We are back in the money again. But the bad news is that we've still got a heck of a lot less free cash than we had a few years back. And we are starting to borrow more. Again.
Latest household financial assets and liabilities figures released by the Reserve Bank show that kiwi households as of December - excluding house values - were worth NZ$239.5 billion, that's an impressive rise of 9.58% in the year. In fact, it was the highest percentage gain in financial assets for the country since the 14.2% gain recorded during the height of the last housing boom in 2006.
More encouragingly, the figure for net financial wealth - if you subtract that pesky debt from the overall asset figure - was NZ$48 billion, up from NZ$33.7 billion the year before, and nearly four times the figure of only NZ$12.9 billion of net financial assets held by Kiwis after the twin effects of the housing boom hangover and global financial crisis in 2008.
So, while the NZ$48 billion of net financial wealth represents a fine recovery from the depths of recession not to mention considerable depression about our financial woes, we shouldn't get ahead of ourselves. If you go back to the late 1990s Kiwi households had net financial wealth in excess of NZ$50 billion. And remember these figures are not inflation-adjusted. So, recovery or not, we are still a long way behind where we were in terms of the net financial position of Kiwi Household Inc.
The asset figures as just described don't actually include the value of houses owned by Kiwis, and which are of course a significant part of the overall value of the average Kiwi. They do include borrowings for houses, however.
The house values are included separately, but the December data are not available yet. However, as at December 2011, the total house value attributed to Kiwis was NZ$614 billion. Given the way prices have risen in the past year, a figure certainly north of NZ$650 billion could be expected for December 2012. If you include house values, Kiwi households had a net financial worth of NZ$636 billion in 2011, which was slightly higher than the pre-GFC peak of NZ630.7 billion in 2007. Presumably the figures from December 2012, when available will show a strong rise in net household wealth, including house values.
But excluding house values, the rise in the asset values of Kiwi households in the past year is in the main a reflection of increases in the amount Kiwis have in the bank and the growing impact of KiwiSaver plus other funds under management. Money on deposit, mainly with banks, hit a new high of NZ$118.6 billion, while superannuation - which now includes over NZ$15 billion in KiwiSaver - hit a new peak of NZ$36.7 billion. Other funds under management reached a new high of NZ$31.2 billion.
Interestingly, while growing numbers of Kiwis now have indirect investment in shares because of their KiwiSaver plans, the value of shares directly held by New Zealanders in the NZ market jumped by about a third in the past year to a new high of over NZ$20 billion. There are two points to note about that figure, however. It's only just ahead of the NZ$18 billion Kiwis had in domestic shares in 1986 and the figures aren't inflation-adjusted. The other point is that the NZ market overall rose by about 24% in the past year, so that would have largely accounted for the increase, rather than any major new surge in share investment.
Well, that's the assets. But of course that's only half the picture.
Households have been keeping the liabilities, or to use the more basic term - borrowing - under check in the past few years. After an incredible period where total household debt rose an eye-watering 15% a year from 2003-2005, we've been making commendable efforts to hold that lending in check.
However, this year's total financial liability figure of NZ$191.5 billion, represented a 3.5% rise on last year's figure and was the biggest percentage gain since 2008, when everything was just about to unravel with the global financial crisis.
The rise in debt of course has come in tandem with a rise in house prices. So, we are being tempted to borrow more again. Good idea? We'll find out won't we. The RBNZ figures show that the total amount loaned by banks and non-bank lenders (it makes up virtually all of the NZ$191.5 billion figure) increased by about NZ$6.6 billion in the past year.
So, maybe that's something to be bothered about.
But more encouraging is the total household disposable income figure, which edged up to NZ$132.5 billion, from nearly NZ$130 billion. More significantly, the proportion of net household wealth to disposable income moved up strongly to 36% from 26% and is now well above the low of just 11% in 2008. Again, we should get ahead of ourselves, though, because back in 1986 the equivalent figure was 150% and it was above 70% at the start of this century.
24 Comments
Not kidding Mist. And the purpose is not to support fund managers. But rather to build the assets of the feckless. So they don't become a burden to the wise later on. We are taxed to support the drones now. And I would have thought you not want to be taxed for that purpose.
Good point about paying down consumer debt. Everybody should be doing that at the same time.
Anyway, not a problem for you. You would be exempt. See note above (11.37am)
You know absolutely nothing about my personal circumstances, family requirements, hopes, expectations and preferences. On what basis do you presume to know what's the best approach to managing my personal finances?
If you force "the feckless" - as you term everybody who chooses to manage their finances differently from the way you prescribe - to reduce their income by 15%, they are likely to become a burden immediately. When they reach the age of retirement, they will be no more of a burden than you will - they will be entitled to NZS, as are you.
Unless you are going to combine compulsory KiwiSaver with pension means testing later, then forcing people to save now will not reduce costs later.
So - contrary to your earlier statement, no exemption from compulsion for interest.co.nz commenters, or indeed anybody else, then?
That (unlike making KiwiSaver compulsory for everybody on its own) is a coherent and defensible approach. But I doubt you will find it to be a politically feasible one.
