By Bernard Hickey
Most families encounter some moment when it's clear a particular situation is unsustainable and an intergenerational agreement has to be reached.
Often these moments are tough and the discussion within the family is difficult.
Sometimes they involve a conflict and a resolution.
Sometimes the situation is ignored and it worsens to the point the problem can never be solved without a disaster.
For example, a teenager might have to be told to shape up, get a job, grow up and leave home. A problem gambler might need to be told to stop gambling and look after their family or leave the family. Very old and sick parents might need to be told it's time to sell the house to move into a retirement home. A partner-less and pregnant
grand-daughter might have to be brought home to bring up the child with the grand parents.
It's time the New Zealand family had that difficult discussion about intergenerational wealth and debt because the current situation cannot be sustained beyond the next 20 years or so.
Somehow, the existing and looming debt burdens on the young have to be eased and older property owners have to agree to give up some of their wealth and future benefits.
The implications of not coming to some intergenerational settlement are unthinkable.
But first, for the doubters, here's why New Zealand and many other the developed, ageing and indebted economies have a looming problem.
Given our low current economic growth rates, the ageing structure ofour population and the pay-as-you go structure of our healthcare and pension system New Zealand faces a government debt blowout over the next 30-40 years of monumental proportions.
If we don't delay our retirement age, change the entitlements for pensions and healthcare, or change the structure of our tax system, our government will have to borrow massively.
Treasury has estimated with current policies and economic growth rates our national debt would rise over 200% of GDP. That is Greek level debt. The simple alternative is to tax those working after 2020 until their pips squeek. Neither option is sustainable without either a creditor revolt or a voter revolt.
The other problem is that those generations born after 1970 who are paying the bills from now onwards are graduating, training and beginning families in an uneviable position. Their unemployment rates are higher, they often have big student debts and the debt they are taking on to buy a family home is two to three times higher relative to incomes than their parents.
Looking ahead of them, these generations X and Y see not only high personal debts but high public debts they will have to service and pay off as pension and healthcare costs escalate. They rightly wonder about the fairness of a situation where the debtload is falling on their shoulders and was created by bad decisions in the past by the
generations who benefit from these 'free' health care and pension regimes and hold most of the property assets built up during the naughty oughties (2000 to 2010). Many of the youngest are revolting in the best ways they know how -- a one way ticket to Australia and/or decisions to put off or cancel having families.
These two groups somehow need to come together to hammer out an intergenerational deal that sees some of that property wealth shifted from the rich and old to the poor and young, while also reducing or sharing some of those future pension and healthcare costs.
Most of all, everyone must find a way to be more productive and boost economic growth in years to come.
There's plenty of ideas on the table, including delaying the pension age, means-testing the pension, imposing a land or capital gains tax, keeping babyboomers in the workforce for longer as mentors to the young, better educating and training the young, encouraging more saving and less consumption by the young, and improving our birth rate.
So why aren't we having this difficult conversation now?
Perhaps what is needed is a jolt to bring the old and rich to the table.
The trouble is the young and poor have little electoral or political power when the aged and rich dominate at the polling booth and in the political debate.
Perhaps the young and the poor need to make clear what happens if nothing changes. Here's a few things they could say in a letter to their parents to get the conversation started.
Dear Mum and Dad: If you don't make these changes, you'll have to watch your grandkids grow up by Skype and Facebook from overseas, or there won't be any grandkids. We'll also vote in the 2027 elections once we're in the majority to cut your pensions and make you pay for healthcare by selling your houses to us at discounted prices. We might even move back home to spend our 40s and 50s living rent-free in the villas you refuse to move out of.
If you do that we'll deliver the grandkids and promise to spend less on espresso coffee and holidays and iPads and binge drinking. We'll also buckle down and retrain to help produce the growth to soften the blow for all of us.
Time for a chat?
67 Comments
As long as “Key’s Geedy Slave Driver Club” is dominating our daily life’s, nothing is going to change. For many families and the younger generation life becomes unaffordable.
Riots in the streets will finally make some impact for changes, when it is almost too late. Inequality is divorcing the nation leading to severe consequences.
Half right and half wrong Muppet. Yes. Families are having a much harder time builidng assets and getting into homes etc. But also if you think about better off you need to acknowledge that todays families have much higher use of goodies and higher consumption of all sorts of services. Including such things as high level health care etc etc Much much more than families dreamed of 30 years ago.
