Our friends across the pond sure have become a reckless bunch, lifting spending well above their incomes and plunging the household saving ratio into negative territory. From statistics.gov.nz:
Household income was $134.4 billion (up 0.8 percent), while household spending was $135.3 billion (up 3.3 percent) in the March 2015 year, Statistics New Zealand said today.
Household saving was negative, at -$0.9 billion. Saving for the household sector has been declining since its 2012 peak. Since 2013, household disposable income has increased more slowly than household spending.
“Household income was up in 2015, but the increase was small compared with the past three years as farming and dividend income fell,” national accounts senior manager Gary Dunnet said.
The increase in household spending was driven by spending on housing, household utilities, transport, and restaurants and hotel services.
Thankfully, the recklessness of New Zealand households was more than offset by the government and business sectors, which managed to lift the national savings rates:
The provisional estimate shows national saving continued to increase in the March 2015 year, but at a slower pace than in 2014. It was up $1.1 billion to $14.8 billion.
Higher operating surpluses for the construction, transport, retail trade and accommodation, and financial services industries were offset by a fall in operating surplus for the agriculture industry…
Government saving increased in 2015 due to a greater increase in tax income than in expenditure. Income tax received was up due to strong increases in both PAYE and company tax returns, which is consistent with the increase in compensation of employees, and operating surplus. Taxes on production also rose due to strong household consumption boosting the GST intake.
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It looks like the blow-off in the Auckland housing bubble is having the desired effect: forcing Kiwi home buyers to borrow big, whilst those already in the market and encouraged by the “wealth effect” undertake a debt-fueled consumption binge.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
