GOLDEN RULES

Central Leader - - YOUR PAPER, YOUR PLACE -

Naughty, naughty, New Zealand house­holds, you have bor­rowed far, far too much money.

The In­ter­na­tional Mone­tary Fund thinks house­holds here should be wor­ried by how big their debts are.

New Zealan­ders were late ar­rivers at the global debt party, but we made up for lost time when we got there.

Back in the 1980s, banks the world over waved their magic money wands, and house­hold debt as a pro­por­tion of GDP rose glob­ally from 70 per cent (1980) to 128 per cent (2015).

New Zealand is on course to reach an Ire­land-like 168 per cent by 2022.

Big debts = height­ened chance of fi­nan­cial cri­sis, spik­ing un­em­ploy­ment, and mort­gagee sales in the IMF’s books.

Of course telling house­holds off is point­less.

Apart from hav­ing done a poor job of elect­ing coun­cil­lors and MPs who gave a fig about ris­ing house prices, none of this is re­ally Pay down debt fast Live fru­gally to do it Vote

their fault.

Each one lived the best way it knew how.

They bought houses, mostly to live in, which is an ac­tion as Kiwi as eat­ing fish and chips, watch­ing the All Blacks, or hav­ing com­pli­cated feel­ings on Wai­tangi Day.

Own­ing a house is the ab­so­lute heart of our cul­ture.

So when house prices went up, and up, and up, peo­ple who could bor­rowed ex­tra­or­di­nary amounts of money to get one.

Just as it sees high debts as risky for a coun­try, so too would the IMF look with a frown on the risk a cou­ple who bor­rowed 6.5 times their be­fore-tax in­come to buy a house have been forced to take on leav­ing them ex­tremely vul­ner­a­ble to shocks like job losses or a spike in in­ter­est rates.

Let’s be clear. I, and many of my age never had to do any­thing so risky.

But what could peo­ple do? When you are born into ex­tra­or­di­nary times, you have to do ex­tra­or­di­nary things.

An ex­tra­or­di­nary debt (which to me is any­thing over four times house­hold in­come) re­quires an ex­tra­or­di­nary debt clear­ance strat­egy to get it down to a level where a cou­ple can cope with it on one in­come.

That means go­ing for op­tions like tak­ing sec­ond jobs be­fore chil­dren come along, adopt­ing ex­treme fru­gal­ity, let­ting out rooms, liv­ing with sec­ond­hand fur­ni­ture, run­ning one car (at most), and pur­su­ing pay rises, and pro­mo­tions, with sin­gu­lar fo­cus.

It also means cri­sis-plan­ning with fam­ily.

Would fam­ily help with re­pay­ments in a cri­sis, or let the kids move back in, so the deb­ten­cum­bered house could be rented out?

I hear peo­ple tell young folk who can’t af­ford to buy in the city of their birth to get the hell out of Dodge and live some­where else.

It’s a level of ca­sual eco­nomic cru­elty and ne­glect that marks the last decade.

Telling young New Zealan­ders they shouldn’t ex­pect to live an or­di­nary life in their home cities is ex­tra­or­di­nary.

That’s why Labour polling shows af­ford­able hous­ing is the num­ber one is­sue for par­ents and grand­par­ents in the com­ing elec­tion, and prob­a­bly why Na­tional has now de­cided to em­u­late Labour with prom­ises to build af­ford­able homes in Auck­land.

123RF

A child’s con­cep­tion of a home. On cur­rent prices, many won’t grow up to own one.

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