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Saving Rates of New Zealanders: A Net Wealth Approach

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Abstract

Reliable estimates of actual household saving rates in New Zealand have proved elusive as existing sources of data have in the past given disparate estimates, making it difficult to reach a consensus of the real rate of household saving. For the first time in New Zealand, however, longitudinal data on the assets and liabilities of households at the unit record level are becoming available from Statistics New Zealand’s multi-year national longitudinal Survey of Family Income and Employment (SoFIE). In this paper we first update estimates from the Reserve Bank’s aggregate data on the household sector (a stock approach) and those from Statistics New Zealand’s national accounts (a flow approach). These continue to give widely different estimates of the overall household saving rate, although both were negative in 2008 and both below their long-run trend values. We then present initial estimates derived from SoFIE by comparing individuals’ net wealth in 2004 with that in 2006 and computing the implied real saving rate on an annual basis. This yielded an overall median estimate of 16%. This is virtually the same as the long-run average annual saving rate measured from the aggregate household balance sheet from RBNZ. Furthermore, the estimated saving rates between 2004 and 2006 for the whole household sector in total are almost identical using RBNZ and SoFIE data. However, it must be stressed that median estimates should be complemented with a measure of dispersion. There is a strikingly wide distribution of saving rates. For example across many categories of individuals around 40% are estimated to have had a decline in net wealth, implying a negative rate of saving. Initial explorations into the reasons for this are undertaken in the paper, but as yet are not fully understood. Measurement errors in the data can account for some of the disparities but much remains for further research. Finally we demonstrate that over the period 2004 to 2006, passive saving in the form of the revaluation of house prices constituted a major part of the total change in net wealth. After removing owner-occupied property as an asset, the median saving rate remained positive at 5%, close to the long run average rate from the aggregate RBNZ data after correcting for changes in house prices.

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  • Grant M. Scobie & Katherine Henderson, 2009. "Saving Rates of New Zealanders: A Net Wealth Approach," Treasury Working Paper Series 09/04, New Zealand Treasury.
    • Handle: RePEc:nzt:nztwps:09/04
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    References listed on IDEAS

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    1. Trinh Le & Grant Scobie & John Gibson, 2009. "Are Kiwis saving enough for retirement? Evidence from SOFIE," New Zealand Economic Papers, Taylor & Francis Journals, vol. 43(1), pages 3-19.
    2. Bryce Wilkinson & Trinh Le, 2008. "Is poor household saving the cause of New Zealand's high current account deficit?," Macroeconomics Working Papers 22024, East Asian Bureau of Economic Research.
    3. Grant Scobie & John Gibson & Trinh Le, 2004. "Saving for Retirement: New Evidence for New Zealand," Treasury Working Paper Series 04/12, New Zealand Treasury.
    4. Chris McDonald & Mark Smith, 2009. "Developing stratified housing price measures for New Zealand," Reserve Bank of New Zealand Discussion Paper Series DP2009/07, Reserve Bank of New Zealand.
    5. John K Gibson & Grant M Scobie, 2001. "Household Saving Behaviour in New Zealand: A Cohort Analysis," Treasury Working Paper Series 01/18, New Zealand Treasury.
    6. Malcolm Edey & Mark Britten-Jones, 1990. "Saving and Investment in the 1980s," RBA Research Discussion Papers rdp9004, Reserve Bank of Australia.
    7. Katherine Henderson & Grant M. Scobie, 2009. "Household Debt in New Zealand," Treasury Working Paper Series 09/03, New Zealand Treasury.
    8. Seater, John J, 1993. "Ricardian Equivalence," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 142-190, March.
    9. Mark van Zijll de Jong & Grant M. Scobie, 2006. "Housing: An Analysis of Ownership and Investment Based on the Household Savings Survey," Treasury Working Paper Series 06/07, New Zealand Treasury.
    10. Wainer H. & Brown L.M., 2004. "Two Statistical Paradoxes in the Interpretation of Group Differences: Illustrated with Medical School Admission and Licensing Data," The American Statistician, American Statistical Association, vol. 58, pages 117-123, May.
    11. Iris Claus & Grant Scobie, 2002. "Saving in New Zealand: Measurement and Trends," Treasury Working Paper Series 02/02, New Zealand Treasury.
    12. Martin Lettau & Sydney C. Ludvigson, 2004. "Understanding Trend and Cycle in Asset Values: Reevaluating the Wealth Effect on Consumption," American Economic Review, American Economic Association, vol. 94(1), pages 276-299, March.
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    Cited by:

    1. Littlewood, Michael, 2014. "Ageing populations, retirement incomes and public policy: what really matters," MPRA Paper 56232, University Library of Munich, Germany.
    2. Daan Steenkamp, 2010. "New Zealand’s imbalances in a cross-country context," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 73, pages 37-49, December.
    3. Anna Orthofer, 2017. "Concepts and Measures of Saving: Selected Issues for South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 85(2), pages 222-241, June.
    4. David Law & Grant M. Scobie, 2018. "KiwiSaver and the accumulation of net wealth," New Zealand Economic Papers, Taylor & Francis Journals, vol. 52(1), pages 1-20, January.
    5. Andrew Binning & Susie McKenzie & Murat Özbilgin & Christie Smith, 2025. "Microeconomic heterogeneity in wages, hours, and assets to inform an OLG model for New Zealand," Treasury Analytical Notes Series an25/06, New Zealand Treasury.
    6. Ross Guest, 2014. "Population ageing and productivity: A survey with implications for New Zealand," New Zealand Economic Papers, Taylor & Francis Journals, vol. 48(2), pages 153-168, August.
    7. Mark Vink, 2014. "Intergenerational Developments in Household Saving Behaviour," Treasury Working Paper Series 14/23, New Zealand Treasury.
    8. Le, Trinh & Gibson, John & Stillman, Steven, 2010. "Household Wealth and Saving in New Zealand: Evidence from the Longitudinal Survey of Family, Income and Employment," Motu Working Papers 292601, Motu Economic and Public Policy Research.

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    Keywords

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    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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