New Zealanders have been accused of being poor savers for years, but are we really?
David Bennett: How has household savings changed recently and what reports has he received on household wealth?
Hon BILL ENGLISH: I think, as we are familiar with, official measures show a significant improvement in the last 3 years, from dissaving of 7.1 percent of household income in 2007 to just positive household savings more recently. Alongside that, though, there is a maybe confusing report from the Reserve Bank, which has recently highlighted that in measuring household wealth its statistics exclude some important items. For instance, when it measures household wealth it does not include equity in farms. It does not include equity in shares in some businesses and commercial properties and forests, and nor does it include some types of foreign assets held by New Zealanders. It estimates that when these items are included, household net wealth is in fact $167 billion higher than it thought, or around 25 percent—that is, the Reserve Bank’s revision of the numbers indicates households may be 25 percent wealthier than they thought.
Trans Tasman offers further explanation:
. . . The reworked figures put NZ not as an outlier among developed nations for its low rate of savings but more in the mainstream. For the best part of a generation it’s been part of the NZ economic story that Kiwis focus on housing as their main form of saving, but the revelation household wealth, following a re-estimation of non-housing assets , is more evenly balanced between property and other assets, will have implications for several major areas of Govt policy ranging from retirement to housing needs. As a result of the information from the RBNZ, Finance Minister Bill English has Treasury testing the figures and reviewing the implications.
This is encouraging, better savers have more security, more choices and are better able to look after themselves.
Better domestic savings also reduce reliance on foreign savings for investment and growth.
Government’s role in encouraging savings include policies which encourage economic growth and discourage inflation.
The first helps lift incomes and the second protects the real value of wages and savings.