New Zealand has changed an awful lot over the past 30 years. Mostly for the good, but not for everyone.

Anyone born since 1985 has seen their incomes grow much more slowly over the past decade than their elders' did, and have missed out on the massive capital gains that landed on anyone owning property over that period.

They grew up during New Zealand's worst recession since the Depression (1990-92) and graduated into the recession in and around the Global Financial Crisis. The percentage of children living in poverty has almost doubled from 15 per cent in 1984 to 29 per cent in 2014, according to the Child Poverty Monitor run by the Children's Commissioner and Otago University.

Meanwhile, those who owned or bought property, particularly since 2000, have done extraordinarily well and their incomes have risen much faster than those that followed.


Household assets rose by over $800 billion to over $1.1 trillion over that period, driven largely by a $700b rise in the value of houses, but the vast bulk of it went to those over 35.

Statistics New Zealand reports the median net worth of people between 25 and 34 was $26,000 in the year to June 30, 2015, and this cohort of 576,000 had a total net worth of $55.1b. By contrast, those over 35 had a net worth of $993.4b at the end of June 2015.

Statistics NZ doesn't have figures for the last year, but house prices have risen 15 per cent and the stock market has risen 20 per cent over the past year, suggesting that group is now worth well over $1.1t. That means the over-35s, the generations born before the 1980s, are worth more than 20 times that of the youth of today.

That's the wealth story. The income story isn't quite as unequal, but those over 35 have also fared much better than the young, particularly over the past10 years.

Statistics New Zealand figures show real median hourly earnings from wages and salaries rose an average of 3.7 per cent per year over the 10 years to 2014 for those over 35, and those under 35 saw their wages rise by 2.1 per cent over the same period.

That means wages for over-35s rose 76 per cent faster than the under-35s, and that growth has accumulated. Average weekly incomes for those over 35 rose by between a third and 55 per cent over the past 10 years. Those under 35 saw their incomes rise by less than a third.

Some of the faster growth for older incomes and the massive rise in wealth for the over-35s was accidental. They grew up in the relatively prosperous 1960s, 1970s and early 1980s when unemployment was low and there were much stronger social safety nets from which to start their lives and families. They were well-established in their jobs when the recessions hit so were less likely to lose them.

Deliberate policy choices are blowing apart the gaps in income and wealth between the generations, starting with Super.

The new entrants to the workforce had it much tougher over the past 10 years than those already locked in to career paths and well-stocked Linked In profiles. Those owning property were also the accidental beneficiaries of a doubling in house prices because of high net migration, falling interest rates and restrictions on land supply for housing - none of which could be blamed on policy-makers at the time.


But there have been deliberate policy choices that are blowing apart the gaps in income and wealth between the generations, starting with New Zealand Superannuation.

In many ways it is a fantastic system. It is simple, fair for those over 65 and encourages many to keep working, unlike in many other countries.

But it does have a couple of in-built expanders of inequality between the generations.

The payment is adjusted in line with average wage growth, which is much faster than inflation and faster than wage growth for younger New Zealanders.

It's also much, much faster than those on other benefits. Average weekly incomes for those over 65 rose 55 per cent over the past 10 years because of that adjustment and because more are working beyond 65.

Those aged 20-29 saw their incomes rise 30 per cent because they are more likely to be unemployed or working on the minimum wage.


Then there's the issue of who will pay the superannuation bill for the baby-boomers.

Over 500,000 people will turn 65 and start receiving the state-funded pension in the next 20 years. Those payments will come from taxes paid by people working over the next 20 years, which will predominantly be those under 35 now.

Sir Michael Cullen knew this and set up both KiwiSaver and the New Zealand Superannuation Fund to help "pre-fund" the retirement burden so that when big payments started being made there was money to help today's young pay that bill.

Unfortunately, the Government decided progressively over the past seven years to reduce the incentives for KiwiSaver and to stop making contributions to the New Zealand Super Fund.

The fund quietly reported this week that had the Government kept making contributions since 2009 the fund would now be worth $50.6b, which is $20.5b larger than it is now. The Government chose not to borrow $14.7b over those seven years and hand it on to the fund to reinvest.

That meant today's under 35s are missing out on at least $5b that would have earned over and above the debt incurred if the Government had continued borrowing to invest. That loss will compound in the years to come, further increasing the burden of New Zealand Superannuation.


The Government has also chosen not to tax the gains on the hundreds of billions of housing wealth that fell into the laps of those aged over the 35, which is helping to fuel a further widening of that gap between the generations.

Those under 35 face a future of very expensive housing, mostly likely as renters, much lower net wealth as they approach retirement and having potentially to pay higher taxes to keep paying the pensions of those retiring with well over $1t in assets.

It's not fair and no one is doing anything much about it.