A Need To Deliberately Encourage Asset Ownership
19 October 2004
The New Zealand Institute Identifies A Need To Deliberately Encourage Asset Ownership
A report released today shows that asset ownership has a profound effect on the lives of New Zealanders, and argues for deliberate action by government, business, and community groups to help many more New Zealanders to get ahead.
The report called “It’s Not Just About The Money: The Benefits of Asset Ownership”, is the second in a series of five papers to be released by the New Zealand Institute, around the theme of ‘Creating An Ownership Society’ in New Zealand.
The report is based on a comprehensive survey of New Zealand and international thinking and evidence over the past few decades, combined with insights from a series of 100 in-depth interviews that we have conducted with a wide range of New Zealanders over the past few months.
The New Zealand Institute’s first report, released at the end of July, showed that many New Zealanders do not own significant amounts of assets. While the wealthiest 10% of the New Zealand population hold more than half of the total wealth, the bottom half of the population holds less than 3% of total wealth.
The New Zealand Institute’s second report, released today, describes why assisting more New Zealanders to get ahead is a critically important priority. New Zealand Institute chief executive Dr David Skilling said this report showed clearly that “personal asset ownership is vital to the welfare of individuals, communities, and the overall country”.
For individuals, assets allow people to access return opportunities – often it takes money to make money. And assets allow people to better manage risks – assets provide a buffer against events like the loss of employment income or the fridge or car breaking down. This generates both economic and social benefits.
Dr Skilling said that “the report shows that the non-financial benefits of asset ownership are at least as important as the financial benefits. It’s not just about the money. Asset ownership allows people to exert much more control over their lives and enhances people’s life opportunities. For example, asset ownership is consistently linked to improved health and employment outcomes, higher reported well-being, family stability, and improved educational outcomes for children”.
The evidence, for example, is clear that home ownership is about more than dollars and cents. Home ownership generates far broader benefits.
Asset ownership also matters for the functioning of communities. Broad asset ownership contributes to social cohesion as more people are able to participate meaningfully in society. In addition, broad asset ownership increases the number of stakeholders in the success of the economy, and move ahead as the economy moves ahead.
However, despite the substantial personal and community benefits from asset ownership, Dr Skilling notes that “there are few deliberate policies to encourage New Zealanders to save and to build wealth. Indeed, New Zealand has the least asset-friendly policies of the Anglo countries”.
The report notes that the absence of such policies matters because people often do not make the savings decisions that they want to. Saving is as much about self control as about economics. Further, for many New Zealanders on low incomes, it is difficult to find the money to save – people are focused on paying the heating bill rather than saving for a deposit on a house.
Dr Skilling concluded that the increasing importance of assets, the lack of asset ownership among many New Zealanders, and the international evidence on the need for deliberate action, suggest that New Zealand’s current hands-off approach is inadequate.
Dr Skilling argues that “it is no coincidence that New Zealand has the most hands-off approach to asset accumulation in the Anglo world and also amongst the worst outcomes in terms of savings and household wealth”.
There is an urgent need for government, business, and community organisations to develop ways in which to help New Zealanders build an ownership stake.
The next paper in the New Zealand Institute’s Ownership Society series continues to make the case for action, by outlining the economic benefits from increasing household savings and wealth accumulation, in terms of higher rates of investment, productivity and economic growth. Early in the New Year, the New Zealand Institute will release papers that propose ways in which to help many more New Zealanders get ahead. The New Zealand Institute’s work on solutions will draw on the best international thinking and practice to design a creative scheme that works in a New Zealand context.