WestpacTrust is the New Zealand division of Westpac Banking Corporation, which is incorporated in New South Wales,
Australia
9 August 2000
HOUSEHOLD NET WORTH STILL DECLINING
Falling house prices and rising debt levels have caused the estimated net worth of New Zealand households to decline by
1.3%, or around $2.8 billion, over the June quarter, according to the latest WestpacTrust Household Savings Indicators
as compiled by NZIER and Morningstar.
Net worth, as at 30 June 2000, is $5.4 billion (2.5%) lower than a year ago, with the latest drop representing the
fourth quarterly decline over the last five quarters. Aggregate net worth now stands at an estimated $206 billion, more
than $10 billion less than the peak in aggregate household net worth recorded in December 1997.
Financial net worth, which excludes housing assets and liabilities, was virtually unchanged for the quarter and is
actually up by 0.5% for the year ended June.
The overall value of household assets fell by 0.7% during the quarter, with a provisional 1.0% fall in house prices the
main contributor. Unusually, however, the value of short term cash and deposits held at financial institutions declined
by almost $1 billion (-2.3%).
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“There is normally a steady positive flow of savings into short term deposits each quarter, but this outflow is
potentially quite revealing about an underlying change in household behaviour,” said Girol Karacaoglu, WestpacTrust
Financial Services general manager. “It looks as though some of this money has been redirected towards other forms of
investing, including managed funds, longer term fixed interest securities and offshore equities. If this is genuine long
term investment money, rather than short term savings chasing higher yields, then it is an encouraging sign,” he
continued.
Liabilities continue to grow, albeit at a slightly slower pace. For the latest quarter, households borrowed an
additional $960 million, a 1.4% increase, bringing the total level of borrowing for the year ended June 2000 to just
over $5.0 billion.
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“With most of this borrowing classified as “borrowing for housing purposes” and housing values in decline, it is little
wonder that households are currently feeling the pinch,” commented Alex Sundakov, director of NZIER. “Most other
indicators, including falling consumer confidence and subdued retail sales, are also pointing to weaker private
consumption activity in the near term,” Mr Sundakov concluded.
HSI - Summary Data Latest Previous Quarterly Change Previous Annual Change
Quarter Qtr $M % Year $M %
Total Assets $274,890 $276,755 ($1,865) -0.67% $275,199 ($309) -0.11%
* Financial Assets $105,897 $105,857 $39 0.04% $105,018 $879 0.84%
- M3 $41,555 $42,528 ($973) -2.29% $42,129 ($574) -1.36%
- Managed Funds $39,626 $38,935 $690 1.77% $36,532 $3,094 8.47%
- Other $24,716 $24,394 $322 1.32% $26,357 ($1,641) -6.23%
* Housing Stock $168,993 $170,898 ($1,905) -1.11% $170,181 ($1,188) -0.70%
Total Liabilities $68,429 $67,471 $958 1.42% $63,340 $5,089 8.03%
Net Worth (Assets minus Liabilities)
* All Elements (incl Housing) $206,461 $209,284 ($2,823) -1.35% $211,858 ($5,398)
-2.55%
* Financial (excl. Housing) $99,486 $99,554 ($68) -0.07% $99,040 $446 0.45%
Offsetting some of the fall in short term deposits and house values was the 1.8% quarterly rise in the value of managed
funds. For the year ended June, the value of managed funds held by New Zealand households has risen by 8.5%, an increase
of more than $3 billion.
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“This latest positive quarterly increase continues a consistent recent trend of strong growth of New Zealanders’
managed funds assets and will help reinforce and grow New Zealanders’ trust and confidence in the benefits of handing
their savings over to investment management professionals,” said Graham Rich, Morningstar managing director.
ENDS
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