
My point being that why do we assume that we can attract the 'rich', whatever of them are left, here, anyway? To do what, that they cannot do as well, or better, elsewhere?
Economics is supply side or demand side. That arguement can also go around in circles forever.

I'm sorry you feel that way Les; obviously I failed to get my points across. At least we can agree on the objective but when it comes to the solution we'll just have to agree to disagree.

Cheers.

So, should I buy in New Zealand - cheap and on the outskirts and work my way up now, or should I travel around, see the world and hope they pay me better then here and start new overseas before getting married? The hard part is that NZ is where our family and friends are, where we were brought up, a beautiful country, our home.... Im not sure if I want to give that up. And will the boomers sell up and retire on their money OR will they pass their properties down to their children and loved ones? Inheritence is looking rather good at the moment....

Touche; The Chairman!
On the other hand, The Black Sea in August will seem mighty appealing if "..we get the government to print our own (money)".
Cheers.

Oh dear Bernard, I had to take a look to see what all the fuss was about (194 comments).

Well MORTIFIED is all I can say, but I'm not sure if that's me or you - I could almost smell your fear coming through my computer screen!

Can I take it from the vitriol, Bernard, that you never got round to buying a house when you were a youngster?

It seems that you've finally realised that saying something enough times won't make it happen (30% forecast!). So a new tack - tell all the poor sods out there that there lot in life is hopeless - and that they should give up now!!

Create a whinger nation? - oh Bernard go and join the Labour Party!

The fact that lots of old people are going to have lots of money is a good thing for us young ones! (Maybe 42 doesn't qualify as young??)

All those old people are going to spend much of that money before they move on (so there will be plenty of opportunities for entrepreneurs to help them part with that cash!) and what's left over will go to the kids who I'm sure will be more than happy to spend it too!

Older people with lots of money will want safe low risk fixed income type investments so expect (over the longer term) more cheap money available for young people to borrow and earn the reward from taking some risks.

Bernard, I can't help thinking that you need to listen to the advice of the Western Union ad released earlier this year (possibly made to cheer up some miserable old sod like yourself):

http://www.youtube.com/watch?v=lbt0m7ae5Ew

Maybe you should be saying "yes" to a brighter future?

Disclosure: Bernard, I just turned 31 and have purchased over 60 properties since 1996 (when I was 17 and at uni). Starting with nothing except what we made in the phonecard bubble (that's one bubble that will never re-inflate!) - my advise is always make the most of what you've got RIGHT NOW and get on with it - always listen to people that caution you, but never take their advice (so I don't expect anyone to take the advice I just offered - but at least you should think about it!! But DEFINITELY don't take Bernard's advice unless your career takes you overseas!).

After a quick add up, right now I've got 27 houses, 8 multi-flat properties (with a total of 30 flats), consents for 24 new houses/sections on 11 different sites and land to develop an additional 30 houses. I pay tax AND GST on all capital gains except for properties owned as long-term rentals.

My point is - there is absolutely no reason why GEN X and Y can't own their own house - you just can't expect all the trimmings right away : it's a bit like high school - just because some loud mouth at the back of the class complains that he doesn't understand linear algebra doesn't mean that mean that nobody understands it!! (This could sound a little curt but...) WOULD THAT TORPID FELLOW PLEASE SIT DOWN!

PS. My preference would be a flat market with people just getting on with their lives buying and selling as per normal. That way I will get back to my original business of just building cashflow. A capital gains tax would make no difference to me and a land tax would just be silly as it would only penalise grandma because she has a large garden.

I dreaded the price rises when they started in 2002 and had to adopt a "buy anything that moved" strategy although as I said I'd prefer a flat market - that isn't necessarily what I am expecting.

No wonder young first home buyers on the average wage cant afford to buy a home, because Chris and his fellow noble landlords own a disproportionate number of them.

Unfortunately for me, I don't have rocket scientist brain and a super-abundance of chutzpah as Chris-J seems to possess. So I for one am glad of your web site Bernard, and your comments, and the ideas and debates that fellow bloggers toss around. Its a great way to learn, and at times a bit of fun, too. Glad for you Chris-J that life is a breeze, and no particular complaints. But the rest of us, from time to time have a grizzle or two. And if that annoys you, tune in to something else, I guess. Well done !

Chis_J

"so I don't expect anyone to take the advice I just offered" - easily the most sensible comment you've made on this blog. You seem to be carrying a few issues - maybe you should sell a few properties to lighten the load.

I'm a Gen Xer (born in the 70's). My partner and I own our own house in Wgtn with a small mortgage, and we also own a rental property. We have 3 children. I paid my way through tertiary education for 6 years, while at the same time working four part-time jobs while I studied full-time. I paid off my student loan within 5 yrs by working really hard and saving hard. I do believe it is possible to have it all as a Gen X or Gen Y if you are financially prudent and save really hard. But you do have to sacrifice your life-style to get ahead. We have had to be financially prudent, no new cars and overseas trips - but we are doing well financially in our late 30's because we have worked hard, saved hard - we are not wasteful and if we don't have the cash - we don't buy it. I have learned my financial habits from my baby-boomer parents who worked extremely hard, lived in a very modest house and had a very modest income. Life has never been easy for them, but they taught me that you have to work your way up in life - and that does mean lowering your life-style expectataions and going without quite often - perhaps Gen X and Gen Y need to learn a bit more about self-sacrifice and going without.