Bernard Hickey details the fourth in the series of the Top 10 charts for 2010 in association with Bank of New Zealand.
This chart from Finance Minister Bill English's presentation of the government's fiscal and economic update on December 14 shows how much equity households are injecting or withdrawing from their household savings going back to 1992.
It shows how between 2004 and 2008 New Zealanders used the rapidly inflating value of their houses as ATMs, withdrawing around 7% of household disposable income from the value of their houses each year for almost 4 straight years.
This was done in a variety of ways. Some households had flexible mortgages that allowed them to borrow at will to a limit without further approval from their banks. Others borrowed bigger fixed mortgages when it came time to roll over an old fixed mortgage, comfortable that the value of their house had risen in the meantime. The 'spare' borrowing was then spent.
Others sold houses with small mortgages and bought bigger houses with bigger mortgages, spending some money along the way on renovations and upgrades to furniture and home entertainment systems.
Essentially, that money withdrawn from the value of a home was spent, mostly on consumer goods and services such as flat screen televisions and holidays.
In some cases it may have been used to finance the growth of small businesses. Or it may have used to subsidise a struggling or failing small business.
From late 2008 however, it's clear that households pulled their heads in and started saving again. This was also done in a variety of ways.
Some borrowers kept paying off their mortgages as if they were still paying more than 10%, even though interest rates had fallen.
Others refinanced with smaller mortgages or moved to smaller houses with smaller mortgages.
Equity injection rose to as high as 4% of household disposable income by late 2009. This helps explain the struggles that many retailers have been having through 2009 and 2010 as the economy (more than two thirds of which depends on consumer spending) fails to get its mojo back.
But that savings spurt may not last.
The savings rate has fallen through late 2010 as some life returns to the housing market, albeit in a spotty way, and some start spending their tax cuts on wealthier properties.
We will see if it lasts.
The savings needed to offset the cumulative spending splurge of more than 25% of disposable income could take years to repair.
Are retailers and the government ready for that?
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