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BNZ chief economist Tony Alexander - interview

Clare de Lore talks with Tony Alexander about Auckland housing, Chinese investment and his best-loved books.

Economist Tony Alexander in his converted bar: “Low interest rates are here forever.” Photo/Simon Young
Economist Tony Alexander in his converted bar: “Low interest rates are here forever.” Photo/Simon Young


After a long day at the office, BNZ chief economist Tony ­Alexander heads straight to a central Auckland bar.

A fitness enthusiast, he is not much of a drinker, and he’s no party animal. Instead, Alexander spends most weeknights converting the former bar into a home away from home, having found a spacious, affordable and imaginative solution to his housing needs in the country’s hottest housing market. Wellington is his main home and he lives there at weekends with his wife, Sarah, and their five children, aged from nine to 21.

Auckland’s economic dominance led to Alexander spending increasing amounts of time there, initially in expensive and soulless hotel rooms, then in a 27sq m shoebox apartment.

What prompted you to think of converting the bar into an apartment?

I’d built up my savings and had been ­waiting for interest rates to go up, but the world is not going back for many, many decades to the interest-rates environment of the 80s through to 2000s. Low interest rates are here forever. I am a hands-on person and like doing things – I wanted to keep myself busy in Auckland, find a good long-term investment and also get more space.

I’d started looking at apartments with 60 or 80sq m, and I thought “no way” because I would need a large mortgage, but I kept coming across the advertisement for this place here – a commercial premises, an ex-bar. I fell in love with it and ended up buying it – almost 180sq m, including a 12sq m balcony apartment. It has this huge mirror behind the 6m-long copper-topped bar with yellow frontage, six lovely white stools, and she is so pretty. I am not ­changing that at all.

Alexander in his office. Photo/Simon Young
Alexander in his office. Photo/Simon Young


You’ve solved your housing need. What’s the solution for everyone else?

There is no solution. There will never be any policies introduced that make a significant reduction in Auckland house prices because more people are happy with house prices being high and rising than would ever be happy with them falling. These prices are locked in. If any ­politician came forward and said, “I have this fantastic idea based on new technology and it will reduce Auckland house prices by 30% and there will be massive price affordability” – they would not get the votes.

As an economist, I deal in what I believe is, and what I believe will be. It is often hard for some people to grasp because they are in the world of “this should happen” and as soon as they talk about and use the word “should”, they are out of my field; they’re into policy proposals, income redistribution or whatever.

Auckland house prices will rise because there is a shortage and the shortage will persist.

Your father was hit by the boom and bust in housing in the 70s, with his building business going into voluntary liquidation. What was that like for your family?

Mum got depressed about it and went to the doctor. He said, “You think you’ve got it bad? Read this”, and recommended she read The Grapes of Wrath by John Steinbeck. That’s when I started reading about economics and how the Great Depression was the most galling example of a failure of policy management.

I came across Tony Simpson’s book The Sugarbag Years, based on oral histories recorded with people who lived through the Depression. That would be the book I would take with me if I was going to a desert island. It’s an illustration of what can go wrong, but how it doesn’t affect everyone equally. Although there were many people doing very poorly, some did okay, but they felt they needed to look as though they weren’t, so maybe they put the car up on blocks because in New ­Zealand then, you couldn’t be a nob flaunting wealth when everyone else was in difficult times.

Henry Kissinger. Photo/Getty Images
Henry Kissinger. Photo/Getty Images


Which books did you bring from Wellington?

I have all my Barry Crump books, as a reminder of how the country was in the heyday of the 60s when anybody could get a job anywhere. I’ve just finished rereading Warm Beer and now I’m reading There and Back. When I was researching the Great Depression, I came across The Day the Bubble Burst: A Social History of the Wall Street Crash of 1929, by Gordon Thomas and Max Morgan-Witts. And there’s an excellent Kiwi book, Tooth and Nail by Mary Findlay. I also like stories about people who have cycled the world, walked long distances or gone through hard times. I loved Cheryl Strayed’s Wild.

I recently read The Lightless Sky by Gulwali Passarlay with Nadene Ghouri – it’s the story of an Afghan migrant and his brother heading to London. His experience at Calais was gripping. When I was researching the Chinese economy a few years ago, the two best books I found were Julia Lovell’s The Opium War: Drugs, Dreams and the Making of China – it’s a very good read through Chinese history over 200 years – and Henry Kissinger’s On China.

The Opium War author, Julia Lovell.
The Opium War author, Julia Lovell.


What do you make of public unease over increasing Chinese investment here?

Although Kiwis will accept investment from anywhere, we pull up at the Chinese. Going back a long way, people thought we would be overrun by these poor Chinese; now it’s “we’re being overrun by these wealthy Chinese”. So it’s nothing to do with their income level or their wealth and instead seems to be connected to there being so many of them.

I wrote a paper, “Sources of Western Apprehension About China”, and listed 55 reasons why in the West we look at China and go yeah, nah. I wanted to help educate Kiwis to the fact that China will be our major trading partner for ever and a day, and we will be heavily reliant on what happens in their economy and inevitably will have more Chinese living here and investment for Chinese here. Any nation that has rapidly rising wealth invests overseas – the British did it, the Americans did and the Chinese are. It’s a natural process.

Does being an economist give you an edge in building up personal wealth?

It was never my aim to make an untold amount. I have always wanted above-average income, but I never set out with a goal to be a Donald Trump or a Bob Jones. I was always aware that there is a point where enough is enough and beyond that it is just a game. You’re never going to be able to use all that wealth.

So, what’s with the book you have on Ferraris by Niki Lauda?

I moved to Australia in the 1980s and set as one of my goals to one day buy a Ferrari. In the late 1990s, I walked into the Ferrari dealership in Newmarket. I had enough money and I could buy one of those second-hand Ferraris, but I walked straight out. I didn’t need it, but goal achieved. I keep the book as a reminder of my motivation.

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