Bernard Hickey: Baby Busters pay the price

All change ... Roger Douglas expounds as Prime Minister David Lange listens. Photo / NZ Herald Archive

Rogernomics set us on a new path, but young people have been the losers

This week, I stumbled across a frightening piece of film. It was a TVNZ clip of Roger Douglas in the mid-1980s. I had forgotten how his moustache bristled when he was at the peak of his powers, lecturing an interviewer about the need to free up the economy and run a tough budget.

New Zealand was in crisis. It was nearly bankrupt, socially divided and ready for change. The fourth Labour Government unleashed a bloodless revolution that swept away decades of regulations and shook our post-war welfare state to its foundations.

Few would argue change was not needed or that all the change was bad. But figures released this week show the benefits have accrued to some generations more than others.

Those born after March 1984 have been the losers. They are the baby bust generation.

Statistics NZ figures this week showed the home ownership rate for those aged 15 to 40 was 22.1 per cent last year, from 35.3 per cent in 2001. The rate for those aged 70 to 74 was 77.5 per cent, barely down from 80.6 per cent in 2001.

Poverty indicators also show the young have been hit hardest since 1984. As many as 25 per cent of our children live in poverty, according to last year's report by the Expert Advisor's Group to the Children's Commissioner.

They are the children of those born in the immediate aftermath of the 1984 revolution.

Those in their 30s, 40s and 50s when the revolution happened are much more comfortable now. The last Ministry of Social Development Living Standards Report, done in 2008, found around 4 per cent of those over 65 were living in hardship.

There are a couple of good reasons for this. The higher home ownership rate among the elderly has helped them stay out of poverty.

The bi-partisan decision to set the pension rate for a couple at 66 per cent of the average weekly wage has meant pensioners' wages have risen more quickly than benefits for those under 65. Social Development Minister Paula Bennett announced regular benefits would rise 1.38 per cent from April 1 in line with the Consumer Price Index, and pensions would rise 2.66 per cent in line with average weekly earnings.

The other major reason for the widening gap between the pre-1984 generations and the Baby Bust generation is the property market. The cost of buying a house started rising relative to incomes in the late 1980s. It really took off in the early 2000s and the trend of buying rental properties began in earnest.

The generations in their 30s, 40s and 50s in the mid 1980s hoovered up rental properties at a great rate, realising tax-free capital gains and cheap debt in a low-inflation era made money for jam.

Meanwhile, those born in the late 1980s and 90s went through school and arrived to find that, unlike their parents, they had to pay hefty fees for tertiary education. If they were unlucky enough to graduate into the 2008-11 recession they were hit doubly hard, suffering higher unemployment rates and lower wages than their elders.

Wages for those aged 15 to 35 rose about 5 per cent over the four years of the recession and wages of those aged 40 to 65 rose 18 to 29 per cent.

So 30 years on from Rogernomics, the Baby Bust generation faces high student debts, low home-ownership rates, high poverty and slower wage growth than those who can remember the Douglas moustache.

How will the Baby Busters judge the performance of the older generations?

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