Young Debt and the demise of Campbell Live


Row of five friends using cellular phones smiling

Three of the stories that attracted my attention this week have been: the near-parity of the New Zealand and Australian dollars (I’m old enough to remember being told that Australian coins – eg florins – were worth significantly less than New Zealand ones, so pass them on quickly); this interview (Working longer is not a retirement plan for baby boomers) on Radio New Zealand’s Nine-to-Noon; and the apparent ingratitude on the part of TV3 towards it’s best broadcasters (John Campbell of Campbell Live – see Save Campbell Live! The Daily Blog 9 April; Why John Campbell’s face no longer fits at Mediaworks NZ Herald 10 April – plus the now displaced Firstline crew).

The Nine-to-Noon story featured US labour economist Teresa Ghilarducci, suggesting that most older workers should save much more of their incomes than they are saving, because they are unlikely to be able to rely on employment after they are aged 65 to keep them financially afloat. This might be good advice to an individual who could be confident that others in the same situation would not follow that advice. That is the ceteris paribus spirit in which the advice was tendered.

The systemic problem is that the precarity of future employment opportunities is due to too little spending by consumers and governments. So, if our 50-somethings collectively (albeit independently) cut back on their present spending, then those weak market forces just get a whole lot weaker, meaning there will be substantially fewer employment opportunities for over-65s than there would be if nobody took the advice.

Under these conditions of fifty-plus-spending-collapse-disorder, it’s up to the young to rescue the economy (the western capitalist economy, that is) by going heavily into debt to offset the increased thrift of the boomers and Joneses. If the young do this – spend more through debt to compensate for their creditor elders spending less – we would call this accommodating or stabilising behaviour.

New Zealand and Australia have been the exceptional accommodators in the world economy. When the Europeans and Asians were being lauded for their thrifty habits, New Zealand and Australia consistently posted interest rates with the message to Europe and Asia: we’ll accommodate, we’ll stabilise; when you lend big, our people will borrow big and spend.

That interest rate gap is practically bigger than ever now. New Zealand’s cash rate is 3.5%, Australia’s is 2.25%. Norway’s is 1.25%. The rest of the countries in our financial milieu range from 0.75% (Canada) to -0.75% (Denmark, Switzerland). From their point of view, we are the debt-stabilisers. We Australasians – citizens of the youngest nations of the western world – are like young indebted spenders accommodating the underwhelming market forces coming from their parents’ generations.

The Australians are on the verge of pulling out of this compact, however; hence the pressure on the Australian dollar. In comparison we have an unwavering determination to keep on accommodating. When the Australians realise that their interest rates are still much higher than they should be, and that real estate booms in Canada are not accelerating (Why low rates may not be enough to save the housing market, Andrew Hepburn, Macleans, 23 February 2015), they will allow their rates to fall to Canadian levels. My best guess is that the $NZ will go well above parity with Australia this year, as we become the last of our ilk to embrace the world market interest rates (under 1%) that we are resisting.

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There is no shortage of consumer debt available to young New Zealanders.

What about the John Campbell story? More than ever, commercial TV and radio features the audience as a product being purchased by advertisers. Programmes are little more than audience delivery vehicles.

So even though middle-aged viewers who may appreciate actual current affairs programmes may have much more money-in-the-bank and income than the generation they have raised, it is the young who are spending their elders’ money. Thus commercial media like to deliver a young albeit indebted spending audience to their advertisers, not an older frugal audience. Further, these media like to capture a multi-tasking audience that will leave the telly on in the background rather than switch it off. After all, when the TV is being used like commercial radio, the adverts are as much likely to activate the audiences’ attention as the programme content; maybe more likely.

Our young may be poor. But they are consumers. Further, our jobs depend – our rockstar economy depends – on them being consumers. Young debt keeps our capitalism afloat.


  1. The financial world may find it exciting talking about how the NZ dollar is approaching parity with the Australian dollar and how that can make barrowloads of extra money for themselves; but they don’t think it worthwhile to talk about how it can affect everyone else. NZ dollar vs Australian dollar? who gives a ………..?

  2. Thanks for another helpful analysis of the current situation. It’s thoughtfulness is in stark contrast to the “rockstar economy” piece by John Armstrong today

    Recently there appear to be two Armstrongs, one who writes insightfully, and the other who wrote today’s piece and the Cunliffe-must-resign outburst.

