Special Topic: National Accounts: Saving and Investment
National accounts statistics provide detailed information on the composition of Gross Domestic Product (GDP) including consumption, investment, incomes and production. The details provided in these releases assist analysis of the sources and uses of income, savings behaviour, capital investment and its financing. This Special Topic looks at what the latest data tell us about saving and investment.
GDP revised up
National accounts data for the year ending March 2012 were released on 21 November. The National Accounts draw on a much larger information set than the quarterly GDP releases and therefore contain a large number of revisions to previous estimates of GDP for the year ended March and its components. The 2012 National Accounts release also introduced changes in the way financial intermediation services are measured.
Changes in the way financial services are measured have led to higher estimates of the current price level of GDP. The average impact on GDP is an upward shift of 0.7% per year in each of the last ten years. Other revisions, particularly to household consumption expenditure, mean that nominal GDP for the year ending March 2012 was $3.6 billion (1.7%) higher than was estimated in the previous quarterly GDP releases.
The upward revisions to consumption suggest that, at the margin, household spending has been less restrained than the Treasury assumed in its Budget forecasts. However, the overall picture of a significant shift in household saving behaviour remains little changed, as Figure 8 shows.
Household saving stabilises
National disposable income, which is the sum of all income available to New Zealand residents for current spending, saving or investment, increased 3.9% in the year to March 2012, but total consumption expenditure rose more strongly, up 4.8%. As a result national saving declined $1.3 billion to $1.4 billion, or 0.7% of GDP (refer to the set of graphs on page 16 of the accompanying Chart Pack).
- Figure 8 - Household saving stabilises
- Sources: Statistics NZ
General government (local and central) saving was negative for the third year in a row, although the shortfall between income and expenditure narrowed to $2.5 billion, from $3.1 billion in 2011.
Household saving dipped slightly, from $177 million in the year ending March 2011 to -$144 million in 2012. Although negative, this level of (dis)saving is a marked turnaround from the mid-2000s. The turnaround in saving is even more marked when depreciation is added back to saving. Because deprecation is an imputed value it does not impact on household cash flows.
Figure 8 shows that gross saving i.e. saving before depreciation (or consumption of fixed capital) is deducted, is at an unusually high level. This means that households, in aggregate, have funds available to reduce debt or invest. This behavioural change is reflected in weak credit demand, strong banking deposit growth and falling leverage ratios (refer to page 15 of the accompanying Chart Pack). The gross measure may therefore more accurately reflect the extent to which household saving behaviour has shifted.
Depreciation exceeds investment
Weak investment growth over the past two years means that investment spending remains below its 2008 level. Investment in fixed assets rose just 0.7% in the year ending March 2012, compared to a rise of 2.1% in 2011 and a decline of 10.5% in 2010. Central and local government investment drove the increase in 2012, up 2%, while private sector investment, including residential investment, was little changed, up 0.2%.
Private sector corporate investment, which accounts for about half of all non-residential investment, fell 17% in 2010 to a level below the rate of depreciation (Figure 9).
- Figure 9 - Private sector depreciation exceeds investment
- Sources: Statistics NZ
As a result the net capital stock of private sector productive enterprises contracted. Although there are no national accounts measures of private sector consumption of fixed capital beyond 2010, there are provisional estimates of the national capital stock. The provisional estimates show that the capital stock excluding residential investment and other construction investment (these assets have a large proportion of household and public sector ownership), has yet to recover to its 2008 level.
The lower capital stock reflects, in part, adjustments made by Statistics New Zealand to reflect asset losses from the Canterbury earthquakes. These downward adjustments affect the stock of residential, non-residential and other construction assets. However, even when these assets are excluded the capital stock remains below its 2008 level.