Automation for an ageing population

by Noted / 12 June, 2018
RelatedArticlesModule - Harbour

Susanna Lee of Harbour Asset Management.

We are on the cusp of a technological revolution and, at the same time, our working population is halving. Such dramatic changes will have an impact on Kiwis’ retirement incomes, but you can prepare.

There’s a demographic shockwave heading for New Zealand that may affect people’s investments. Automation and other technological progress could, however, be a saviour for investors.

The world is changing rapidly and if you assume that investing for retirement will be more of the same, think again, says Harbour Asset Management’s Susanna Lee.

Multiple forces are at work in our economy. One that investors should have their eye on is the potential for dramatic demographic change as the baby boomers age and retire. In New Zealand, the number of dependants per 100 workers is 50. This is expected to balloon out to 77 in the next 50 years.

“The working population is going to halve and you’ll have one-quarter of the population supporting three-quarters,” says Lee. Investment growth is, of course, more complicated than just a single factor in isolation, says Lee. Capital and technology will also have an impact.

“Although demographic changes are likely to depress growth, we’re on the cusp of a technological revolution, with more patents being filed around the world than ever before,” says Lee. “Automating jobs through technology is how we will grow ourselves out of this demographic hole that we are facing.”

That doesn’t mean Kiwis have to invent the technology. Instead, we need to evolve and adopt it to keep productivity high as workforce numbers fall.

“For example, we could expect to see productivity increase as transport companies adopt self-driving cars in the next five to 10 years, supermarkets introduce more self-checkouts, and fast food outlets offer more self-ordering,” says Lee.

Such dramatic changes to industry will have a huge effect on Kiwis’ retirement income if they stick with traditional passive index-tracking funds that buy a bit of everything.

“If you invest in a passive index fund, you always get what the market has, even if some sectors are challenged,” says Lee. Passive funds may have investments in companies with technologies or in markets that have uncertain futures. “When it comes to utility companies, for example, we don’t know what our power grid is going to look like in 10 to 15 years or even that these companies are going to be that profitable,” says Lee. Yet passive funds buy their shares and longdated bonds.

An active manager can construct portfolios to succeed in different markets, moving in and out of companies and sectors as their fortunes wax and wane.

That’s because active managers don’t wear the same straitjacket as a passive fund's. Harbour can weight its funds towards growth sectors such as healthcare, age-care and other industries that benefit from demographic and technological developments. Harbour’s managers also monitor local companies to see which are using technology to the best advantage.

“We talk to companies about the technologies they are adopting,” says Lee. The shift in demographics may also affect fixed-interest investments as the Reserve Bank of New Zealand manages interest rates to navigate the influence of supply and demand on inflation, which is likely to be influenced by the ageing demographic, says Lee.

Although demographic change and technological evolution will be big players in growth in the decades to come, there will be times when labour-market changes drive growth and others when technology plays catch-up or gets ahead, says Lee. As one is in the ascendancy, the managers will be weighing up which investments have the best prospects at that time.

This means Kiwis need to look for funds and portfolios holding hand-picked investments with good long-term prospects as New Zealand moves through different market cycles.


White Noise: Who is shaping Auckland's future?
101439 2019-01-21 00:00:00Z Auckland Issues

White Noise: Who is shaping Auckland's future?

by Kate Newton

Some Aucklanders have more say in their city's future than others.

Read more
Stephen Fry revisits the world of the Ancient Greeks in Heroes
101242 2019-01-21 00:00:00Z Books

Stephen Fry revisits the world of the Ancient Gree…

by Lauren Buckeridge

In his delightful way, Stephen Fry dips back into the ancient world with more stories of tests, quests and feats of old.

Read more
Comedian Jo Brand on the benefits of not giving a toss
100970 2019-01-20 00:00:00Z Profiles

Comedian Jo Brand on the benefits of not giving a…

by Diana Wichtel

Jo Brand’s deadpan style is deceptive, as some blokes have discovered to their very public cost.

Read more
Green Book: A racially themed road-trip drama that stays within the white lines
101345 2019-01-20 00:00:00Z Movies

Green Book: A racially themed road-trip drama that…

by James Robins

Green Book joins a long tradition of civil-rights era movies that barely scratch the surface.

Read more
How I caught Marie Kondo's tidying up bug
101329 2019-01-20 00:00:00Z Television

How I caught Marie Kondo's tidying up bug

by Diana Wichtel

Four episodes into Netflix’s Tidying Up with Marie Kondo, something snapped.

Read more
The vital importance of full sleep cycles
100962 2019-01-20 00:00:00Z Health

The vital importance of full sleep cycles

by Mark Broatch

It’s a myth that older adults need less sleep, says University of California professor of neuroscience and psychology Matthew Walker.

Read more
Searching Great Barrier Island for the meaning of life
101413 2019-01-20 00:00:00Z Life in NZ

Searching Great Barrier Island for the meaning of…

by Joanna Wane

Joanna Wane goes to Great Barrier Island in search of the answer to life, the universe and everything.

Read more
Australian classic Storm Boy gets a modern remake
101340 2019-01-19 00:00:00Z Movies

Australian classic Storm Boy gets a modern remake

by James Robins

The biggest beak in Oz screen history returns in a remake of a 1970s favourite.

Read more