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MIND THE WEALTH GAP

New Zealanders’ ‘wilful blindness’ blamed for driving a wedge between rich and financially disadvantaged and making a myth of classless, egalitarian Kiwi society.

Just a fifth of New Zealand's wealthiest 30-somethings already own 70 per cent of the assets of their age group – and are only going to get richer because they are also more likely to inherit property and wealth.

In his new book, Too Much Money, author Max Rashbrooke explores the widening wealth gap in New Zealand, and how inheritances and a booming property market are driving an even bigger wedge between the rich and the financially disadvantaged.

He also busts some myths about New Zealand as a classless society.

Rashbrooke says the ultra-rich 1 per cent are far richer than the other 99 per cent think they are.

A wilful national blindness, a failure to collect reliable wealth data, and the wealthy's careful strategies to keep their affairs secret have enabled those at the top to obscure the true extent of their wealth.

Stats NZ estimates from 2018 indicated the top 1 per cent of individuals owned around 20 per cent of the country's wealth. But their true share was probably close to a quarter.

Rashbrooke is on a mission to expose how wealth is shared in Aotearoa New Zealand; to the poor who don't know how wealthy the top echelon really is, and to middle and elite New Zealanders who underestimate the struggles of the people who own less than nothing thanks to their debts.

‘‘There was a long period where we didn't want to see things. In the 1990s, researchers were actively discouraged from using the word ‘poverty', for instance,'' Rashbrooke says.

‘‘We haven't as a country prioritised getting data on these things. We haven't got any data on inheritances, for instance. Literally no current data on what people are inheriting from their parents.''

New Zealanders have also been blinded by the myth of the classless, egalitarian society, he says.

‘‘That leads to a kind of wilful blindness where you don't even look for the answers, or the data, because you don't want to know what it might tell you.''

In a country without social insurance, it is possible to fall from financial grace fast, and far. Kathleen Paraha used to help manage a trucking business, but fell ill, and being in her 60s has been unable to find work.

‘‘I'd worked all my life until I got sick,'' she says. But employers treat the idea of a woman in her 60s looking for work as a joke.

Paraha scrapes by on benefits and occasional food grants from Work and Income, but it’s hard. She says she’s had weeks with a budget of $13 for food.

Despite the debilitating effects of poverty, she’s not idle, volunteering at Auckland Action Against Poverty (AAAP) as a benefits advocate, helping struggling families negotiate the complexities of Work and Income, and Ka¯ inga Ora.

She has little, but she still gives.

‘‘I took a family in last year because they got kicked out of their home. They couldn’t afford the rent,’’ she says. There were four kids.

‘‘I took them in because we couldn’t get them into emergency housing,’’ she says. ‘‘I had them here for three months.’’

Paraha is most moved by hunger among children.

‘‘The kids are going into Countdown and pinching food because they are hungry,’’ she says. ‘‘Those kids. It makes my heart bleed, and I end up in tears.’’

Class has divided our society, says Brooke Stanley Poa, who works for AAAP, and we’ve been blinded by it. ‘‘We live in a really entrenched class society, and people only mix with who they know,’’ she says.

‘‘Yeah, we’re diverse when you take a wider view, but not when you look at it from the ground. People aren’t mixing. Society has been structured not to mix.

‘‘During Covid we have had this idea of bubbles. Stay in your bubbles. We’ve always lived in bubbles.’’

It’s convenient for people not to see poverty, she says. Then they don’t have to care about the people suffering it.

Shame also divides. People are made to feel shame about their poverty. They hide that shame.

‘‘They are made to feel guilty, but shouldn’t be them that feel that way. It should be us that are embarrassed,’’ Stanley Poa says.

Paraha says she does not like to ask for help, and has at times kept the extent of her struggles from family.

‘‘I’ve always been independent. It’s a matter of pride, I guess. Stupid, I know, not to ask for help.’’

She believes others, especially those who have children depending on them, or don’t know how to engage with Work and Income, have a harder time than her.

‘‘Because I know Work and Income, I just have to apply for a food grant, and I only do that when I’m desperate, and they give it to me,’’ she says.

‘‘Before I became well-known I was turned down all the time. Now I know more than they do, they can’t do it to me. It was just so hard, so hard.

‘‘I would go in my room and cry, and starve myself until I can get to my children.’’

But things are getting harder again. She says her rent has just gone up $20.

‘‘I don’t know how I’m going to cope, but I will,’’ she says.

Rashbrooke’s estimate of the true wealth shares of the rich are based on the growing international realisation that the rich hold their cards close to their chests.

‘‘There are a lot of shy wealthy people who don’t fill out the surveys that we use to estimate wealth inequality,’’ he says.

It’s something that’s now being corrected. Revenue Minister David Parker has instructed officials to develop better data on upper-end wealth.

That could deliver the data to corroborate, or disprove, Rashbrooke’s adjusted wealth shares.

