If we needed confirmation that the June quarter 2024 was a rough one - it's provided in a big way by Statistics NZ's latest household assets data.
The data shows that during the quarter household savings decreased, the net worth of households dropped and - for the first time since this series started in 2016 - total household income decreased for the first time.
According to Stats NZ, household saving was a negative $479 million in the June 2024 quarter (a -$1.1 billion turnaround from the previous quarter's figure) as household spending increased while net disposable income fell.
Seasonally adjusted household spending increased 1% to $59.7 billion in the June 2024 quarter. The increase in household expenditure was driven by spending on services and non-durable goods like groceries, partly offset by a decrease in spending on durable goods like motor vehicles.
Meanwhile household net disposable income decreased 0.9% to $59.2 billion.
Total household income decreased 0.2%, which as mentioned above was the first fall since the start of this data series.
Stats NZ says household net disposable income is the amount of money a household has once all income such as wages, interest, and child support, and income payable such as taxes have been accounted for. It represents the money available for a household to save, spend, or invest.
"With net disposable income falling in the June quarter, the household sector is funding the increase in spending through borrowing and drawing on existing funds," Stats NZ's national accounts industry and production senior manager Ruvani Ratnayake said.
Westpac senior economist Satish Ranchhod said Stats NZ's update on households’ finances highlighted the continued pressures in the household sector.
He said adjusting for population changes, he estimates that disposable incomes for individual households rose by 2.8% in the year to June. That’s below the 3.3% rise in consumer prices over the same period.
"Looking at the past three months, the pressure on incomes has been particularly stark. In fact, a number of households have seen their earnings going backwards as small business profits have fallen."
Ranchhod said the combination of slowing income growth, high interest rates and large increases in living costs over the past few years "has been a significant squeeze on households purchasing power".
Ranchhod noted that some of the "powerful financial headwinds" that have buffeted households over the past few years are now easing off. Consumer price inflation is dropping back, and next week’s figures are set to show inflation back below 3% for the first time since 2021. At the same time, the RBNZ has been cutting the OCR, with a large 50bp cut on Wednesday and more expected over the next few months.
"It will take some time for those changes to flow through to households back pockets. And at the same time, the labour market is weakening, with unemployment set to rise above 5% before the end of this year. As a result, we don’t expect a big rise in spending through the back part of the year.
"However, there is a growing sense in the economy that the worst is behind us, with business and consumer confidence turning higher in recent weeks. Combined with reductions in borrowing costs, we expect to see spending and economic growth gradually pushing higher over the year ahead," Ranchhod said.
Stats NZ said growth in wages and salaries was 0.8% in the June quarter, lower than the average quarterly growth of 2.1% from December 2021 to March 2024.
"Slower growth in household wages and salaries reflects fewer working hours in the June quarter," Stat NZ's Ratnayake said.
Dividends received and the income of self-employed business owners and partnerships both decreased in the June quarter as well.
Household net worth decreased 2% ($47.1 billion) to $2,311 billion in the June 2024 quarter following increases in the previous three quarters.
Net worth is the value of all assets owned by households less the value of all their liabilities.
"Despite a fall this quarter; household net worth increased 1%, or $24 billion, over the year to June 2024," Ratnayake said.
Among household assets, the value of owner-occupied property decreased $21 billion or 1.8% this quarter, and equity and investment fund shares decreased $27 billion or 2.6%.
Ratnayake said household equity assets include the value of rental properties less the mortgages held against them.
"The June 2024 quarter decrease in household assets reflects a fall in property values for both homeowners and landlords."
Household financial liabilities grew 0.7%, continuing a relatively steady increase in recent quarters. This was driven by a 0.9% increase in housing loans, and partly offset by decreases in consumer loans (1.2%) and student loans (0.7%).
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.