3.5 Assets and liabilities relative to household income
Nominal disposable income[7] increased at an annual average rate of 6.6% over the period 1982 to 2007. However, the annual average growth of nominal assets was nearly 10% and for nominal liabilities it was 12.7%. As a result, there has been substantial growth in both assets and liabilities as a percentage of household disposable income (Table 3 and Figure 7). Assets relative to disposable income increased from 362% in 1982 to 775% by 2007. Liabilities relative to disposable income increased from 43% to 171% over the same period.
Although non-housing assets and liabilities have risen, it is evident that the growth on both sides of the balance sheet has been largely driven by housing, most notably over the past five years where the ratio of housing assets to disposable income increased by 54%. This compares with a 66% increase in the ratio over the entire twenty year period prior to 2002. As much of the growth in net wealth relative to disposable income has been driven by housing, which is the largest component of both assets and liabilities, the household sector has become increasingly exposed to a house price shock.
| 1982 | 1992 | 2002 | 2007 | |
|---|---|---|---|---|
Assets |
||||
| Housing | 229% | 269% | 381% | 585% |
| Non-housing | 133% | 161% | 176% | 190% |
| Total | 362% | 431% | 557% | 775% |
Liabilities |
||||
| Housing | 33% | 59% | 106% | 149% |
| Non-housing | 10% | 8% | 21% | 22% |
| Total | 43% | 67% | 126% | 171% |
Net wealth |
||||
| Housing | 195% | 210% | 276% | 436% |
| Non-housing | 124% | 153% | 155% | 168% |
| Total | 319% | 363% | 430% | 604% |
Source: RBNZ
It is evident from Figure 7 that the ratios of housing assets and net wealth to disposable income may be close to a peak in 2007. Additional housing data reveals that the value of the housing stock peaked in March 2008 and the June 2008 estimate was 3.5% below the December 2007 estimate.[8] Estimates for December 2008 indicate that the ratio of net wealth to disposable incomes had fallen from around 600% to 500% as a result of falls in housing values and financial asset prices.
- Figure 7 - Assets and liabilities as a percentage of household disposable income
- Source: RBNZ
Notes
- [7]Disposable income is income available for consumption and saving (ie, gross income less tax and including social welfare benefits). Imputed rent is also included. Note that the measure used in the Reserve Bank data includes consumption of fixed capital and household interest paid (ie, an estimate of debt servicing costs) that are both excluded from the System of National Account (SNA) measure.
- [8]Source: http://www.rbnz.govt.nz/keygraphs/housingdata.xls
