TIME MACHINE

To help celebrate the 15th birthday of this illustrious publication let’s jump into our economic time machine and take a trip to the recent past.

For those of us who’ve spent most of our lives living in the 20th century, October 2004 doesn’t seem so long ago.

The anniversary also coincides with the arrival of my first child — so, to be honest, it’s all a bit of a blur.

But a look back at the economic data of the day shows the economy that the Herald on Sunday was launched into was very different to the one we’ve got now.

Houses were about half the price but mortgage rates were double.

The economy was booming — with GDP growing at more than 5 per cent a year.

Some things weren’t so unfamiliar; there was a Labour-led Government and guess what? Business didn’t like it.

Business confidence was also in negative territory back then.

The net confidence figure on the National Bank (now ANZ) Business Outlook Survey was negative 21 per cent in October 2004.

That compares with an even gloomier 51 per cent (negative) in the Survey last week.

Business confidence actually stayed in negative territory right through three more years of solid growth under Helen Clark and on into the 2008 global financial crisis.

Unemployment was also relatively low in 2004 — 4.2 per cent then versus 3.9 per cent now.

In 2004 New Zealand was still enjoying the first flush of the dairy export boom, underpinned by the China free trade agreement.

We were in the early days of a big surge in tourist numbers — off the back of the wildly popular Lord of the Rings films.

The housing market was also in good shape. There was growth but prices were still relatively affordable for first-home buyers.

According to One Roof/Valocity statistics, the national median house price was just $253,000, compared to $560,000 now.

In Auckland — unsurprisingly — the contrast is even more extreme.

In 2004 the median house price within the old Auckland City limits was $360,000; in 2019 it is $915,000.

That’s not to say it was always easy or stress-free to buy a house in Auckland. Although it was still possible, which it isn’t for most younger people now.

The difficulties in the housing market back in 2004 were more to do with cash flow than the size of the deposit.

There were no Reserve Bank loan-to-value ratios in 2004 and — pre-GFC — the banks were generally more relaxed about lending on a 10 per cent deposit.

The hard part of the housing equation was interest rates.

When it comes to monetary policy, 2004 really was another age.

The official cash rate in New Zealand was 6.5 per cent, putting the floating mortgage rate at about 8.5 per cent.

Rates would keep rising into the GFC as the Reserve Bank struggled to keep inflation down and the economy from overheating.

We have the opposite problem these days.

Inflation has more or less disappeared from the economy, possibly due to the dramatic rise of the internet, which has made everything cheaper for consumers.

The downside of that is that wage growth hasn’t been that flash either — although it has improved.

The average household income was $60,433 in 2004, it’s $107,647 for the year ended 2018 (latest available).