Transcript: Max Rashbrooke
Lisa Owen: His new book is called Wealth and New Zealand, and Max Rashbrooke joins me in the studio now. Good morning.
Max Rashbrooke: Good morning.
Tell me about the wealthy people in New Zealand. Who are they, and how rich are they?
Well, if you're looking just at the wealthiest 1 percent, so that's about 34,000 adults in New Zealand, they've got an average wealth of $4.5 million each. And that's the kind of wealth that allows you influence. You know, you can donate to political parties; you're likely to have substantial business investments, you know, to kind of exert the sort of influence that then ripples out through the rest of society. So that's your 1 percent.
If you had to give me a profile of them, who are they? Are they men? Are they white males?
We don't know a lot about that in detail, but, yeah, Pakeha are disproportionately wealthy compared to other ethnicities. Men are as well. They're probably spread around the country quite a bit. I mean, there's significant wealth in Auckland, as we all know, but actually, the figures show a lot of rural wealth, and that's farming wealth and those kinds of things. So, yeah, not representative of New Zealand as a whole.
I mean, people probably won't be surprised of that big picture, but let's burrow down into some of the detail, and we've got a graphic here to help us with that. So let's take a look at this graphic, and you can talk us through it. Oh, I don't think we can get that at the moment. But it's basically a tower block, isn't it, Max, and at the top, you've got this very wealthy set of people. What about the people filtering down?
Yeah, I mean, if you think about all the wealth in the country as a 10-storey building – so, like, the country divided up into tenths – the wealthiest 1 percent of people, who we were just talking about, they've got nearly a fifth of all the wealth in the country. So it's just 34,000 people who in this metaphorical 10-storey building would have the first two storeys all to themselves. Then if you sort of move further down through the building, you have the top 10 percent – the wealthiest 10 percent of the country. They've got half of all the assets. Then after them, it's the rest – the people rounding up the top half of the country, so the middle classes, if you like. 40 percent of the country, they've got 40 percent of the wealth. So they're just where you'd expect them to be.
And on the bottom floor, what have you got?
In the bottom floor, so half of the country – so, you know, 1.7 million adults – have got just 4 percent of all the wealth. So they would have not even the bottom floor to themselves. They'd be crammed in to half the bottom floor.
Well, I was really interested in how much of that wealth involves housing or property.
Yeah, and that's always the case. Housing makes up about half of all household wealth. The rest of it is investment in businesses, some investment in farms, you know, some shares, some cash in the bank, that kind of thing. But it really is housing that plays a dominant role.
Because the interesting thing about that is there'll be people sitting at home watching this programme, particularly in Auckland, and they'll be thinking, 'I just own a house. I'm not rich.' Are they really rich?
Well, it does depend on how you define it. I mean, to be in the wealthiest 5 percent of the country, you probably need to have wealth free of any debts of about $800,000. So, yeah, that will catch a lot of people who are Auckland house owners. But I think coming back to the point I made earlier, the reason to be interested in wealth is the opportunities that it opens up and the opportunities for influence and power. And I don't think that comes just with owning a house. That is much more about having a level of discretionary… you know, having cash that you can draw on, things that really give you a whole range of opportunities and influence. And that's why wealth is important.
Like choices of where you send your kids to school and who they mix with, as you say in the book?
Yeah, yeah. I mean, and this applies to some extent to everyone. I mean, the reason to talk about wealth as opposed to just income is that income is what makes a difference to your life day to day. But it's wealth that gives you that stability, the security, the ability to plan for the long term, and to choose between a whole lot of different options that might be open to you. And so the fact that, you know, you've got the wealthiest 1 percent have got nearly 20 percent of all the wealth shows you that those opportunities and that influence really is concentrated very much at the top.
In a small group of people.
In the book, you talk about a thing called inheritance society. Who do you mean by that, and do we have a bunch of New Zealanders who are now wealthy just because of their family connections?
Well, the truth is in New Zealand we don't have a lot of data on inheritances because we stopped taxing it a long time ago, and so it's very hard to know what the numbers are. But we know that in comparable countries, inheritance is very important. And the reason to be concerned about it is that it creates compounding inequality, and I think we'll see that. I mean, we already know from people who are trying to buy a house in Auckland, right, it's much, much easier if you've got parents who themselves are wealthy, who can help you with the deposit. And so you start to see that compounding effect – people in the older generations providing inheritances to people who are already better off within their generations, and so the opportunities start to become more and more concentrated at the top.
And you think we as a country make it easy for those people in terms of our tax regime, don't you? How do we stack up compared to others?
Yeah, I mean, we really are an international outlier in the sense that we don't really tax wealth in any form. We don't tax capital gains except now in very limited circumstances. We don't tax inheritances. We don't tax gifts. We don't tax wealth in general, and this is a complicated area. In a lot of countries inheritance taxes are falling out of fashion. They get called death taxes and that kind of thing. But in response to that, what a lot of people are talking about are things like kind of a lifetime capital receipts tax. So rather than taxing the giver, you tax the recipient, and you say, 'Look, over your lifetime, you can inherit, say, $200,000 tax free,' so that your parents can pass on a bit to you.
A progressive-type tax, but why should they? Even you say in the book, even you raise the question – if you slogged for this money, if you worked hard, why shouldn't you be able to give it to who you want to without being penalised for that?
Well, there's absolutely an element to that, but at the same time, inheritances are obviously undeserved. The recipient hasn't done anything to work for it.
But arguably someone's deferred enjoyment of that money in order to pass it on to the next generation.
And that's absolutely true, but you have to think about how wealth is created in the first place. Now, a lot of people work very hard to create their wealth. That's absolutely true, but anybody who's done that, anybody who's started up or run a business in New Zealand has been drawing on what I describe as a common pool of resources. So if you're running a business in New Zealand, you're driving on roads that everyone paid for; you're employing a workforce educated at the public expense; you're using public infrastructure. You're drawing out of that common pool just like you draw water from a reservoir.
But some people would just simply see that as an envy tax.
No, I think it's just recognising that wealth is always created in some kind of partnership between the individual and what society provides. And the thing about that common pool is that you have to keep replenishing it, otherwise it isn't there for future generations. So if you've drawn out from it, you do have to put back into it.
Well, some of the information in your book, it really strikes at this idea that New Zealand is an egalitarian society; you can all just pull yourself up by the bootstraps. How true is that perception?
Oh, I really don't think that's true. You look at those figures we've been talking about – the wealthiest 1 percent having nearly 20 percent of all the wealth. That is a really striking inequality of wealth. Now, that's also true in other countries. Our levels of wealth and inequality are pretty well comparable with other places like Germany or Canada or wherever. But the point is – we do or we like to think of ourselves as egalitarian, and increasingly the evidence shows that that's just not true.
All right, well, let me put you on the spot, then. If you could change one thing in a bid to even up the scales, what would it be? What would make the most difference? What would you choose?
I think you would probably— I mean, it's different to fasten on one thing, but I would probably say some kind of taxation on wealth. I think people across the board acknowledge that something of that kind is important, and then the question is – what do you do with that? Well, one of the problems is that the poorest tenth of families are $7.5 billion in debt between them. They and their kids have got almost no chance of building up a decent asset state, so why not use the revenue that you generate elsewhere to try and build some kind of asset base for those kids so that they adulthood with something behind them?
So the state gifts it to them, basically, at a certain age?
It could be a gift or it could be a kind of matched savings scheme – you encourage people to save and the government supports that in some form.
All right, thank you very much. It was a great, interesting read. Max Rashbrooke.
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