Ten ways for baby boomers to redeem themselves

I argued in my blog post last week here  that Generations X and Y should leave New Zealand because baby boomers were stopping any change to the status quo that would allow younger generations to own family homes.

I got quite a few comments from baby boomers (and younger readers) throwing their hands in the air and wondering what could possibly be done to solve the problem. They also pointed out it was no different anywhere else so what was the point of leaving. House prices have collapsed 20-30 per cent in America and Britain, effectively reducing the scale of the problem, while prices here have only fallen around 9 per cent here. Australian prices are more affordable in many cities because incomes are higher, although inner Sydney and Melbourne are pretty unaffordable.

But there is much our baby boomer leaders and their voter-enablers could do to fix the problem if they wanted. We all need to agree on a variety of things to lift our productivity and therefore our real per capita incomes at the same time as reducing house prices. Here's 10 ideas:

1. Impose a land tax. It works in Hong Kong and is much cleaner, fairer and more efficient way to take some of the air of the land price bubble than a capital gains tax.

2. Introduce a flatter, simpler system for income tax to encourage productive work rather than tax avoiding rental property investing and consumption. Here's more detail here.

3. Remove middle class welfare payments such as Working for Families and non-means tested interest free student loans. They create work for bureaucrats and create ruinously high marginal tax rates.

4. Extend the retirement age to 70 from 65 by 2020. Reduce the universal superannuation payment to 60 per cent of average wages from 66 per cent. We just can't afford it and it will give us time to restructure our economy.

5. Open up monopolistic industries to competition wherever possible and regulate hard to restrain inflation wherever competition is not possible. The electricity and telecommunications industries come to mind. I'd love to see the power generators forced to sell their retailing operations and I'd love to see the Commerce Commission force mobile termination fees much lower to encourage a third mobile competitor.

6. Crack down on handouts for politically neat but economically dumb ideas such as sports stadiums, NZ$40 million wharves and railway operators. Be ruthless on public sector spending.

7. Open up the immigration taps. Population growth, particularly of young skilled migrants, will do an awful lot to kick-start our economy and skew the population imbalance to something more sustainable. Welcome everyone in, regardless of whether they are from China, India, Brazil or Timbuktu. As long as they have some English and are bright, we should open the door.

8. Convert the NZ Superannuation Fund into individualised accounts that could be transferred to KiwiSaver accounts with other fund managers. This would effectively make KiwiSaver almost compulsory and encourage many New Zealanders to become more financially literate.

9. Set a target size for the government sector (both local and central) in some sort of taxpayers' rights bill as a proportion of GDP and manage the sector down to that level, which could be, say, 30 per cent of GDP.

10. Allocate every adult New Zealander a certain pot of 'free' money to spend on fees for tertiary education, particularly for retraining.

 

 

Bernard Hickey

 

Photo:Herald on Sunday