I’m also old enough that a 20th anniversary doesn’t quite feel like the epic sweep of history it once did.
I remember in 1987 the world going crazy for the 20th anniversary of Sgt. Pepper and the Lonely Hearts Club Band. The psychedelic era and the original summer of love seemed fascinating but impossibly distant. Of course, back then a 20-year anniversary was more than a lifetime ago.
Last year I celebrated my 20th anniversary as a writer at the Herald. Sometimes 2004 seems distant, but more often it feels like it has gone by in a rapid blur of headlines.
Governments have come and gone. The unlikely combo of Winston Peters, Judith Collins, Gerry Brownlee, David Parker and Damian O’Connor are the only survivors from 2004.
The economy has also seen some dramatic booms and busts. The past 20 years have delivered a global financial crisis, a devastating earthquake and a pandemic.
Things have probably been better than in the previous 20-year period, but only because the bar was set quite low as New Zealand struggled through a series of recessions and difficult restructuring through the 1980s and 1990s.
Perhaps given the grim economic environment of the past two years, some people will disagree with that assessment.
But offsetting the crises of the past two decades has been the tourism boom and the dairy boom – both underpinned by huge growth in the Chinese economy and the free trade deal we signed in 2008 which allowed us to leverage that.
There are other bright spots. We built an internationally renowned film industry, we produce video games and have a not insubstantial tech export sector.
These are providing career pathways for Kiwi kids that we couldn’t even dream of when I was growing up.
And of course, we’ve had housing booms.
If there is anything that makes Kiwis feel wealthier than they were 20 years ago it must surely be owning a home (or preferably more than one).
Median house prices have basically trebled over that period. It would be nice to say that home-owning Kiwis were three times richer. But of course, most of us still just have one home and have to live somewhere.
But as a nation relying on residential housing for wealth creation has a number of problems. Not least is that it has exacerbated wealth inequality. If you were in the market in 2004 you’re probably pretty comfortable now.
Too bad if you were just a kid.
Even young professionals with good salaries now have to save harder and wait longer to get onto the property ladder. The inflation in house prices has also inflated the amount we have to borrow to buy a house.
That inflates the amount of money that New Zealand sends offshore in the form of dividends to foreign shareholders. And that has undercut a lot of the good work we’ve done growing exports over the same period.
New Zealand’s current account deficit was 5.1% of GDP in 2004. After the huge rise in exports to China and the tourism boom, it’s depressing to see that not only do we still have a deficit but that it is wider than 20 years ago at 6.7% of total GDP.
To be fair we had already sold off all our major banks by 2004. KiwiBank, which was launched in 2001, has trucked along steadily without ever presenting a threat to the big four.
Perhaps the next 20 years will see it rise to offer more serious competition. Moves by the current Government to investigate options to capitalise it are promising.
Growth has been a bit more impressive for some other initiatives of the era.
KiwiSaver – launched in 2007 – has been a solid success significantly boosting the number of New Zealanders saving for their retirement.
The FMA’s latest KiwiSaver annual report shows funds reached $111.8 billion – up 19.3% from $93.6b in the previous year.
John Horner – the FMA’s director of markets, investors and reporting – said breaking through the $100b mark, for a relatively small country like New Zealand represented a “coming of age” for KiwiSaver.
I suppose it is to some extent. And I don’t want to small the party but Australia’s compulsory savings superannuation scheme is now worth more than NZ$4 trillion.
It makes for a pretty simple reason why Australia is a richer country - they save more.
As Simon Power – chief of investment firm Fisher Funds – said recently “We need to have a nationwide discussion about whether the settings are right on KiwiSaver... we’re having broad discussions about whether 3 or 4% seems to be the right contribution rate. In Australia, they’re debating between 11.5 and 12%.”
There are other comparisons that don’t stack up well. GDP in 2004 grew at 5.2%. It went backwards by 0.2% in the year to June 2024.
Hopefully, that is a short-term economic issue. It’s the longer-term issues we need to address if we really want to power ahead.
We need to diversify and find export markets, we need to grow new exports and rely less on dairy commodities. We need to save more and boost investment in productive parts of the economy. And we need to ensure more people can afford to own their own homes.
Ironically we were debating these same issues in 2004.
In the 20 years since then, we’ve made a few positive steps forward but it feels like progress has stalled.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003. To sign up to his weekly newsletter, click on your user profile at nzherald.co.nz and select “My newsletters”. For a step-by-step guide, click here. If you have a burning question about the quirks or intricacies of economics send it to liam.dann@nzherald.co.nz or leave a message in the comments section.
