November 5th, 2024
New Zealand households spent more than they earned in the June 2024 quarter, with savings dipping into negative territory at -$479 million, according to Stats NZ data released last month. This marked a period of increasing spending, declining income, and falling net worth for households across the country.
Household spending increase: Seasonally adjusted household spending climbed by 1.0% to reach $60 billion in the June 2024 quarter, driven largely by increased spending on services and non-durable goods, such as groceries. This trend was slightly offset by a reduction in purchases of durable goods, like motor vehicles.
Disposable income drops: Net disposable income, which reflects earnings after accounting for taxes and transfers, declined by 0.9% to $59 billion. This fall was the first drop in total household income since Stats NZ began tracking this data in 2016.
Savings decline: With household spending exceeding net income, savings fell to -$479 million, highlighting a shift towards spending that outpaces income growth.
According to Stats NZ, wage and salary growth in the June 2024 quarter rose just 0.8%, significantly slower than the 2.1% average quarterly growth rate seen from December 2021 through March 2024. This slower wage growth, coupled with rising spending, put further pressure on household budgets.
Household net worth, a measure of the total assets owned by households minus their liabilities, fell by 2.0%, a $47 billion decline from the previous quarter. This decrease followed three consecutive quarters of gains.
Decline in property values: Among household assets, the value of owner-occupied property dropped by $21 billion, or 1.8%, in the June quarter, reflecting softer demand in the housing market.
Investment losses: Equity and investment fund shares also recorded a notable decrease of $27 billion, down 2.6% as market fluctuations weighed on financial assets.
Liabilities continue to rise: Total household financial liabilities increased by 0.7%, driven by a 0.9% rise in housing loans. However, this was partially offset by declines in consumer loans, which dropped by 1.2%, and student loans, down 0.7%.
An analysis of household consumption and income data since 2017 reveals a persistent trend of rising expenditure outpacing income growth, with few exceptions:
Historical highs in spending and income: Between 2017 and mid-2023, household final consumption expenditure grew from $40.1 billion to $57.9 billion, reflecting a general increase in household spending capacity. Net disposable income also rose over this period, but has recently declined from a peak of $59.7 billion in March 2024 to $59.2 billion in June 2024.
Quarterly net worth volatility: Household net worth showed steady growth until 2021, peaking at $2.4 trillion. Since then, however, net worth has fluctuated due to shifting asset values, particularly in property and investment holdings.