I spoke at the IOD Annual Conference on generational change on 16 April 2013. Ageing is a structural force that will change the economic landscape. Change is becoming faster. It will change politics, what we do and how we do it. Skills will be in demand and capital will get cheaper. Prepared businesses will leverage these tectonic shifts into opportunities, not challenges.

1. Responding to generational needs
Shamubeel Eaqub, CFA
IOD Conference 2013
16 April 2013
A New Zealand perspective

2. Summary
• Huge change through recession
• Generational change up next
− Labour more scarce
− Regional differences
• Lead the change through
− Boards
− Business strategy
− Business processes

3. BACKDROP
“He who rejects change is the architect of decay.”
- Harold Wilson

4. Recession and recovery
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
1936 1948 1961 1973 1986 1998 2011
1995/96$
Real GDP Per Capita
Stagnation Actual Forecasts
Source: Statistics NZ, RBNZ, NZIER

5. Structural change…
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1901 1956 2011
Sector Employment Share
Services & other
Construction
Manufacturing
Primary
Source: Statistics NZ, NZIER

6. …sped up
180
190
200
210
220
230
240
250
1996 1999 2002 2005 2008 2011
Number,000s
Manufacturing Employment
Source: Statistics NZ, NZIER

7. Next up: generational change
0%
1%
2%
3%
4%
1992 1997 2002 2007 2012
Population Growth
Under 65 65+
Source: Statistics NZ, NZIER
Channels
• Political
• Demand
• Supply

8. Political economy: polarisation?
29 years
50 years
0
10
20
30
40
50
60
1992 2012
Years to Buy a Home
Pay off mortgage
Save deposit
Source: NZIER
Save 15% of income for 20% deposit, 6% mortgage rate, 1/3 of income in
mortgage repayments, for someone on the average income.

9. Demand: each generation is different
-15 -10 -5 0 5 10
Kitting out the house
Transport
Clothes & shoes
Sins (alcohol & tobacco)
Education
Food
Health
Running the house
Difference in weekly budget allocation
65+ Today vs 1990
Source: Statistics NZ, NZIER

10. Ageing is local
Southland
Canterbury
Marlborough
Bay of Plenty
Auckland
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85+
Age group in 2031
Source: Statistics NZ, NZIER

11. Ageing is global

12. Supply: Fewer workers
0
20
40
60
80
100
1991 2001 2011 2031 2051
Age Composition of Labour Force
65+
45–64
25–44
15–24
Source: Statistics NZ, RBNZ, NZIER

13. Ageing: Wages up; capital costs down
25
26
27
28
29
30
31
2011 2030 2060
Real Hourly Wage
Source: NZIER
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2011 2030 2060
Real Interest Rate
Source: NZIER

14. Governance
• Succession
- Add youth
- Retain experience
• Strategy
- Capital structure
- Long term growth

15. Operational
• Labour will cost
more
- Capital vs labour
• Hiring & workplace
policies
- Each generation is
different
15

16. Summary
• The recession has changed us…
• …more changes ahead
• Labour to be scarcer
• Lead the change through
− Boards
− business strategy
− Business processes

17. QUESTIONS?
“Invincibility lies in the defence; the possibility of victory in the
attack.”
- Sun Tzu