Household wealth just keeps growing

Sunday 4th September 2005

Contrary to expectations, the net worth of households is continuing to grow rapidly on the back of a further increase in house prices and a strong run by the New Zealand sharemarket.

The Spicers Household Savings Indicators show that the total net wealth of households rose an estimated 4%, or $18.1 billion, in the June quarter.

The average household enjoyed an increase in net worth of an estimated $10,000 during the quarter and $38,000 for the year to June. In fact, over the last three years, the net worth of the average household has increased $113,000 to stand at just over $300,000.

Commenting on the latest Household Savings Indicators, Spicers Wealth Management's Chief Economic Adviser Rozanna Wozniak says that rapid gains in house prices have fuelled most of the rise in household wealth during the last few years. As a result, an increasing proportion of wealth is tied up in housing. Owner occupied housing now account for around 70% of all household assets, and housing in total account for around 78%.

Household wealth also benefited from a booming local sharemarket this quarter. Gains by financial assets outpaced the rise in house prices for the first time since the December 2001 quarter.

"Given the current high levels of interest rates and falling net migration, we still expect the pace of housing appreciation to slow considerably," Wozniak says.

Turning to the election policies affecting household savings, Rozanna Wozniak says with an underlying Budget surplus of $8.3 billion, there is clearly room for some sizeable election promises.

"Labour's decision to give some of this huge surplus to those who need it most has a strong moral argument. However the economic benefits of delivering some of those gains across a wider spectrum should not be ignored."

Wozniak says that if the drive to lift New Zealand's standard of living is to succeed, then further productivity gains are essential to build on the improved economic growth rate achieved in the last decade.

"Juggling spending priorities is never easy. However, it is important that the search to 'redistribute the economic pie' is not given overriding priority over the ongoing need to 'make the economic pie bigger'."

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