Glory of money ‘fric­tion’

Kapi-Mana News - - OUT & ABOUT - ROB STOCK MONEY MAT­TERS rob.stock@fair­fax­me­

I’m un­der­go­ing a ter­ri­ble or­deal in my bat­tle with frit­ter­ing.

My work­place has moved into a su­per-mod­ern of­fice on top of a su­per­mar­ket.

It is now dan­ger­ously easy to put a thought like: ‘‘I fancy a sausage roll’’ into ac­tion.

Thoughts like: ‘‘Mmh, I fancy a dou­ble choco­late stout tonight’’ are com­ing with greater fre­quency now I spend my days over a nice beer se­lec­tion.

I have ex­pe­ri­enced a massive de­crease in what a re­tailer would call ‘‘fric­tion’’, which is shop­ping in­dus­try jar­gon for the dif­fi­culty of buy­ing some­thing.

The greater the fric­tion, the less money peo­ple spend, so the harder re­tail­ers work to get rid of it.

When I was a nip­per, it was hard to spend money. No-one had credit cards. Shops shut early, and didn’t open on Sun­days.

Once the closed sign was up, you couldn’t buy any­thing. The in­ter­net had been in­vented, but you couldn’t shop on it.

These days your lounge is a shop­ping mall when­ever there’s a screen open. If you are awake, you can shop.

Even the ac­tion of buy­ing has lost fric­tion.

Writ­ing out cheques and count­ing out cash have largely gone. These days PINs of­ten don’t even need en­ter­ing. If you’re too lazy to get a card out, just wave your wal­let at the ter­mi­nal.

As fric­tion di­min­ishes, peo­ple need more willpower and an­ti­con­sumer de­fence strate­gies. Here are some of mine. Will­ful ig­no­rance: I vir­tu­ally stopped watch­ing TV years’ ago, so I don’t see much ad­ver­tis­ing. I’m squea­mish about vi­o­lence, and bored by re­al­ity shows.

I know less than I used to about things I could buy. As a re­sult, I don’t yearn for them. Cut­ting screen time re­duces con­sumer pres­sure.

Place avoid­ance: I dis­like shop­ping. I de­test malls. Re­plac­ing recre­ational shop­ping with more healthy pur­suits (walks in the bush, trips to the beach, etc) in­creases will­ful ig­no­rance, and phys­i­cally sep­a­rates you from temp­ta­tion. Dou­ble win.

Big pic­ture think­ing: Do you want an­other shirt, or do you want a mort­gage un­til you are 72? Fair ques­tion.

Is that cof­fee a cof­fee, or is it the par­tial sac­ri­fice of your early re­tire­ment? Fo­cus­ing on the big uses for money makes it eas­ier to avoid frit­ter­ing.

Hap­pi­ness fo­cus: Fo­cus on us­ing money to bring deep hap­pi­ness. Ask your­self: ’’Will knock­ing four months off the mort­gage make me hap­pier than bring­ing for­ward the pur­chase of a new car by a year?’’ Train your­self to ask the ques­tion.

In­creas­ing per­sonal fric­tion: Many peo­ple do it. They leave their credit cards at home, or don’t carry change, if there’s a vend­ing ma­chine at work. They’re sab­o­tag­ing their abil­ity to spend.

Joy­less sneer­ing: I know it doesn’t sound very pleas­ant, and I don’t do it out loud, but I am sus­pi­cious about the per­sonal fi­nances of the best-dressed, best­housed peo­ple I know. When I find my­self in­clined to envy, I de­fend my­self with spec­u­la­tion about the state of the en­vied party’s debts.


Be­ware fric­tion­less spend­ing. Fo­cus on spend­ing for deep hap­pi­ness.

Work on your willpower Last week, Auck­land’s av­er­age house price reached just over a mil­lion dol­lars, mak­ing the City of Sails an even more ex­pen­sive lo­ca­tion than Lon­don.

For any Bri­tons who have been hop­ing to escape here in the wake of Brexit, the bad news in the Guardian news­pa­per was that ’’New Zealand has the world’s most fre­netic prop­erty mar­ket’’.

This ex­tra­or­di­nary prop­erty boom con­tin­ued to out­strip the abil­ity of Par­lia­ment to re­spond.

Last week, Build­ing and Hous­ing Min­is­ter Nick Smith was cham­pi­oning leg­is­la­tion that will cre­ate eight spe­cial hous­ing ar­eas to­talling 762 hectares of green­fields land for hous­ing in Auck­land.

Grad­u­ally, the leg­is­la­tion will also help to free up land else­where via a na­tional stan­dards process that will take three years to fully take ef­fect.

‘‘There is no sil­ver bul­let to New Zealand’s long­stand­ing hous­ing is­sues, but this bill takes a fur­ther step in the right di­rec­tion,’’ Smith con­ceded.

Smith’s Par­lia­men­tary ef­forts were con­sis­tent with the gov­ern­ment’s in­sis­tence on treat­ing sup­ply as the real prob­lem, and its faith that crank­ing up the hous­ing sup­ply will even­tu­ally make prices af­ford­able for most peo­ple.

If only the Auck­land City Coun­cil zoned even more land, more favourably, for de­vel­op­ment - so the the­ory goes - this would boost the sup­ply side of the af­ford­abil­ity equa­tion, and all will be well. Even­tu­ally.

Not so, alas, in the real world. Yes, many will wel­come the em­pha­sis on new state houses be­ing built, rather than old ones be­ing sold. How­ever, new homes com­prise only a frac­tion of the hous­ing mar­ket.

Any re­lief that an in­crease in hous­ing sup­ply can of­fer on price will con­tinue to be swamped by de­mand side fac­tors like the he said. ‘‘No­body has ever shown … that you can sup­ply enough hous­ing into a mar­ket to ef­fec­tively make prices fall. New sup­ply is two per cent of the hous­ing mar­ket. Even if that dou­bled, what im­pact would that have?’’

More to the point, the only peo­ple able to af­ford to buy houses, old or new, are the ones who al­ready have a foothold in the prop­erty mar­ket. With in­ter­est rates slosh­ing around the zero to 2 per cent mark ex­ist­ing home­own­ers can lever­age their ac­cess to this cheap credit and to the mort­gages in­volved.

Spec­u­la­tors can do like­wise. But for ev­ery­one else? Ar­guably, the gov­ern­ment may need to use its own ac­cess to cheap money to fund peo­ple into hous­ing at a rate be­yond its cur­rent ef­forts. Ul­ti­mately, we can­not sim­ply build our way to af­ford­abil­ity.

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