‘‘Overseas statisticians have begun . . . inserting figures from their countries’ Rich Lists into their household survey data, completing the tip of a hockey-stickshaped line of rapidly-increasing wealth at the upper end,’’ he says.

In the 1990s, the NBR Rich List broke through the $10 billion mark.

‘‘I’ve always been independent. It’s a matter of pride, I guess . . . I would go in my room and cry, and starve myself.’’ Kathleen Paraha

It reached $89b in 2019, but is no longer called the Rich List, just The List, as the wealthy sought to rebrand themselves, Rashbrooke says.

The most recent Rich List, published in mid-2021, devoted a lot of space to the philanthropic work of the rich, he says; a clear sign the public’s enthusiasm for enormous wealth inequalities has diminished.

Rubbing shoulders with their own kind, the rich massively underestimate the need for more redistribution, says Rashbrooke. Middle New Zealand doesn’t understand either, says Ronji Tanielu from the social policy and parliamentary unit of the Salvation Army.

‘‘I don’t think it’s a lack of empathy or care. It’s a lack of insight or knowledge about the reality of it,’’ he says.

He often speaks to Rotary groups, corporates, politicians and other people from middle and higher-earning parts of society.

‘‘They’re shocked by the reality of how the other half live,’’ he says.

‘‘Even these MPs didn’t have a very good understanding of what we see. You’re constantly educating. I can’t be arrogant and say everyone should know. Actually, everyone doesn’t know.

‘‘Everyone’s in an echo chamber. The brown people are. The Asians are. The Pa¯ keha¯ are.’’

He would like to see more people breaking out of their social bubbles, more marae holding open days, more farms pushing open the gates and welcoming visitors, more opportunities for people from different rungs of the wealth scale to meet.

‘‘Kanohi ki te kanohi. You’ve got to be willing to give a little ideologically, and to test the truths of things,’’ he says.

Rashbrooke says survey results show respondents underestimate the share of wealth owned by the top end of town.

He cites survey work by Peter Skilling in 2014 showing that people thought it would be ‘‘fair’’ for about half of all private wealth to be split between the 60 per cent least-wealthy households.

The bottom 20 per cent of households should share around 10 per cent of the wealth, instead of owning almost nothing.

Rashbrooke’s recipe for getting to ‘‘fair’’ is redistribution through measures including taxing wealth (while setting a high bar so middle New Zealand doesn’t face extra taxes), taxing inheritance, lifting benefits, and making tertiary education free.

Economist Eric Crampton from the Right-leaning New Zealand Initiative policy think-tank says people describing their concept of ‘‘fair’’ would be unlikely to be thinking about the economic consequences of trying to achieve it through taxation and redistribution.

‘‘You could make everyone more equal, but it’s got to be a downwards adjustment, if you try it that way,’’ Crampton says.

Wealth-share data can be used to help identify failures in policy that unfairly tilt the playing field towards certain groups in society, and present barriers to others, he says.

But ‘‘the focus should be on removing those barriers, so the game becomes more fair, rather than trying to put a redistribution process on top of an unfair way of generating wealth’’, Crampton says.

‘‘If you’ve got the background rules that are basically right, and everyone has a fair go to compete with each other, and you don’t have a bunch of basically cartels that are set up by legislation, and regulation that protects the privileged, then it doesn’t really matter what that wealth distribution winds up being.’’

Crampton also thinks the way wealth data is calculated creates a false impression, but for different reasons to Rashbrooke.

Put a price on the value of NZ Super, for example, and suddenly middle and lower New Zealand would look a lot richer, he says.

He sees inheritance taxes as being easy for the rich to avoid.

‘‘If you’re the kid of a wealthy person, you just maintain your tax residence not in New Zealand and visit New Zealand for however many days you are allowed before you’re forced to be a tax resident here.’’

Wealth taxes would reduce investment, and damage the economy.

‘‘New Zealand is a capital-poor country. New Zealand is always worried about getting enough investment in capital stock, whether it has enough access to capital. Taxing wealth will not help with that,’’ Crampton says.

Hone Martin, known as Papa Hone in Kaitaia, isn’t looking to politics for change. He runs One Wha¯nau at a Time, which he started 12 months ago with his partner Rachel to collect koha, kai and household goods and give them away to those in need.

‘‘There’s a North Pole and a South Pole. That’s how far apart things are,’’ he says.

‘‘We run on 100 per cent donations. The people we are dealing with are really rich people and struggling people. The space between those two groups of people is huge, but we are trying to close it in.’’

He does this by ‘‘rubbing hearts’’ as he puts it, telling the stories of struggling people to the people who do not get to hear them.

‘‘The lower class has trauma, amazing trauma that nobody hears,’’ he says.

‘‘The normal people who are working and doing all right don’t see any of it. It’s being hidden from them.’’

‘‘Everyone’s in an echo chamber. The brown people are. The Asians are. The Pa¯keha¯ are.’’ Ronji Tanielu Salvation Army

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2021-11-21T08:00:00.0000000Z

2021-11-21T08:00:00.0000000Z

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