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The cost of keeping up with the Joneses

Monday 22 November

The cost of keeping up with the Joneses:

Aucklanders carry lion’s share of New Zealand’s personal debt

A project initiated by Metro magazine has revealed that Aucklanders, making up 30 percent of New Zealanders carrying debt, have taken on 40 percent of the nation’s personal debt – a massive $29 billion, compared with $43 billion for the rest of the country.

“Mortgages, credit cards, student loans, bank loans and hire-purchase agreements… when you add them all up and take a look at who owes what, the breakdown is staggering. Your average Aucklander owes more money than people in the rest of the country, and what’s more, for the better part of their working lives, Aucklanders are also worth less,” said Gilbert Wong, Senior Writer for Metro.

The project, initiated by Metro with Statistics New Zealand, found that Aucklanders owed on average $73,471 per debtor, compared with $47,569 per debtor for the rest of the country. Average net worth was also found to be lower for most age bands, with the balance only shifting at the 60-64 age band.

The project analysed figures from the landmark Household Savings Survey conducted in 2001, which benchmarked assets and personal debt levels across the country – levels that have since continued to rise.

“As a result, not only do we know that Aucklanders have bitten off the lion’s share of the country’s personal debt – what we actually have is a conservative figure,” said Mr Wong.

Although a large part of the difference in debt levels comes down to higher house prices in Auckland translating into higher mortgages and rents, additional research also indicates that it’s also the result of a keeping-up-with-the-Joneses attitude.

A Nielsen Media Research survey in August of households with incomes over $80,000 shows that compared with people in the same bracket elsewhere in New Zealand, Aucklanders regard success and being seen as successful as more important than other New Zealanders. They are also more likely to keep up with the latest fashion, try new foods and eat out.

“You want people to see how well you’re doing so you put up a façade. If you were to rank New Zealand cities, then Auckland is the capital of conspicuous consumption,” said financial advisor Murray Weatherston, one of several commentators spoken to by Metro.

Former Treasury economist and chief executive of the New Zealand Institute David Skilling put the responsibility for debt in the domain of the middle class: “Their attitudes have changed. They are the people buying up at the garden centres and the car dealers. The debt problem is a middle New Zealand problem.”

Mr Skilling also confirmed the trend of New Zealanders opting to spend on big-ticket items for themselves: “That’s where the money is going, it’s on big-screen plasma televisions rather than financial assets.”

Another statistic showing the extent of the difference in debt levels between Auckland and the rest of New Zealand was the average 2001 mortgage, at $155,082 for Auckland compared to $92,697 for the rest of New Zealand. Increases in mortgages since then put the figures at approximately $183,000 for Auckland and $109,382 for the rest of New Zealand.

The full Metro article (attached) provides more details about how Auckland measures up against the rest of the country.

Other debt facts: Single Aucklanders between 25 and 29 have an average net worth of $492. The same age group elsewhere has an average net worth of $1856. Auckland couples aged 40 to 44 have an average net worth of $286,721. Couples aged 40 to 44 elsewhere in New Zealand have an average net worth of $324,915. Aucklanders with student loans owe $1.7 billion.

ENDS

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