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Economists say the surge in wealth during the coronavirus pandemic has created a permanent wealth gap. File photo.
photo: 123 RF
New Zealand’s 2021 wealth surge has created a “generation gap” that may never appear again, economists say.
Data from Statistics New Zealand last week showed New Zealand household incomes improved slightly in the first three months of this year.
The report said total household assets increased by $10.3 billion, or 0.4 per cent, in the March quarter, while net worth – the value of assets less liabilities such as debt – rose by $7.8 billion, or 0.3 per cent, to $2.34 trillion.
Statistics New Zealand said superannuation assets such as KiwiSaver drove the growth.
The total value of household insurance and superannuation assets increased by $8.3 billion, or 5.5 per cent, compared to December 2023, and by $6.2 billion in the previous quarter.
Independent economist Shamubeel Eaqub said the surge in wealth during the COVID-19 pandemic had created a permanent wealth gap. Household wealth increased from $1.82 trillion in June 2020 to $2.49 trillion in December 2021.
“That’s where the landowner class comes in – those who own the land own the land and their children benefit from it. But if you’re locked out then it becomes an intergenerational blockade.”
ANZ senior economist Miles Workman said it was unlikely that household wealth would see another sharp increase like the one in 2021. But he said it would take a major economic shock for that to happen again.
“Be careful what you wish for… peaks are very consistent with markets that are out of balance and unsustainable.”
The bulk of New Zealanders’ household wealth comes from house prices, and Workman said there was limited scope to push house prices up further in the short term.
Whether the strength of the stock market will lead to sustained improvements in KiwiSaver balances remains to be seen. “In the US in particular, it’s been driven by tech stocks recently, but we’re on the brink of some potentially game-changing technology, so who’s to say whether these valuations are appropriate?”
The same data showed that net disposable income of households has increased by 6.2% this year, while the growth rate of household spending in current prices has slowed to 5.6%.
Westpac said the average mortgage rate paid by households had risen to 6.3% from 3.2% in 2021.
“This is costing a lot of households a lot of money. For example, if you have an average-priced home with an 80 per cent mortgage, this change will add about $290 a week to your mortgage bill.”
ASB senior economist Mark Smith said he expected a more solid pace of wealth accumulation going forward, particularly in house prices.
“Over a period of time, the value of an asset should essentially increase in line with its income.”
He said some people whose property values fell would see a silver lining in the performance of their KiwiSaver balances, but the impact would not be evenly distributed.
“While the government delivered a lot of income transfers to businesses and households in 2020 (through wage subsidies and other support) due to the pandemic, which did help households, we are now seeing challenges facing the household sector, such as rising living costs, which are eroding household incomes.
“In the early days of the pandemic, during the lockdown, households generally built up a lot of savings… The government transferred a huge amount of income to households, but over the past few years, households’ savings have been steadily declining. Now they are spending more than they earn.”
Households had $243.7 billion in deposits with registered banks and total loans were nearly $300 billion, of which $268 billion were home loans.
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