Why Expats in New Zealand are Feeling the Squeeze

After nearly a decade struggling with a fluctuating and often failing native currency, British expatriates retired in New Zealand may finally be recovering, but the majority are still left wondering: will it last? Unfortunately, there is no way of knowing.

To explain, it’s first important to understand how exactly the economy works.

Your Brief Economic Guide

Money is a supply and demand business, and domestic or international demand for goods and services creates the need for economic credit i.e. currency. In times of prosperity or stability, individuals and corporations buy into the economy by supporting businesses that meet this demand, and the value of the local currency goes up.

Because demand equals value, it effectively costs “more” to own a part of a successful economy than it does an unsuccessful one, meaning if demand or purchasing power is compromised (i.e. by unemployment) market non-confidence will cause the same individuals and businesses who bought in for the boom to then buy out, devaluing the local currency.

This boom and bust cycle is what causes the value of the pound to fluctuate, but for British expatriates living in countries that have had relative economic stability or recent growth, they are forced to stack the pound against a healthy currency in a healthy market, meaning the parity gap (the difference between equal and greater value) will be smaller, so it will ultimately cost more to own less.

Coupled with the fact that between 1998 and 2007, New Zealand experienced its largest economic boom since 1945 (and that 2007 also marked one of the worst years for the pound) moving to New Zealand was off the table for most British retirees, and of those that had already made the move, many returned unable to handle increased cost of living.

With this uncertain climate weighing on the minds of many, the question of whether or not international removals to New Zealand still make sense is unclear.

Although financial experts agree that a fixed-term exchange-rate might provide a temporary shield against this type of variant value, it still can’t protect against natural inflation. As frozen pension policies continue to prevent expatriate retirees from getting an increase to their payments, the gap between cost of living and pound-parity is shrinking. For expatriates in New Zealand, this means that any economic fluctuation may leave them short when it comes to basic expenses such as food or housing, forcing them to repatriate.

Still, with the pound bouncing back and New Zealand’s boom receding, purchasing power is up approximately 13pc on the dollar leaving most pensioners cautiously (if not a little skeptically) optimistic about packing up and shipping to New Zealand in 2015.