This article was published on 2 June 2007. Some information may be out of date.

Q&As

  • Student allowance rip-off is not OK.
  • Advice for house-less Gen Xers: Buy a rental property in the provinces.
  • Rental property buyers feel like the scourge of society.
  • The cliché king has his say.
  • Cardboard boxes and contentment.

QWhen I finished university I had a $40,000 student loan. I could have worked part time to help curb that debt but the reality is most students cannot simply find the time to work in part-time jobs without their grades suffering dramatically.

I really honestly do not mind paying for my education via student loans. I am the one reaping the rewards after all. What really irks me though is borrowing $150 per week to live on.

I seriously think living costs should be at least subsidized by the government — especially when the richer students’ parents can and do hide their annual income in their businesses such as buying tonnes of farming equipment the year their kids go to uni.

AI hadn’t heard about that one. But I’m not surprised.

For the benefit of others, student allowances are paid to students 18–24 whose parents’ income is below $71,238.96 if the student lives at home, or $65,050.96 if the student lives away from home.

(Funny how you can pick the government’s cut-off points that are adjusted for inflation. Couldn’t they at least round their numbers to the nearest dollar, or better still the nearest hundred dollars? Who needs 96 centses?)

Other students under 25, with parents on higher incomes, must pay their own way, or borrow $150 a week as a student loan to cover their living expenses.

It’s sad but true that whenever there’s a government handout that’s limited to those under a certain income, people will rip off the system.

And the more “sophisticated”, who are often among those on the highest incomes, can be the cleverest at it.

What’s more, I’ve heard lawyers and accountants telling their clients that their rip-off behaviour is legally — even morally — fine. “Why shouldn’t you arrange things to your advantage?” they’ll say. “After all, you’ve paid more than your fair share of taxes over the years.”

And indeed, these people often have.

But there’s another way to look at that. If you figure that you’ve paid the government more than you’ve got back over the years, how about contemplating how lucky you are?

Those in high tax brackets, even after paying lots of tax, are still much better off than the people who pay less in tax than they receive from the government.

My message to those who do tricks like the one you describe: It’s not OK, despite what your lawyer or accountant — or the bloke at last Saturday’s dinner party — tells you.

How about taking pride in the fact that your good fortune — or “good management” if that makes you feel better — enables your family to not only support itself but also those less fortunate?

Something tells me, though, that opportunistic farm machinery buyers won’t be swayed by such arguments.

There’s no easy answer to this. Some options:

  • The government closely examines every applicant for a student allowance to see if they are genuinely on a lower income. But that would feel very Big Brotherish.
  • Parents report their average income over, say, the last five years. There’s merit here, bit it would penalise families who were formerly doing well and had come upon hard times.
  • The government gives student allowances to all students, or at least subsidizes them, as you suggest.

That, of course, costs all the rest of us taxpayers. We would then be supporting the children of the wealthy. Then again, we’re doing that anyway, according to you.

And everybody — rich or poor — gets NZ Super. Why not the same for student allowances?

If students still paid their own tuition fees and course-related expenses, that would balance things — reflecting, as you point out, that students tend to be rewarded for their study.

Our next correspondent chose a different path.

QI’m a 23-year-old. No uni education. Started at the bottom rung of the large company I work for and worked my way up to where I am now.

Comfortable salary, able to afford the necessities in life and not lumbered with a student loan. I am definitely in a better position than most.

I’ve worked hard to get where I am, but have decided not to worry about buying my own house any more.

Why not? Even as I’ve got a reasonable deposit to use and pre-approved finance from most of the main banks, every time I place my price, it inevitably gets knocked out by the baby boomer couple living around the corner who have decided to ride the crest of a fast collapsing wave and get a city rental property for their retirement.

So what have I done? Gone and spent about five times less in the provinces for a good rental property that returns 7 per cent a year.

Generation Ys complaining they can’t afford a house? Course they can, if they think outside the square.

