Decline In Household Net Worth Continues In March
18 May 2001
DECLINE IN HOUSEHOLD NET WORTH CONTINUES IN MARCH
The net worth of New Zealand households fell for the fifth consecutive quarter in March 2001, according to the latest WestpacTrust Household Savings Indicators as compiled by NZIER and Morningstar. Over the quarter ended March 2001, New Zealand household net worth fell by $0.4 billion (0.2%). Net worth is now some $4.0 billion (1.9%) lower than a year ago.
Despite the fall in total net worth, financial net worth - which excludes housing assets and liabilities - rose by $1 billion (1.0%) in the quarter.
Growth in liabilities continues to slow
Continued growth in liabilities drove the decline in net worth again this quarter, with households borrowing an additional $1.0 billion, an increase of 1.4% from December. Over the year to March 2001, liabilities have grown by 5.8%. However, annual growth in household liabilities has eased for the sixth consecutive quarter.
“With household net worth continuing to decline, debt levels high, and house prices at best only keeping pace with inflation, it is not surprising that growth in household borrowing is declining,” commented Alex Sundakov, director of NZIER.
| HSI - Summary Data | Mar-01 | Dec-00 | Quarterly | Mar-00 | | Annual Change |
| | Qtr ($M) | Qtr ($M) | $M | % | | Qtr ($M)$M% |
| Total Assets | $275,341 | $274,778 | 563 | 0.2 | | $275,435(94) | | 0.0 |
| * Financial Assets | $107,009 | $106,046 | 962 | 0.9 | | $104,6462363 | | 2.3 |
| - M3 | $43,585 | $42,912 | 673 | 1.6 | | $41,75118344.4 |
| - Managed Funds | $39,719 | $39,542 | 177 | 0.4 | | $38,49812213.2 |
| - Other | $23,705 | $23,593 | 112 | 0.5 | | $24,397(692) | | -2.8 |
| * Housing Stock | $168,332 | $168,732 | (400) | -0.2 | | $170,788(2456) | | -1.4 |
| Total Liabilities | $71,340 | $70,352 | 988 | 1.4 | | $67,42939115.8 |
| Net Worth (Assets | minus Liabilities)
| * All Elements(incl Housing) | $204,001 | $204,426 | (425) | -0.2 | | $208,005(4004) | | -1.9 |
| * Financial (excl Housing). | $100,182 | $99,203 | 978 | 1.0 | | | $98,34318391.9 |
Growth in household assets anaemic
On a positive note, the value of New Zealand households’ assets increased by $0.6 billion (0.2%) in the March 2001 quarter, bringing asset values to a similar level as a year ago.
Financial assets (excluding houses) increased 0.9% in the quarter, and are now 2.3% higher than a year ago. The quarterly rise in the value of financial assets was due mainly to increases in the value of funds in M3 institutions (1.6%) and funds held in unit trusts and group investment funds (3.3%). Meanwhile, the value of physical assets (housing) fell by 0.2% in the March quarter.
“The value of a diversified portfolio continues to be highlighted by this survey. Low inflation expectations, weak population growth and high debt burdens are slowing the drive for residential investment and hence house price growth. Meanwhile, growth in other assets continues to rise, albeit subject to the short-term gyrations of equity markets,” said Girol Karacaoglu, WestpacTrust Financial Services General Manager.
Over the year ended March 2001, managed fund assets rose in value $1.2 billion or 3.2%. In comparison, the amount of deposits and cash held at financial institutions rose by $1.8 billion (4.4%), while the value of housing declined $2.5 billion (1.4 %).
“The continued strong trend of net funds inflows into managed funds over the last year is encouraging, particularly given the recent high-profile volatility of many international markets,” said Graham Rich, Morningstar CEO and Publisher. “Kiwis have historically been jittery about investing further in managed funds during periods of market turbulence, so it’s a positive sign that they appear to be recognising the longer-term benefits of investing and staying in their managed funds.”
“The continued decline in household net worth over the past year continues to suggest a reasonably subdued domestic spend over 2001. Although we still anticipate a rise in consumer spending over 2001, it will be well below the growth rates experienced in the mid-1990s,” said Adrian Orr, WestpacTrust Chief Economist. “Furthermore, declining net wealth, weak asset prices and slow borrowing is not an environment in which the Reserve Bank of New Zealand need worry about a burst of persistent inflation.”