New Zealand households are still spending more than they earn, although their level of dis-saving fell in the year to March 2010 according to a new savings measure released by Statistics New Zealand.
"The household saving rate, expressed as a percentage of household net disposable income, has been mostly negative since 1999 but has improved in recent years, reaching negative 2.2 percent in the year ended March 2010. Household saving is calculated by subtracting expenditure from income received through salaries, wages, interest, and dividends," Stats NZ said.
The release comes the same day as the government-appointed Savings Working Group is set to deliver its interim report to Finance Minister Bill English on how to improve the level of national savings in both the private and public sector.
There have growing calls for New Zealand to improve its savings rate and decrease its exposure to global financial markets as they remain jittery about European and the US economies. An improved savings rate would also help lower the New Zealand dollar, Reserve Bank governor Alan Bollard said last week.
Finance Minister Bill English has previously said New Zealand's exposure to global markets was his biggest worry for the economy as the Euro sovereign debt crisis rolls on.
Here is the release from Stats NZ:
Household expenditure continues to outpace income, with New Zealanders showing a steady preference for investment in the property market, according to new saving statistics released today by Statistics New Zealand.
The household saving rate, expressed as a percentage of household net disposable income, has been mostly negative since 1999 but has improved in recent years, reaching negative 2.2 percent in the year ended March 2010. Household saving is calculated by subtracting expenditure from income received through salaries, wages, interest, and dividends.
"While improvements in the saving rate in recent years were due to rising salaries and wages, and farming income, the improvement in 2010 was mainly due to less income tax paid arising from decreases in personal tax rates effective from 1 Oct 2008,” economic statistics development manager Jude Hughes said.
From 1999 to 2008, New Zealanders continued to invest mainly in property, particularly in residential buildings. Mortgage interest paid also increased during this period. The official cash rate peaked at 8.25 percent in July 2007.
The government saving rate was negative in 2010, the first time in 17 years. This fall was due to lower income as a result of reduced personal tax rates and reduced resident withholding tax. In addition, social assistance benefits paid have increased from 2008 to 2010, consistent with the rise in the unemployment rate from a 21-year low of 3.7 percent to 6.4 percent for the year ended March 2010.
National saving, which is the sum of all the sectors in the economy, increased to $3.2 billion in the year ended March 2010 and is down from its peak ($7.9 billion) in 2004.
This is the first release of the official institutional sector accounts (1999–2008) for all sectors of the economy. Information contained within the accounts can be used to study the source and disposal of incomes, the origin of saving, the direction and method of transfer of saving from one sector to another, and the areas of the economy in which available funds are spent. Official accounts for the household and general government sectors are included to 2010.
14 Comments
So, 'household savings' is a residual statistic. It guess it's easy enough to calculate the income side, but assuming that 'what is left' is saved is a big assumption? I mean, how does the repatriation of funds overseas, for instance, reflect in 'savings' to this country?
Yes ! Also 20 years ago was National . 13 years ago . 19 years , ditto . And 11 years . Plus 14 years ago , that was National , too . 12 years . 16 . .... Ummmmmm , 13 years ago . Oh , and 15 years ago , that also was National ....... Ooooh , 18 too !
Oh Jenny & Jimbo , how quigley they forget !
looking at the graph...and taking a wild side guess...savings might turn positive in 2012...but that would still leave a 160 plus billion dollar debt belonging to those who borrowed big to chase property. They won't be saving any time soon. And Bill the Borrower is busting a gut to build the govt/public debt total at $350 million a week. It also guarantees the economy will stay in this new normal state. Expect stuff all to change for the next............ten years!
So a deposit is saving.
But those chasing property are saving, instead of a bank earning 5% its in an asset that should appreciate and give an income..........depending on your defination of saving....provided they then dont spend the gains when they sell...
That graph is worth watching to see if it indeed pans out as you/I think it will...
Another point Theses are averages if this is a % of savings based on a static income v fixed outgoingsmodel?
By this I mean if some ppl with fixed outgoings have suffered an income loss they cant save or save as much as they would want....others may not have sen a wage cut or had a salary raise and are saving at a higher %.....I'd like to see if this % is uniform or if there is a bias/spread in it....curious.
regards
Steven, most of my friends in property are borrowers not savers they try and make the money out of tax free capital gains. If you borrow and have an interest only loan you are bad, if you cannot pay the loan back and the rest of NZ has to wear the loss through higher interest rates you are very bad.
On the other side, some one sold you a house and hopefully paid off a loan, and moved in with their Parents. If you look at the national debt and our interest bill and then our income , there is this big black hole thats going to hurt you if you get close to the edge. Im still saving im very happy to be able to, it would be nice if more could, sometime very soon cash will be king.
This isn't so bad - that means most can't save enough to buy a one way ticket across the ditch...
AndrewJ "If you borrow and have an interest only loan you are bad, if you cannot pay the loan back and the rest of NZ has to wear the loss through higher interest rates you are very badnterest only payments are really bad" - yeah they all need a good spanking!
But look whats happening to interest rates
money morning
Why This Market is Risky as Hell
So where could the trouble come from?
Easy, have you watched the US bond market lately?
If not, you should. US bonds have now sold off a full percentage point since November when Benny boy – that's US Federal Reserve chairman Ben Bernanke – started buying bonds. In the bond market, that's a huge move:
If you're wondering why that's such a big deal, you need to remember that as bond prices fall interest rates rise. That means the borrowing costs of the US government have risen 40% in the past few months from 2.5% to over 3.5%.
Amazingly, the mainstream media are trying to sell this as good news. They're saying bond yields are rising because the economy is showing signs of improvement. So, investors are selling bonds and switching to riskier assets such as shares and commodities.
Mortgage rates in the US are priced off the long bond (10 year Treasury bond) and have started to rise. This will add pressure to a sector of the economy that's already lying on its back crying uncle. And expect foreclosures to begin rising again.
Bond investors stepped up the selling pressure after the farce of a compromise between the Democrats and Republicans in Congress. The deal extends tax breaks that will deny the government of $900 billion over two years.
While we're in favour of tax cuts, they aren't much good if the government doesn't cut spending too.
The story we are being sold; that the economy is slow and folk aren't spending cause we're all saving and paying down debt looks like a load of BS in the light of this.
Household debt is at an all time record, hasn't gone down at all at just shy of $183,000,000,000 according to the RBNZ figures, in fact it's been going up by about around 2.5% of GDP. The government are leveraging up to the tune of 7.7% GDP so combined that's over 10% of GDP we are adding to our debts each year. The dreaded double digit debt growth!
That's one hell of a stimulus - so how come the economies still in the crapper?
RBNZ stats here - see C5 on this page http://www.rbnz.govt.nz/statistics/monfin/RegBanksNBLIs/3822930.html
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