Fair call, according to a lot of older folks that I know it is as hard if not harder now for people to buy their own home than it was in the great depression. I think thats interesting but at the end of the day I do think when you come of age you do have to buy your own home, regardless of how much it costs, for family security reasons etc, thats why I'm currently looking. Looking at borrowing around $400-500K with deposit of $100-150K. WHOS GOT SOME HINTS/TIPS? Haha
Funny how our parents did not have the same view of us baby boomers. (And we have done all we can for our children.) Not only did our parents' parents live with them but they were willing to pay high taxes and do everything they could so that their children could have a good life. And funnily enough so did the rest of the world. The world had an economic structure that enabled this to be done. Don't play the blame game Bernard. Look at the economic structure that has been in existence for the past thirty years. Nothing will alter while ever that continues.
We are not Greece. Japan, a sovereign Country as we are, has 200% debt to GDP and it continues on. We don't need to borrow we can print. This idea that government printing is bad Government borrowing is good is stupid. After all Banks print the stuff through their fractional reserve system. It all depends on the shortage of goods for inflation to occur. (Houses anyone or is that just a giant ponzi scheme in which we all participate). Taxation can withdraw the printed money as repaying loans does for the borrowed money
Probably Wolly because he is a man and men find it very difficult to admit they are wrong. In addition he is of an age when the economic policy we now have was promoted and promoted at the Universities. It would be very hard for him admit that his life's work was based on promoting an economic policy that has proved to be a fraud on the people. He probably wants to have a good life now that he is at the end of his professional life here and so he took the job he now has. He will be in good company because all the men there are of s similiar age and they all have their heads in the sand.
I agree with Patricia. I was on my own financially at 18. However my parents had given me the best non-financial upbringing of hard work, intense study habits & saving/career goals....
My own kids have had more than me, high decile schools, overseas exchange experiences, wider choices of tertiary study, Australian work options, etc ... How long do I keep potentially propping them up in early adulthood? I need to now recover from child-rearing & save for retirement otherwise I could be a burden to them in old age.
Maybe I will be doing them a better favour by now closing off the Bank of Mum & Dad, let them experience some hardship in their 20s & 30s so they can value hard work, thrift, thankfulness, & a little suffering to get into their first home, get established financially etc ...
Hannah McQueens book cites research that the more adult kids are supported financially the worse off they are.
Patricia - unbelievable, do you really believe that? .....the absolutely classic statement. You think money printing is ok until inflation arrives....do you understand the human propencity to take the easy route until too late - look at debt and the GFC.
So why don't we just print a trillion tomorrow and all become multi-millions. There's a damn good reason that's not even worth debating here as surely everyone understand that there's no easy life for those not prepared to work for it ...you sure you're a BBer, smacks of something younger and more niave?
This is yet another 'bash the boomer' effort by BH. The damage is not being done by the better off elderly, it is coming from the system that encourages banks to flood the market with cheap credit and a political system structured to feed pork to voters in an economy built on property speculation.
If the current mob lose to Shearer et al in 014, expect a deluge of pork to be sliced and diced for Shearer's support base..that means a rapid entry into the piigs hole.
The best and brightest will leave in even greater numbers, while the destitute and needy will flood in to prop up Shearer's mob and live off the pork.
So let's see if Bernard can make an effort to end the banking rort...the deliberate destructive and dirty little game. Currently this economy is feeding the big four fat profits extracted on the back of created credit sold as drugs to Kiwi peasants.
And it's high time Bernard said something about the dirty political system as well....a system in need of gutting to remove the cancerous behaviour of those involved in buying power.
Perhaps the young and the poor need to make clear what happens if nothing changes. Here's a few things they could say in a letter to their parents to get the conversation started.
The presumption that families are dysfunctional and have little comunication is probably not the norm . I speak to my son most days and he is enjoying living in his Grandmother's house while she lives at mine.
What's more he is very pragmatic about the current lack of employment opportunities, but is cognizant that lack of talent has a very high price and that poverty could be it. He is nevertheless, optimistic regardless of the fact that his Father is one mouse click away from poverty himself, given the way government approved financial pirates operate. - witness MF Global etc - there are no safe havens and handouts for the old or young. - get over it.
Dont always agree with Stephen but he is dead right about families functioning miles better than Bernard seems to give them credit for.
