Hon Bill English

Minister of Finance

26 November 2014

Media Statement
Household savings rate positive for five years

New Zealand households have together saved more than they spent over the past five consecutive years – the first time this has happened since 1989-94, Finance Minister Bill English says.

The latest revised annual National Accounts (Income and Expenditure) compiled by Statistics New Zealand show aggregate household savings – which includes the impact of debt repayment - totalled $2.8 billion in the year ended March 2014.

This represents a positive savings rate of 2.1 per cent of household disposable income.

The revised figures show that before 2009 – the year after the National Government was first elected - the household savings rate had been negative in all but one year since 1995.

“This news is the latest in a series of results that show households are getting ahead and that the economy is steadily rebalancing towards higher savings and away from borrowing and consumption,” Mr English says.

“Combined with average hourly earnings growing more than twice as fast as inflation, a sustained period of historically low interest rates, falling unemployment and good economic growth, the household savings data adds to a picture of New Zealanders making sensible decisions to strengthen their own balance sheets.

“The Government, which has also kept tight control over its own spending during the same period, has made changes that have encouraged New Zealanders away from debt-funded consumption in favour of a more sustainable and secure position.

“Households have been nudged towards this by a combination of factors including the 2010 tax package which lowered taxes on income and savings and increased tax on consumption and property speculators.

“The Government has also pursued initiatives that have made investments more attractive, including the government share offer programme which helped stimulate New Zealand’s capital markets. At the same time, we’ve tidied up the finance company sector to help protect depositors, and made KiwiSaver more affordable.

“Many low-income households are still finding things tough . However, the overall picture supports a rebalancing of the economy away from the debt-fuelled consumer binge that occurred under the previous Labour government, to a growing culture of saving and investing.

“While this helps households get ahead, low inflation and restrained consumption contributes to government revenue being lower than it otherwise would be, again reinforcing the challenge of getting back to surplus.”

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