Despite our iconic bird's wingless status, Kiwis have always been keen to fly.
For the last two years we've been grounded while Covid took its toll. Now borders are starting to open and, despite the situation still being grim in places like the UK, New Zealanders are keen to get going and explore the world like they used to.
Recently the Ministry of Business, Innovation and Employment predicted 50,000 New Zealanders will leave for an OE or for work, after two years of Covid-19 restricting international travel. High estimates range to 125,000 people leaving, though the lower 50,000 estimated is expected to be more likely.i
And it's not just people going overseas – close to 25,000 people have left Auckland in the past two years. This isn't unusual in itself, as it follows traditional internal migration patterns, but the lack of international arrivals certainly highlights it more.ii
New Zealanders flying the coop is nothing new. The beloved OE has been a rite of passage for many young New Zealanders, and the expected exodus can be somewhat attributed to a bottleneck of these eager travellers. While New Zealand has gorgeous scenery, it's hard to compete with the allure of cities like New York or London for young people wanting an overseas adventure.iii
What this might spell for we who remain, however, is an exodus of mid-skilled employees along with the entry level ones who would traditionally go on their OE.
This is what is being referred to as the brain drain, where a portion of our skilled workforce will leave New Zealand amidst an already tight labour market. Two more years on the tools gives more mastery to any trade, so we may see the gap between entry and senior roles increasing.
New Zealand companies were already having to contend with companies overseas offering remote roles with more competitive salaries, but now they may lose the home-ground advantage as well now that people can actually relocate to take up new employment.
Then, of course, there's the cost of living in New Zealand. As we're all no doubt hyper-aware, inflation is currently the highest it's been in 30 years and wages have not risen to match it. Essentials like gas, rent and food are sky high, while predatory lenders in buy now pay later schemes are making it all too easy for the average person to dig themselves into a hole under the pretext of helping them finance an increasing range of items - but that's a whole other article.
You may have seen the news about the young couple who figured out living in Barcelona was cheaper than trying to buy a house in New Zealand. Other similar articles have anecdotes from soon-to-be expats who have calculated the costs of moving overseas, and say higher income will compensate for expensive living in trendy places like New York.
While it makes a good headline, I think it falls into the same category as the Otago woman who saved money ordering her groceries from Australia – technically doable, but not for everyone, and not without some logistical considerations.
For one, there are tax consequences to any move. This is something most OE-hopefuls tend to overlook, as NZ tax is currently one of the friendliest systems in the world – moving to elsewhere can make it infinitely more complicated. For example, gaining a US green card sees the recipient become a US tax citizen, and must declare your entire income no matter where or how it was earned (capital gains included).iv
While those flights can be tempting, it's worth taking a moment to assess your situation and how this will impact your financial stability long term. Even if you're fed up with your situation here, rushing into a new setting may not change much if you're not prepared for it.
Do you still have that OE fund from two years ago, or has it shrunk a little while you were waiting for normalcy to return? Have you kept contributing to it? As we've seen with recent inflation pieces, your budget for travel may need adjustment if it was based on old estimates. Yesterday's (or yesteryear's) dollar doesn't hold the same buying power today.
Overseas isn't going anywhere. Even if travelling freely is a question mark at this stage, the past few years are still just a blip on the horizon of humans moving around the globe.
Take a breath, step away from the flight app, and go through your options to make sure you're not setting yourself up for hard times down the line. Have a good look at your current situation and your goals. Will moving overseas help these – and if not, are you willing to accept the impact it may have on your financial future?
When assessing whether you're ready for the move, make sure you have enough money to do so.
If you're resettling more permanently, make sure you have an emergency fund with enough in it to cover your living costs for several months – you don't know what will happen when you're over there, and it may take longer than you think to find a stable living situation and your ideal job.
If you're doing the big OE with no strings attached, the same rule applies – go with more than you think you need, just in case.
For those wanting to stay in the home field a bit longer, now is a good time to think about where you want to be on your financial road map. Is your next big goal a savings one, buying a house, retiring? If you're finding it hard to see the wood for the trees (especially in the current climate), seeking advice from trusted professionals is a great place to start.
· Nick Stewart is a Financial Adviser and CEO at Stewart Group, a Hawke's Bay-based CEFEX certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver solutions.
· The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from an Authorised Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz
i https://www.nzherald.co.nz/nz/covid-19-the-exodus-after-the-borders-open-mbie-estimates-50000-kiwis-will-leave/HB4LXYDQWCFY4LM4NGPCQHW3UA/ ii https://www.rnz.co.nz/news/national/464636/thousands-leave-auckland-for-other-new-zealand-centres-amid-covid-19 iii https://www.newshub.co.nz/home/politics/2022/04/brain-drain-green-mp-chl-e-swarbrick-says-kiwis-can-t-expect-young-people-to-stay-after-talking-down-to-them-for-years.html iv https://www.alllaw.com/articles/nolo/us-immigration/do-green-card-holders-pay-taxes.html#:~:text=Once%20you%20get%20a%20green,where%20the%20income%20was%20earned.