Necessity is the mother of more than invention and we are likely to see kids living at home for much longer , oldies passing on assets to the young much earlier to enable them to have a resonable life and the young being much more supportive of elderly parents as a quid pro quo for getting the dosh early.
Families will have to support each other across generations in a way that used to be the norm and still is in many cultures. The concept of a family consisting of say two sets of grand parents, a couple and say three kids in their twenties having six homes between them with resultant levels of debt is nonsensical. Every generation in its own little silo subcontracting their responsibilities for caring for each other to the State is a luxury neither the country nor individuals will be able to afford.
It might mean a few compromises in lifestyle and people might have to talk to each other again, but families that hang together have a chance of beating the debt trap.
The current account deficit still strikes me as the best score as to whether we are spending more than we earn- so depriving future generations of income, and loading them with debt. Given we have had a significant current account deficit for 40 years; we have effectively borrowed off the future for that period. Bill English's rosiest forecasts suggest the deficit is going to 6.7% of GDP by 2016. That's $16.8 billion per annum; or over $300 million per week. Factor in health and pension costs of ageing, then this is unsustainable as Bernard says. Many young capable people will opt out of helping pay for it, by moving offshore, thus making it worse.
So what solution? Higher taxes? Not great for productivity, although some may be necessary. Means tested pensions?- sensible but will not get past Grey Power and the Winston mob, or John Key for that matter. Property taxes?; could be helpful. Make government decisions based on the current account a priority.
I actually think Patricia is closest to the mark in terms of effective solutions that are politically acceptable. Print enough to lower the exchange rate to sustainable and competitive levels; meanwhile also reducing the government debt from what it otherwise would be. If managed as per the UK, printing would cause inflation in imported goods and services, making lower production more competitive. Overall inflation of say 5% as per the UK, while higher than an ideal world, would reduce debt burdens.
Remember that we don't live in an ideal world- we are losing $300 million a week, and that has to change. Critics of this solution do not seem to come up with effective alternatives.
Bernard Hickey...I salute your editorial savy, your persistance to the topic that keeps you up nights,your ability to pull the burning issues ( real estate/ Boomer baiting or sometimes both in the same storyline)....................but , your Dear Mum and Dad story demonstrates a lack of objectivity , which belies your ability to invite your reader to consider the article on it's merits alone.
You say the conversation is not being had...? in my case you are wrong, and I am sure many others( that number growing) are having the conversation with their children about wealth transfer as a means to protect their (the childrens) future.
Moreover the conversation with them about what we can do to relieve any possible financial ecumberances upon them going forward...you really don't think we care about not being a burden......????? You are just ...........wrong.
You see ,your misdiagnosis here is that you make assumptions about "the family" that appear to have little basis in fact or experience.
I would love to have just thown some flippant comments back at you on this as it's probably what it deserves, ( the approach I mean not the intention of the story )
It turns out the Big Fat flatulating Elephant in the room is concerned,that his one day caregiver to be (possibly only), hasn't noticed the trumpeting for the generational wall he put up to ensure his/her sense of identity was not sullied or inquired of by the annoying Probocidea .
The concern you should be focused on, is the large number of soon to be superannuants who arrive at that point unprepared in any way to sustain a decent standard of living, ....who will go on to burden the state.....who will have had little or no reason to have "the conversation" with their offspring as the point will be moot.
Do please give an example of that conversation, I'd love to read it.
While your at it, you may want to give some of that intellectual time of yours to thinking up more sustainable , balanced ,"fair" social welfare reforms, so as to shift at least some of the burden unnecessessarily placed upon the Taxpayer current and future.
Dear Son and Daughter
I take this opportunity to apologise to yourselves for your Mother and I being born into a time where State funded services were the normal practice of the Governments of the day. Further for misrepresenting to you, our intentions to Capitalise at every opportunity during this period of State funding, with the express intention of extracting as much wealth and(free?)services from the economy as we could, knowing we would arrive at this Utopic place having squirreled it all away, only to cash in all over again while you pick up the tab.......................yes that was the plan
We have since, through guilt and remorse for our disgusting life of selfishness, been given cause to review and revise "the plan" as it was, to find a suitable way to transfer these ill gotten gains to yourselves without fueling further your insatiable appetite for leveraged / credit card debt. This for us, is a conundrum as we have observed over your lifetimes that you subscribe to an " I want it now and worry later " policy , which you may find conflicts directly with the plan of easing your ..future...burden.
love Mom N PopXXXXXXX
He's not into hatred Gibber....Bernard has a itch....and scratching it means he doesn't need to have a bash at the parasites or pollies.
