Bernard Hickey 's Opinion

Bernard is an economics columnist for the NZ Herald

Bernard Hickey: Methinks boomers protest too much

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Home buyers now pay almost twice as much to buy a house as in the 1980s and 1990s, relative to incomes. Photo / Chris Skelton
Home buyers now pay almost twice as much to buy a house as in the 1980s and 1990s, relative to incomes. Photo / Chris Skelton

Last week's column about the need for an intergenerational wealth and debt deal struck a nerve.

I was swamped with comments from outraged baby boomers telling me to stop the blame-gaming.

I was told to get back in my box with the rest of the lazy, selfish, whingeing Generation Xers and Ys.

I was told the youth of today never had it so good with all their Xboxes and iPads and 5 per cent interest rates.

I was told the baby boomers had to cope with 20 per cent interest rates and had to work harder and longer for less. I was told they had worked hard and paid taxes all their lives and they were "due" their pension at 65.

Now the rebuttal. Firstly, on the argument that it was just as hard to buy a house in the 1980s and 1990s as it is now. Productivity Commission figures show the national house price to disposable income ratio rose from 2 in 1980 to around 3 in 2003, before doubling to almost 6 in 2008. It is now 5. Treasury figures show the percentage of gross income needed for an average mortgage payment rose from around 35 per cent in the mid 1990s to a high of 65 per cent in 2008 when interest rates hit 10 per cent. It is now 45 per cent.

Essentially, home buyers now pay almost twice as much to buy a house as in the 1980s and 1990s, relative to incomes. The relative costs are much worse in Auckland.

Property is much more expensive for first-home buyers now than in the 1980s and 1990s. First-home buying would now be impossible for most, particularly in Auckland, if interest rates were not at record lows. It also requires both income earners in a home to stay working.

Secondly, on the argument that baby boomers worked hard for that property wealth and don't deserve to have it taken off them. Reserve Bank figures show the net equity in housing wealth more than doubled from $203.5 billion in 2002 to $456.7 billion in 2007.

Property owners' wealth rose the equivalent of more than 125 per cent of GDP in five years. That wealth was not earned or built.

Final word to Stephen, a listener to a Radio NZ interview with World War Two veteran Bob Wood recently.

"As his generation passes, I consider it important to acknowledge how great his generation was. They had a childhood marred by The Depression and a youth lost at war. An acknowledgement of what they did is why I and others of the younger generation have been going to Anzac Day parades in recent years. That generation's children, the baby boomers, come across as shallow and self-absorbed in comparison. They dismantled the welfare state and even disrupted Anzac day parades in the 1970s. They labelled these poor traumatised men as war criminals. I would like to say to the Bob Woods - thank you."


Debate on this article is now closed.

- Herald on Sunday

Bernard Hickey

Bernard is an economics columnist for the NZ Herald

Bernard Hickey is the publisher of Hive News, a Wellington-based political and economic subscription news email service. He also writes for Interest.co.nz and appears regularly on Radio New Zealand, Radio Live, TVNZ and TV3. He has been a financial journalist for 25 years, having worked for Reuters, the Financial Times Group and Fairfax Media.

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