The city housing market in all centres is due to collapse. We haven’t hit the bottom of our ten-yearly cycle yet, but it’s bound to happen. I’m circling like a vulture.

Ten-yearly cycle? 70’s oil shocks, 80’s sharemarket crash, 90’s Asian crash, but as yet, nothing for the 00’s. This long-winded economic boom cannot be sustained.

AYou might well be right. I reckon house prices will at least slow down, if not fall — although I’ve been saying that for a couple of years now, so who knows what the timing will be?

If you look at a graph of house prices, it’s not quite as simple as a ten-year cycle. But the fact that prices were at a record level, relative to incomes and rents, two or three years ago, and yet have continued to rise suggests a “correction” must come sooner rather than later.

Meantime, the “buy in the provinces” message keeps coming through as an option.

QAbout 10 years ago, we were struggling as share milkers, working 7 days a week.

We were told by the Government that there may not be a superannuation when it is our turn to retire and we needed to start planning our retirement.

One August, when the final payment for the season was paid, I took enough out for a deposit on a house in Dunedin, thinking that it would be paid off by tenants by the time we reached 67 and then we would be able to supplement our income for retirement.

We did nothing more for a few years, but then we worked out that having another $180 per week from rent meant we would only have about $450 per week to spend, assuming NZ Super is still there. That wasn’t enough, so we bought another house.

Soon it became apparent that it was going to be very hard for our children to get into the property market, so we decided to buy a couple more houses to help us build up enough equity to help them into their own homes. We used equity in the previous houses to buy new houses.

Having continued to work hard, save pennies to invest and make sure the Government doesn’t need to look after us in our old age, now we are the scourge of society, causing mayhem for the Reserve Bank.

If the next generation wants to get in on the property market, they too need to stop spending and save their money. It’s quite simple, just don’t buy anything except essentials, and not just for a month, do it for a few years.

AYou’ve had the guts and gumption to get in and take some risks. Good on you.

You’ve also been pretty lucky with your house purchase timing. I wouldn’t recommend that others buy lots of houses in the current market.

For what it’s worth, I don’t think you are a scourge. It doesn’t make sense to blame long-term owners of rental properties for the house price boom.

It’s the result of many factors — such as immigration and barriers to building more houses, as well as high demand for rentals.

If there’s any point in blaming anyone for the rental property factor, it should be Inland Revenue, for not keeping closer tabs on people who buy and sell rentals so frequently that it’s obvious they are doing it for a living. Why shouldn’t they pay tax on the income they earn, the same as the rest of us?

Inland Revenue, in turn, would probably blame the government for not giving them enough resources to monitor this behaviour. But, in the latest Budget, they got more money for this very purpose. It will be interesting to see how Inland Revenue uses it.

QAs always there are “three sides” to any given situation, those for, those against and those on the fence.

Like all things, we do need a balance. For without balance there is no harmony.

Change is constant, and as we all evolve we need to adjust accordingly to our personal standards/requirements. Remember, as no two persons are alike so no single solutions will apply. Different strokes for different folks as always, lest we forget, as you have rightfully pointed out on many occasions.

So you guys out there, please do not drink too much, eat too much, complain too much. Be happy. Best wishes always.

ASomething tells me you didn’t have a high school English teacher like mine, who loved to scrawl “cliché!” in the margins of my prose.

On the other hand, if every reader can’t find at least one idea in your letter to embrace, I’ll eat my hat.

Oops!

QLove your column, and I’m especially enjoying the present batch of whining letters. Like you, I am reminded of the three Yorkshiremen in the Monty Python sketch. What about when the fourth one comes along and says, “When I were a lad all we had were a cardboard box on the median strip!”

The reply was, “A cardboard box! A CARDBOARD BOX! LOOXURY!”

Born in 1932, married in 1955, two children and a carpenter’s wage to live on, we felt quite well off compared with our parents.

I would like to wish you what I have had, a long life and contentment.

AWhat a wonderful way to end this column. And, I think, this whole topic.

Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.