Sadly most rugrats today in skool and at home are not helped to learn why saving and thrift lead to security and happiness. Simple really.
So no matter what Bernard writes...nothing will change.
'New Normal' near zero growth with 3%plus currency debasement per year is here for years to come.
Wolly,
Bernard himself may not be into hatred.
However, my view is that his writings on the inter-generational Baby Boomer scenario is going to fuel anger and hatred at a bunch of folk who had nothing to do with the design of the system. ANd for many of them, are going to arrive at super age in poverty.
In my opinion, he is way off beam in his analysis of cause and effect
Christov
Many thanks. I think.
You say that families are having these discussions and I should back off. I agree many are. I have heard of a few who are gifting money to sons and daughters to use as deposits.
But they are overwhelmingly those who are the very rich with large property holdings.
The real problem is those who don't have parents who are property owners or those parents in debt up to their eyeballs already, having geared up to the hilt in the last decade just to get on the ladder.
The risk is some of these will pull down on some of this equity by borrowing even more to pass on to their kids as deposits.
This all smacks of a debt-fueled Ponzi scheme just to support current values.
cheers
Bernard
Back off...? No..please do not, but please do adjust your approach because it's polarizing those you'd care to hear your message I hope.
Very rich ...large property holdings....? again the gifting that I have come to observe amoung many middle class people "I know " has been a case of doing everything they can to facilitate their childrens well being and security going forward.
Bernard ...i'll say it again the real problem is going to be the percentage of Boomers who arrive at that point totaly unprepared financially for retirement.....you will find a case of pensions plus accomodation suppliments...
Secondly successive administrations fertilising and fueling the disaster that is the N.Z. property boom.
CGT....? honestly mate....I don't care, but that's because it won't hurt me....if it helps significantly ...good.
If the landscape of N.Z. has arrived at Ponzi status you really have to look at the legislators who wittingly or otherwise encouraged the possibility,,,,,not berate those who accepted to live under the rules as laid out for them by those very legislators.
Voting....? we still have'nt really got past the two horse race....same horse different jockey.
Thank you for returning to respond to any number of us. Cheers
Dear daughter and son,
As a member of the BB generation I say sorry to you for letting the corrupt, greedy and unethical process in human behaviour flourish. Over 40 years working hard and making a good living for ourselves, we did nothing to stop an obviously corrupt system, we do nothing to stop the current “Key’s Greedy Slave Driver Club” dominating our daily life’s. For many, but especially families and the younger generation life becomes unaffordable. Inequality is divorcing the nation leading to severe, social, financial and economic consequences.
Hopefully you have the desire for a better, more honest world. Riots with you participation in the streets will finally make some impact for changes, when it is almost too late – I wish you good luck !
Your dad.
REDEMPTION
It has long been known among the Socialist elite that when fighting the "war" against the Capitalist elite, the essential mantra is, our foundation stone is to attack wealth and defend poverty. Wealth cannot defend itself. Poverty can. Within the realms of the media, (main stream or fringe) it is not the done thing to attack poverty and defend wealth.
Bernard. Thats what you are doing with regular doses. Attacking that what cant defend itself. It must be that time of month again.
As I read your daily Top-Ten bulletins I notice how there is a bias to rely on many overseas articles that analyse to death the impending implosion of China. Many of the articles even name names and name institutions. But, that's alright because they can't defend themselves here in New Zealand. Then there is the Eurozone, and Greece and the list goes on, of people or organisations who can't defend themselves.
There is enough going on in New Zealand that could and should focus your attention and deserving of your wrath. But you don't. And I wonder why. The only time you do turn your attention to domestic issues with a bit of acid, is to dredge up the one favourite you can do without any recrimination.
In your article you draw a line in the sand at 1970, yet the global events that brought about the situation was in the 2000's, and the beneficiaries of that explosion were all property owners with a double-dip prize to those who also had debt and mortgages. As Wolly points out at the top of these posts, it is the system that allowed it in the first place (going in) rather than the recipients on the other end (coming out). Fix the system going in with a fence at the top of the cliff instead of queuing up ambulances at the bottom of the cliff.