If your employer can afford to pay you $100 and put another $9 into your super account, then he could afford to pay you $109 and you could decide for yourself how much to put into your super account. How is it better for the Government to dictate how much?
You don't think you have the willpower to put the $9 into your super account? Not my problem.
You don't think I have the willpower to put the $9 into my super account? Not your business.
The tax benefits in the Australian system are costing billions, and most of the benefit of that is going to high income people. And they still have a higher rate of poverty among old people than New Zealand does.
It is our collective problem if because of a lack of saving that could reasonably have occurred, we have to pay for those in retirement who didn't bother to save. Am not sure the current taxpayer funded pension will be available when I reach the qualifying age, let alone when my kids do.
Separately there is I believe evidence in employment, that many employees do not put a value on whatever a prospective employer is offering as a pension plan. Many really only look at the annual or weekly, or hourly rate; such that without a degree of compulsion employers maximising their short to medium term profits would offer only the $100 in your example.
It is our collective problem if because of a lack of saving that could reasonably have occurred, we have to pay for those in retirement who didn't bother to save.
"Save" is an emotive term that has little value in the post GFC world of effective real zero bound interest rates and stock market returns that inevitably reflect the monetising of foreign government debt issuance.
Stephen
Fair enough. Would you be happier with "invest", whether in the Kiwi favourite of a buy to let house (or even in paying off the mortage on your own house); or in the sharemarket for example (both of which seem to have done very well in the last year at least, even if the price increases are supported by foreign printing, as you suggest)? Whatever the particular investments, some seem better than blowing the lot on consumption, where not doing so was at least plausible. Ms demeanour rightly points out that blowing it is a valid personal choice (although not one I would recommend; the government pension probably rightly is not a lot); except of course that with an ageing population even the fairly low pension may not be affordable to pay to all over 65 year olds in the future.
If the government ever does grapple with that issue, prudence and fairness suggest some compulsion on saving/investing earlier would have been a good idea.
More encouragingly, the figure for net financial wealth - if you subtract that pesky debt from the overall asset figure - was NZ$48 billion, up from NZ$33.7 billion the year before, and nearly four times the figure of only NZ$12.9 billion of net financial assets held by Kiwis after the twin effects of the housing boom hangover and global financial crisis in 2008.
Unfortunately I understand this increase in household net financial assets was nearly exactly matched by an increase in NZ government debt, so that NZ's net position was not materially changed.
However it would be unfair of me to suggest that all recent data looks bad, or is the government's fault. Have seen elsewhere that NZ's overall foreign debt is inching down, (although if due to asset sales, not a big step forward); some of the property investment is in real improvements, not just trading; manufacturing has surprised me by staying okay despite the exchange rate, and am hopeful that unemployment has topped.
My one real beef is that it seems running fiscal deficits( probably necessary in a recession) is money flying out of the country due to a zero fiscal multiplier in an open economy; so some form of capital controls/incentives; and or exchange rate manipulation is essential to change that, and get national wealth increasing again at speed.
kimy,
Good points I believe; and I suspect this issue has a double whammy, in that we are paying foreigners an arguably unnecessary premium; and separately that taking their money lifts the exchange rate, with vicious cycle effects needing even more money- unless you break that cycle. Maybe changing the incentives you talk of would be a good start.
Yes, it is a collective issue whether you like it or not.
Australia - 17% self + 9% Employer = 26% = good retirement
NZ 3% + 3% + Govt $520 = $100k or so = enough for 2 world trips - ho hum
If the rules are set - then it happens.
Leave it to individual choice = 15% of people organise , leaving general Super nec for next 60 years
You are assuming it is the Government's business to make sure people have a good retirement. I do not think the Government has any such responsibility, particularly when it comes at the cost of reduced choice and income in earlier life. The Government does enough to make sure New Zealanders stay out of poverty in retirement (which is more than many Australians do); anything above that is up to the individual.
Yes, some individuals will (eventually) benefit from being forced to save. Does that justify the dis-benefit to other individuals who are better off saving in a different way, or not saving at all at certain times? I don't recognise your figure of 15% being organised, by the way, what's the source?
" What country is the next special case? Is it Portugal or Spain?"
http://globaleconomicanalysis.blogspot.com/#5zXuy2HfRsHj2KIY.99
Punters in NZ must wake up and position themselves to be ready to move capital instantly out of reach of thieving politicians. Long term deposits are dangerous. Bonds more so. SOE shares amount to toilet paper promises of future never ending dividends...why else would Key et al prefer cash!
And the situation in the UK?
"...millions of savers in British banks have already lost much more of the real value or purchasing power of their money to prop up financial institutions closer to home.
..... shrinkage of bank and building society depositors' purchasing power caused by inflation exceeding frozen interest rates,.......
http://blogs.telegraph.co.uk/finance/ianmcowie/100023428/cyprus-banks-euro-tax-bail-out-is-a-small-scale-smash-and-grab-compared-to-britains-slow-motion-bank-robbery/
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