FSC shines a spotlight on how young people think about the economy

New Zealanders between the ages of 18 and 39 are at risk of becoming the “lost generation”, with many expected to head overseas for higher-paying jobs and lower living costs once our international borders re-open.

Thursday, April 14th 2022, 7:20AM

by Jenni McManus

That’s one of the key takeaways from a survey released yesterday by the Financial Services Council (FSC) which found that people aged 18-39 age group are more fearful of wage stagnation than any other age group and have little or no confidence that the New Zealand economy will improve in the next 12 months.

Of those aged 18-39, only 39% own their own homes, with 61% still renting. Apart from wage stagnation which is a concern for 68% of respondents, their main worries are inflation, house prices and interest rates. About 50% have received financial assistance from the “bank of mum and dad” to buy a property and their savings rates are low: only half could find $5000 within a week in an emergency.

Laurie Kubiak, the chairman of Trustees & Executors which helped sponsor the survey, said the pandemic had exacerbated the predicament of this age group as it would be up to them to “find a way to pay back the government credit card”. It was a rock that had been placed on the backs of young people, Kubiak said, and many would find it easier to simply go overseas.

The pandemic had shown how much New Zealand has relied on immigration to provide liquidity to the labour market, he said. “I’m not expecting the next few years to be day at the beach.”

Inflation and its contribution to cost-of-living pressures was of particular concern to the financial services industry, along with wage stagnation, erosion of savings and the need to rely on parents for financial support, Kubiak said. He also noted that New Zealanders under the age of 50 had yet to experience a high inflationary environment.

On the economic front, 43% of the 18-39 age group have little or no confidence in the current environment; only 20% say they are confident. On the outlook for the next 12 months, 47% say they believe the economy will slow or contract while 26% are expecting it to grow.

FSC chief executive Richard Klipin said the past couple of years had been “relatively benign” economically, particularly around spending habits, but a lack of confidence was starting to show. “Inflation is something this generation hasn’t had to deal with,” he said. There were signs in Australia that job mobility was starting to kick in “and I can see the early threads of that starting to take place [here].”

Klipin said for anyone aged 18-39, things had never been this tough. “I suppose the challenge for all of us in this sector - creating products and services, providing guidance and advice, providing research and insight - is how we help New Zealanders make sense of this, how we help [them] unpack some of these issues because the big four [inflation, wage stagnation, interest rates and house process] are a confluence of factors that are certainly going to impact the way New Zealand thinks in the coming 18 months to two years…. There is not going to be money printing again, it’s not going to get easier anytime soon.

“So, learning to live with a very different sort of macro indicators is going to be a really important issue and one in which the financial services sector has an important role to play.”

The survey, The Lost Generation, expands on the themes of Generation Rent, a piece of research the FSC released last August. A key finding of that survey was that 90% of respondents across all age groups believed younger people were being locked out of the property market. But it also found that Generation Rent was increasingly savvy about money: 60% had investment portfolios of between $1,000 and $150,000 (including KiwiSaver but excluding property).

Tags: economy