Redeem yourself. Would you like a list of institutions?
I would second every word of that ......well said iconoclast......Wooly...Kunst ...Stephen H....Alter Ego....PDK.....Justice.
The balance of your demographic must be off on a property thread there Bernard, or maybe they too, think your being a little inflamatory and or devisive.
Iconoclast / Wolly make the excellent points of your blindspot in relation to on the ground dirty dealings within both the politcal and "free market" institutions of N.Z.
There is more than enough swill sloshing over the trough requiring your CSI like analysis to keep you up at nights.
They say who dares wins , but you Sir are a pragmatist in not wanting to offend the sensitivities of the trough dwellers. While that is understandable, it is hardly in keeping with your epithet of Noble Justice.
Quixote raises the lance for another futile attack......Panchez smiles knowing at least the intention is in the right place.
Good luck ...stay well.
Jeez..Christov...some long words that I have never even heard of, never mind used. Well said...I thunk???.
Flatulating, is that where you build a flat on the side of yer house...on the off chance a woman with 10 kids can come and stay for nowt, but you pay em 50K per year for the privilidge....and let em pay orf money lenders at higher Interest, than even this site.
Or is it where you bend over forwards to accommodate another "Trust me, I know what I am doing".. Civil Serpent to spend yer hard earned....WINDFALL and life's savings.
Cos either one can blow up in yer face....and become a REAL liability....if ya let em.
Don't play with matches...(Nothing matches).
So go easy on them long words, I ain't edumacated.....like the big fella, come back from overseas, come to tell us where we went so wrong....
Just what this country needs, another ex-spert from overseas printing and publishing a new version of the TRUTH.
So be careful about that inflated ego.....that too can blow up in yer face and may Herald the makings of a new publishing empire.
(Though broadly speaking I think broadshite is dead, I got a free copy of the Sunday version today......otherwise...I might not even know what the Flatulating Hell yer on about..)
But I am sure there may be little interest in it for .....us...bludgers.
Especially if they get our facts...and farts wrong.
But I concur......I thunk.
PS..What I told .....My kids....and it was not in a letter.
I will stand by you in whatever you chose to do....but do not stand there with yer HAND OUT.
And they don't.
And they never will....edumacated...see.
Praise be.....(It is Sunday and this Heralds a new low for me, but it was raining)
So - Bernard, after all we've given him, still thinks on terms of 'improving' the birthrate?
So help me, I thought he was the smartes of the bunch, that's why I started posting here. Doesn't say much for the rest.
Answer the question, Bernard Hickey - Do you think that MORE people hereabouts is the answer? If so, where do you envisage the process stopping? Bangladesh/Haiti/Rwanda levels?
Anf if you think the answer IS more, I say to you "Bollocks, you've been given enough info to know better.".
"Most of all, everyone must find a way to be more productive and boost economic growth in years to come"
Bollocks again. Productive has two parts - a trend to zero wages, and efficiencies. The first is a scrap withing a contained game, the latter is indeed a valid pursuit, but limited. You've been told this Economic growth within a finite sphere of operations cannot go forever, and you are seeing it peaking globally now. Sure, a country this size with 4 million people has some headroom - until we are like Rwanda.
No reply as usual, I bet. The Emperor still with raiment begarbed.
"So why aren't we having this difficult conversation now?'
Ahh, because NZder's are renowned for putting their heads in the sand on real critical issues and only elect politicians who do the same!
It sounds unfair but unfortunately its 100% true, hence we have ridiculous legislation like WFF, KWS, and a DPB many solo mums get rich on. We have a pension scheme where you can be super rich with 100 properties under your belt and STILL claim a pension!
We have sold and continue to allow the sale of every piece of taxpayer utility infrastructure for life's essentials, and THEN have the audacity to wonder why such things get more and more expensive beyond inflation
We allow multi conglomerates to pollute every lake and stream in the country and THEN pretend to the world that we are "100% PURE".
We are actually contemplating selling our WATER to one racist party/culture or a group of corporations, not seen anywhere in the world since the riots in Bolivia where 131 people were killed in the process of not letting it happen. But...............watch as sleepy sheepy old NZ lets it happen..........and then complains for decades afterwards how they were robbed YET did nothing to stop it much like the sale of our Telecommunications.