    I’d be very interested to read your views on how we get out of our position as the world’s patsy, especially as currency cross rates are a zero sum game. Personally I have no idea.

  3. We have an aging society, even with significant immigration compensating this a bit. We have also before us increasing health and social security costs to manage, and only some older people will be able to continue working.

    The present NZ government, in cohouts with private enterprise and business is committing a very serious and irresponsible crime to the future society, pretending that the older people can rely on the guaranteed retirement incomes as they now are, and that their health and well-being will be secure.

    At the same time the younger generation gets seduced into endless consumerism and an individualised approach to life, which suits the neoliberals very well. They are told to buy, to consume, to spend, but also to “invest” in their future by borrowing for their tertiary education and some training.

    So they go into debt, which is at present affordable, but it will not be so forever, and the money will need to be repaid. Given the dumb economic policies of focusing on milk powder, logs, raw seafood exports, serving tourists that spend their time here, and also training other countries’ students, while NZers end up more as servants and mercenaries, we will have a grim future.

    The commodity prices are low, the Chinese will boost their own dairy production, like others, and the knowledge economy is only a small part of the NZ economy.

    The future holds (unless major changes are made) continued indebtedness of private persons and also some businesses, gradually increasing government debt, and a burden to carry, which the already indebted will not be able to and not want to carry for that long. As a result the aged will face a grim future, of likely neglect, loneliness and poverty, worse than it has been for generations.

    Some may wish not to get old and despair at the thought of retirement, others will continue to only look after number one and will walk by the future homeless and beggars in the streets of Auckland, Wellington and Christchurch.

    An otherwise blessed country with fertile lands and work ready people is being ruined, by governments and business rather choosing the quick buck and easy way, lying and seducing left, right and centre.

  4. “Yeah Right”
    Has the Government spinners hoodwinked these
    The Government opened its books yesterday and it doesn’t make pretty reading.

    Keith, you said;

    “Our young may be poor. But they are consumers. Further, our jobs depend – our rockstar economy depends – on them being consumers. Young debt keeps our capitalism afloat.”

    Consider these two together then rethink that again please as we are headed for a massive fall ASAP right?

    New Zealand Government Debt now 108 Billion!!!!!!!

    Key/English/Joyce lied we owe 108 billion not 35billion.

    Green Party public press release yesterday;

    With just over a month to go to the Budget, John Key and Bill English are heading towards a record seventh consecutive deficit, equalling the mark set by their National mates from 1966 to 1972.

    This is a Government that has sold itself as the masters of economic management, and what do we have to show for it?

    To start with, there’s that string of deficits, as well as growing inequality, and a two-track economy that only benefits a small number of people.

    Tax cuts for the rich and selling off our assets have done nothing to help everyday Kiwis.

    There are signs of this Government’s ineptness everywhere you look; be it growing child poverty, substantial job losses or the horrendously over-inflated housing market – all of which John Key and Bill English are turning their backs to.

    The Green Party is committed to promoting a fairer, greener economy for our country.

    We also know that New Zealanders are depending on us to hold the Government accountable for its fiscal failings – and that’s what we’ll be focusing on over the coming months.
    They all call this a stable Government, and a “rock star economy?
    We are all TOAST sooner than we thought.

    • You are totally correct with respect to economic ineptitude of this government. That they have managed to so thoroughly trash the economy while the country has had many years of highly favourable, indeed at times record, Terms of Trade plus the massive boost from the Christchurch rebuild is a staggering achievement.
      The truth is that Keys government is driven by short term tactics, neoliberal dogma trumping evidence, populist self aggrandisement policies all bundled up with a heavy dose of hubris and a paucity of social empathy.

    • Consider this government debt is 108 billion total debt is 508 billion it not fair to turn the young into debt slaves while so many blighted lives because of horrible society we have created for what????

  5. The kids in that stock photo would be about 25 years old now.

    You say that the old have more money than they need and the young have less and must borrow.

    I propose raising taxes and spending the proceeds on things that all New Zealanders can benefit from.

  6. Encouraging saving in a consumption driven economy, where the average relative wage is continually falling, and debt continually rising, seems to have a very obvious flaw that gets repeatedly ignored. Why is that?

  7. The problem with debt is that, eventually, it has to be paid back. But that seems to be something capitalists seem to ignore these days. It’s like the 2007/08 GFC never happened.

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