“I think people have described elements of it as Wild West — and probably some of it was.”
But there was also an element of bad luck for New Zealand, he says. “In the sense that, had there not been a global bull market going on at the time, the effect on our economy would have been much more moderate.”
There were people who were amateurs who were caught out, say Hazledine. “But in a sense everyone was amateur then because the whole big game of privatisations and big buyouts was fairly new to New Zealand.
“But this wasn’t a real game; this was a paper game. There were bankruptcies and stuff but it wasn’t really what the real economy was doing. It wasn’t like GE going broke — the big industrial firms like Fletcher Challenge, they weren’t going broke.”
For that reason he’s not convinced that the economic woes New Zealand went through after the crash were all caused by it.
There was over-exuberance, he says. “But we should remember that we’ve had a well-functioning stock market for about 100 years before that. We weren’t a socialist country; we were a capitalist country with a lot of controls on it.
“So it wasn’t like what happened in Soviet Russia and stuff. It makes it a little bit harder to explain.”
Nevertheless, the housing market stalled. Unemployment rose and confidence plummeted. Gross Domestic Product, which had grown at 1.6 per cent in 1985 and 2.7 per cent in 1986, ended 1987 up just 0.9 per cent. By the end of 1988 we were in recession, with a decline of 0.4 per cent. Growth didn’t climb back above 1 per cent until 1992.
Could we see a crash of that scale again?
“Definitely,” says Hunt. “Although I think the biggest risk is the housing market. Let’s say that interest rates go up, people start going back to Australia as they’ve done in the past, immigration slows down because things are going well overseas, then you suddenly got too many houses.
“You could see a 20 per cent dip quite easily. People basically like to make an easy buck. And there is no way of doing that long term.
“People just need to be careful, that’s why diversity is critical. People should take more interest in their KiwiSaver. What industries is it in? How good are the managers?
“You can’t expect 15 - 20 per cent like we’ve had the last 8 or 9 years.” Says Hazledine: “I never predict. I suppose I should wonder because my pension fund is in that too .
“One thing that is different now is that our shares tend to be dividend oriented,” he says. “Not growth shares, but income shares.
“In 87 we thought we’d have a capital growth market. They weren’t going to ever pay dividends; they were rubbish to start with. Whereas I don’t think the companies we’ve got in New Zealand now are rubbish.”
For Cameron — one of the architects of the current regulatory system, including our Financial Markets Authority — there is no question.
“Look, the one thing I can tell you with confidence is there will be another financial crisis. It is in the nature of humans.”
“We are our biases — probably a lot of them evolutionary — and they will lead to periods where we become overly optimistic about asset prices, and we’ll find ways which no-one’s ever thought of yet to come up with financial innovations that fuel it.”
It’s something to consider as the nine-year bull market, both here and on Wall Street, rolls on to new record heights.