Houses are too expensive in the centres causing younger generations to move abroad or take on crazy debt levels. And house prices are still going up in price due to these supply and demand (and easy credit) levels.
So the government should;
state that all new immigrants can only buy new build properties (not demo and old property on the site)
tax land bankers
release more land.
Immigrant right here doublegz. In a new house to. And I like it. If all new immigrants looking for a new house had to buy new then that would in turn increase the supply of houses which Auckland has a shortage of. Do you have a solution(s) to the current supply contraint issues? If you do I'd love to hear it/them. I'll refrain from commenting about you post of "grow up" and so on.
Not the cause DC!.....the cause is poor judgement by the young doing the buying with parasite credit and believing the BS about rising values.
Look to educate the 'young' as to why they are suckers and fools....try to foster a bit of thinking by them...not much thinking going on if they are using parasite credit to inflate the parasite property bubble is there!
And don't expect the poodle media to take up that task...they never have and never will...they are owned by the parasites just as the pollies are.
There is that line between giving your children too much(que spoilt unemployed drug cousin). and steering them towards creating their own wealth. It also depends on how many children you have. If I ask my parents to give up some of their wealth for me, what about my brothers and sisters?
I don't think my parents should give up any of their wealth. Maybe pay off the remains of my studen loan, but then again it is only still around because I didn't want to live at home any longer when I turned 18! They did give us 10k towards our first home, but that was a trade off for wedding money - means we probably won't get married unless it is at home, waste of money really, weddings.
Might see a change when the grandkids come along but you're right they have not come yet because it's too expensive..
When I was 20 I had no money and all the houses companies and farms were owned by the 60 year olds. It's pretty much the same now, forty years later.
And those former 60 year olds have now all dropped off the end of the conveyer belt.
And all the generations including the 20 year olds, have more now , in a material and consumption sense.
Explain to me what the problem is again.
When your parents bought houses they could afford it with one income and the house was generally worth 3 times one income. Now the house is worth 8-10 times income and it's not affordable unless both parents work full time and interest rates stay at 5%.
cheers
Bernard
YES We can lay the blame at the feet of Mum and Dad...
We have raised our younger generations with a materialist , I want attitude with a lack of pioties in life....This being a result of providing a secure home, food on the table envioroment.
This has a resulted in the next generations considering a roof over the head, food on the table a given right, therefore they piorities are cell phones, cars more expensive than needed...label clothes and want to run before walking.
When a population proities a cell phone, car, clothes over and above food and roof, they cant throw stones at a generation that put a roof and food on the table 1st.
BH mentions extending retirement age (I dont have an issue with that) and theolder generation "mentoring" well here is the mentoring....learn what is neassary, (food roof) and throw way those expesive cars, expensive star wars communicators and the expenses related to maintaining these....
It is this that is the great difference between the BBs and those following behind.
Yep bring on a Greece, educate our younger generations who have not seen a major crisis/war in over 70yrs...THEN their proties will change, nothing like an emty stomach to motivate and an expensive car with no fuel to put in it..a usesless hunk of steel and plastic.
Steps
NO christov. It's just starting. It will only die if you let it.
YES. It is a necessary conversation that is worth having. It is to be hoped that BERNARDS next chapters are an examination of the contributing factors that have gone into this situation, and not simply a re-gurgitation of the same-old same-old as has been going on for the past two or three years. One hopes that this conversation can do society a genuine favour and progress to some genuine destination. If you dont ask the right questions you can never get the right answers.
Here are potential headings for the next four chapters
(a) GOVERNMENT. What influence have government policies had on the prices of land and housing. Look no further than a DC article elsewhere today about the strangulation of the components that go into this mix by government central and local. Remember that each member of society is presumed to act in their own selfish interest. So even the most dim-witted member of society knows that in response to government policies, prices of housing must rise. So jump on board folks. That's the subliminal message from your leaders.
(b) IMMIGRATION. On several occasions, poster OMG has correctly pointed out that prices are set at the margin. So does it make sense to continue to allow immigration of (one) wealthy individual to arrive into Auckland and buy a dwelling in a prime position at a price that is chump-change to that new arrival but absolutely un-affordable to the local first-home buyer. Remember that, that one new arrival is re-setting the pricing threshhold for all houses from that day on. Until the affordability and strangulation questions are fixed, all inbound immigration should cease.
