Tony Alexander Q&A: Land tax, brain drain, and teaching our kids about money

In this bonus episode, economist Tony Alexander tackles your burning questions—from the case for a land value tax, to the flood of Kiwis heading offshore, to what financial education should mean for kids..

Tony shares why a land tax might not fly politically, how soaring rates could change where retirees live, and a twist on the “brain drain”—with whole families following their kids across the ditch. Plus, his take on why financial education needs to go beyond budgeting—and into the world of startups .

This Q&A follows our full chat with Tony on the state of the property market. Haven’t heard it yet?

Check out “Property: recovery or relapse?”on YouTube via http://linktr.ee/sharedlunch

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Episode Transcript

Speaker 1 (00:03):
We've got just a little bit of time for a
couple of the listener questions that have come through, and
I wanted to hit you with one of those, a
land value tax. What are your thoughts on a land
value tax?

Speaker 2 (00:12):
Well, we sort of already have that in the form
of rates. The higher the value of your land or
your property generally, the more you're going to pay in rates.
And I think the last thing that ratepayers want to
do is see a new specific tax come along, presumably
from the central government level as opposed to the local
government there and get them even more up in arms,
because there's a lot of pain out there already. And

(00:35):
if we look at Wellington specifically, where we've got the
newspapers reporting on people's rates. In Corori, you're going to
go from two and a half thousand a couple of
years ago to eleven thousand dollars and five or six
years time, and there's a lot of older people realizing
they're not going to be able to afford to stay
in their property any longer. And I think this is
going to be one of the dynamics in the housing
market the next few years. Maybe a bit more cashing up.

(00:57):
We used to call it Now, it's just force south
out of the cities in New Zealand and maybe moving
to the more affordable regions as long as there's a
hospital nearby, good access to health services, good transport for
the grandkids visiting that sort of thing. I think that's
going to be a sort of an extra overlay in
these markets. And I don't think any thing specific like
a land takes is going to come along. And also

(01:19):
I hope not. I guess as a landowner.

Speaker 1 (01:23):
Takes me a next question because I guess you can
only sell up and move out if there's someone really
come into the city and buy. And you know, we're
seeing immigration really move around. We're seeing again that dreaded
brain drain phrase come up again. Are there specific policies
that you think we need to be looking at to
address that issue brain drain of younger and able people

(01:44):
heading off shore for better opportunities.

Speaker 2 (01:45):
I'd say not really, because it's one of the phenomena
of New Zealand society, our culture that we're relatively small
in New Zealand, we're exposed to the outside world and
we go look out all those big buildings over in Sydney.
That was me back in the early nineteen eighties. I've
definitely got to get across there. I remember studying road
maps and think, oh, look at that's George Street and
all this sort of thing, and so go overseas and

(02:07):
have some experience, and I think it's always going to happen.
And we've got a net loss of KEI we citizens
in the past year of about forty four thousand, which
is about twice the average for the past twenty to
twenty five years, so it is relatively strong at the moment.
I think some of that will dampen down in the
very near future, but not disappear entirely. And a key
driver is New Zealand's labor market versus Australia. They get

(02:28):
a four point one percent unemployment rate. We're at five
point one percent. People are going to move across.

Speaker 1 (02:32):
The heading to five point three.

Speaker 2 (02:33):
If we believe the prediction, maybe we go up slightly
slightly high. And then I'm reading the Irish Independent newspaper
the other day about a young woman who's moved across
into Western Australia, driving these big rigs across there, earning
fifty five dollars an hour, and she plans working maybe
one or two years and then shifting back to Ireland
and be able to lay down a deposit on the house.
We've always done that in New Zealand as well, so

(02:54):
we can't really, I think expect that the brain drain
is necessarily going to be sort of cat to of
keeping the young people in New Zealand. What does concern
me a bit is the newer development recently the parents
of those kids, they are starting to go as well.
My neighbors have done it, two sons both living and
working on the Gold Coast in Australia, and three months

(03:15):
ago they decided we're following them and they just put
their place on the market. Gone within four weeks essentially.

Speaker 1 (03:19):
So what's the risk there that you get people don't
come home to family because the family has gone to
them kind of thing, and you don't see that brain
gain return.

Speaker 2 (03:27):
Yeah, it's one of the reasons why I say the
Auckland population has continue to grow because your family is
near there and so you stay there. It'll be a
limit on how many you sell up in Auckland and
go somewhere else for cheaper rates, for instance. And so
if your kids are overseas, where your grandkids are going
to be overseas. If you want to you have that interaction,
then maybe you shift across as well in the middle
of your career. So it's a mid carea sort of

(03:48):
forties early fifties sort of a cohort that's moving across there.
We shouldn't forget that there are probably two or three
billion people who if you said to them, come in,
would hop on the plane and come in tomorrow to
New Zealand. And so that's a sort of a skill swap,
which has always been the case for New Zealand.

Speaker 1 (04:05):
Yeah, we're drinking from the fire hose there, as they say,
in terms of that younger generation that the oldies might
be moving a bit closer to. We've got a question
about what sort of long term financial education we should
be trying to give our young people, particularly at school
or wherever. What are some takeaways that you think.

Speaker 2 (04:22):
I think it's a bit more than just you need
to say for your retirement. Certainly, I think just increasing
the awareness of by saving through key we savor you
can build up a deposit there. So that's one way
to get into the housing market later on. But frankly,
the idea of buying your house when you're at school.
It's just it's irrelevant. You're not thinking about it.

Speaker 1 (04:40):
Saying about buying a v at the dairy probably exactly,
that's right.

Speaker 2 (04:43):
It's a totally different mindset that you've got there, and
retirement is just way way down in the future. You're
probably going to be run over by a bus before then,
is what we always used to say back in my day. Anyway,
in the nineteen seventies. I think it's probably more important
to focus where more and more schools have been doing
the past two decades, on the entrepreneur worship, on setting
up your own business, and there is an eagerness of

(05:04):
young people out there because of the accessibility of developing
your own apps. Learn AI, get the AI to do
all the coding for you. And my youngest son first
year at university, he's involved with a group rinter developing
an app looking at better matching of the tenants with
the landlords, for instance. I'd have never thought of anything
like that when I was first year of varsity back

(05:25):
in nineteen eighty. But more of the education of have
a go, set up a little startup, et cetera. That's
what I would focus on, rather than just financial budgeting
of sort of stuff. I think it's got to go
a little step beyond that.

Speaker 1 (05:38):
Yeah, good, I guess, because that's where we've seen the focus,
haven't we. They've talked about more financial literacy, but it's
actually like, well, what are you going to read? Now
you literate? What are you going to write?

Speaker 2 (05:47):
Yeah?

Speaker 1 (05:47):
Yeah, what are you going to do about it?

Speaker 2 (05:49):
And the world is filled with examples, including many people
from New Zealand who started out with very very little,
and while we still have the people who then set
up a factory and grew from there, or they got
into the beverage distribution business and grew and made millions
from there. Just setting up an app and it goes
viral and everybody wants it, and all of a sudden,
there's three hundred million dollars there. You know, it's moved

(06:11):
a step beyond Sam Morgan setting up trade me and
selling it for our seven hundred million dollars, for instance.
It's beyond that into the whole app area and these
other areas.

Speaker 1 (06:21):
Now they're buying the papers back there we go, there
we go