Kiwis borrowing more

By Phil Boeyen, ShareChat Business News Editor

Friday 24th August 2001

Increased borrowing has caused a drop in the net worth of New Zealand households, but people are putting more money into the sharemarket.

For the June quarter the WestpacTrust household savings indicators show household net worth fell by $0.8 billion or 0.4% compared with the previous quarter, and is now some $2.5 billion or 1.2% lower than a year ago.

However financial net worth - which excludes housing assets and liabilities - rose by $1.7 billion or 1.8% in the quarter.

WestpacTrust economist, Donna Purdue, says household wealth remains a key influence on consumer confidence and household spending.

"The persistent decline in household net worth over the past year will continue to act as a constraint on household spending going forward.

"Nevertheless, strong employment and earnings growth over the past six months is expected to provide support to household spending in the second half of this year."

Continued growth in liabilities drove the decline in net worth again for the June quarter, with households borrowing an additional $1.3 billion, an increase of 1.8% from March.

Over the year to June 2001, liabilities have grown by 6.2%, which is an increase in the rate of household borrowing. Until this quarter, annual growth in household liabilities had been slowing for the past two years.

The latest figures show that financial assets are now 2.6% higher than a year ago. Recent increases in financial assets are mainly due to an increase in the value of funds held in unit trusts and group investments, and a 6.1% increase in funds held directly in the sharemarket.

Cash and term deposits increased by only 0.9% in the quarter, in contrast to the two previous quarters where most of the growth in financial assets came from cash and deposits.

For the first time this quarter, net wealth ratios have been calculated in the figures and show on average, each New Zealand household has a net worth of $148,300, representing an increase of over $18,000 since March 1990.

Net worth per capita and net worth per adult have also been calculated for the first time this quarter. As at the end of June 2001, net wealth per capita stood at $52,800 and net wealth per adult stood at $68,300.

"These new net worth series are useful tools for individuals and households to benchmark their financial performance against," says Alex Sundakov, director of New Zealand Institute for Economic Research.

"Over time, we hope households will be able to use these indicators to benchmark their wealth accumulation performance in much the same way as financial analysts and fund managers use sharemarket indices such as the NZSE40."

Comments from our readers

No comments yet