(c) CRISTCHURCH has obviously caused a serious dislocation to mobility and re-location of a large chunk of new zealand society (chch being the second largest city in new zealand) many residents are re-locating north (to Auckland?) at a time when competing overseas contestants are able to outprice them.
(d) MONEY LAUNDERING: Hot money is coming into New Zealand destined for the property market. I have commented on this issue in the past so wont repeat it. But the issue is there. Never gets any traction though. Refer the recommendation that all new migrants into the country with serious money should be required to produce a tax-clearance-certificate from their country of origin.
My brother and I have just had this exact converstation with our parents.
"If you want to have the farm stay in the family, you will have to gift the difference between what we can pay and what the market value is otherwise we won't be able to stay in NZ and will be moving to Aus".
It sounds like a bit like blackmail, and in some ways it is, but the reality is unless we take on a crippling mortgage we cannot stay here. It was a very uncomfortable conversation/process and involved A LOT of compromise from both sides.
Bernard is right this is a conversation NZ in general needs to be having - without playing the blame game as to why it is such a mess. Forget the extremes of society that make the headlines. If we want the working middle class to stay and live/work/support this economy then we all need to take a long hard look at the options.
- A generation Y
My advice to the whole family is to sell the stupidly overpriced asset if a crippling mortgage is even a possibility. A greater fool is called for and all participants will be happier and less stressed. The sooner the new greater fools and their bankers are ruined the better.
Great comments. But Iconoclast has my vote...the old have always held the $, but generally recycyle it via bank deposits and interfamily arrangements like helping a grnadchild into a home or through an education.
Hmmm. Home. Hmmm. Education.
Hinge points of the two greatest bubbles...
Homes - see the myriad of writing and check Median Multiples. It's really bad: the product quality is indifferent, the price (especially for land) is quite simply a rort, and the combinatory effects of cheap credit, money laundering, safe haven, economically dopey zoning regulation and all of the above, mean that the debt load needed to carry it all is crippling.
Education - if you follow Instapundit, you'll know his take: it's reached the point in the credentialism cycle where there is quite broadly no possibility of recouping the education outlay via increased lifetime earnings. And he's speaking from within a ZIRP environment!
Ah well, BH, us oldsters can contribute Wisdom. At least aboot the Causes.
Solutions elude us all...
Dear Peter and Penny
Its May 2018. Your mum and I have just been out to a nice dinner and were thinking of the key lessons we could pass onto you guys as you make your way in the world. Although you are both only toddlers now, we think in 5-10 years time the following points will still be relevant:
- Never waste time blaming others for your predicament. This is particularly the case with the government. Realistically, you have one vote out of about 3 million and consequently they are outside of your sphere of control. Accept the fact that they are a bunch of self-interested losers who (with a few exceptions) cannot get a real job anywhere else - and move on to figure out how you can use the existing system to your advantage.
- Equally, don't waste time moaning about previous generations and how they benefitted from a free university education, fantastic house price increases, and Woodstock (the concert not the bourban). Life is unfair, but it feels a lot fairer when you have achieved something with yours.
- Relationships matter, be they with your family, friends or your wider contact base (you won't remember this but there was once a crazy website called Facebook where, before it folded in 2015, you could make a real fool of yourself online. Can you believe that!). Ultimately people only do meaningful business with people that they like, so its important to treat others how you want to be treated yourself.
- You will always be best at the things you enjoy most. Never study a subject at school or university because you think (or others think) that it might 'do you some good'. Rather, concentrate your studies on the things you are passionate about. Later in life it will be this passion that gets you up in the morning (not the money you earn or the so-called 'respectability' of your profession).
- Be grateful for your life. Every morning when you brush your teeth think of something you are truly grateful for and carry this thought for the rest of the day (p.s. based on your mum and I this probably won't be your looks...)
Well thats about it guys, life is simple when you boil it down.
Lots of love, Mum and Dad
Jandel
Do you really believe this:
"Realistically, you have one vote out of about 3 million and consequently they are outside of your sphere of control. Accept the fact that they are a bunch of self-interested losers who (with a few exceptions) cannot get a real job anywhere else - and move on to figure out how you can use the existing system to your advantage."
If so, are you saying there's no point in being a citizen or a voter or someone who cares about their community or nation?
Really?
The ultimate conclusion of your argument is a gated community with armed guards.
cheers
Bernard
Bernard - you are right - but your argument is flawed.
Teaser Headline on home page - “Older property owners have to give up some of their wealth”
Headline at top of article - "It's time the NZ family had that difficult discussion about inter-generational wealth and debt".
The flaws in Bernard Hickey's article are these - it's not an age issue - it's an ownership issue - and yes the wind-fall wealth created by the boom should be sprinkled around a bit and re-distributed, but, to which demographic?, and if you must bring age into it, who were the biggest winners? who should bear the biggest burden?
(a) The issue he wrestles with is the wind-fall profits that accrued as a result of the 2001-2009 property boom. They are not an age problem. The problem is identified as a property-owning problem. ALL owners of property benefitted. Not just the elderly. Of the property owners:- Those who benefitted the least were those who had most equity in their home. Property owners who benefitted the most were those who had the least equity in their home ie those with mortgages.
(b) Without any supporting evidence (until proven otherwise) I am going to assume that as a group, the elderly would have held the most equity, while the next generation down, ie genXers would have held the least equity, but benefitted the most.
(c) The questions Bernard does not address are
- who should bear the burden
- transfer BB to genX? why
- transfer BB to genY? yes they should bear some of the burden
- transfer from genX to genY? yes they should bear the greatest burden
Happy to be corrected Bernard. Next question is - how would you do it.
Iconoclast
I agree that not all property owners are old and your point about the younger property owners being the most leveraged (and therefore made the most proportionally) is right.
The problem is that most of the gain were skewed mostly to older property owners, almost as a matter of historical accident.
And now they don't want to give it up. Otherwise they would vote for a land tax or capital gains tax or be serious about delayed, meanstested or reduced pensions.
cheers
Bernard
Bernard, as you know i have fought you and others over your BB bashing for some time now. This is not because i agree or disagree with the issue. It is because you and Alex and others just don't get it. You seem to think that if you single out one section of society and crucify them then ALL YOUR problems will be solved. This is nonsense and the sooner you wake up to this fact the sooner a solution may be found.
Baby Boomers In Denial
There are so many baby boomers here giving Bernard a hard time for wanting to debate a very important issue. Of course we need to fix the system as well but that won’t change the current reality or any of the points Bernard makes. As Bernard says and as you have all demonstrated so well the baby boomers have all the influence so nothing will change until we start down the cliff face.
It's easy to see all the reasons why Bernard is wrong when doing so means you can maintain your hold on all the countries assets with a clean conscience.
Do we really care about daughter and son ?
As a member of the BB generation I think we deserve a good bashing. Looking into the current worldwide circumstances - we failed miserably creating a better world after the war. I cannot believe how many people here are ignoring the facts. Our generation accepted unethical, greedy and corrupt behaviour – almost in silence. The increasingly negative impact not only directly on us humans, but our environment and nature are visible everywhere.
What’s left is a big mess on many fronts, which the next generation has to "clean up" – almost unbearable and prohibitively expensive.
…and for once BB’s should stop and tell children good night stories.
The whole debate is nonsensicle. Throughout mankind's history, wealth has ALWAYS be most heavily held in the hands of the old, those that have worked the longest to earn it. There is no doubt that recent generations have grown up in an increasingly PC world where they are under the illusion that they can achieve that in half the time (some smart ones will) but for the majority, only time will resolve it for you. And I have no doubt that this new generation will be richer than their parents - some new technology or advancement will create wealth from areas that are not today imagined.
The redeeming feature for you is that we're giving you a fair bit more earlier in life (wedding, house deposits, paid off student loans), and what is left will eventually go 100% to you. The bad news, most of us don't plan to do that until you're at least 75-80. Please keep the medical standards advancing.
Of course the old hold more wealth, the debate here is that they hold disproportionately more than they should thanks to borrowing from future generations who unlike their parents now find themselves unable to afford inflated house prices. To top it off the baby boomers are now inheriting their parents wealth and unlike other countries there is no inheritance tax to ease the burden on current tax payers, madness.
I agree with you the amount they "should" hold is defined by ethical standards. I think Bernard’s point is that much of it wasn't ethical.
I would be happy for a 100% or at least 30% inheritance tax (even though I have wealthy parents and children of my own).
- It would break the wealth trap where money concentrates into the hands of rich families
- It would provide much needed relief to tax payers
- It would mean everyone’s retirement was based on their own efforts rather than the lottery of how wealthy their parents were
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=108…
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