3 Trends in saving rates
This section provides flow estimates for saving by sectors and stock estimates for the household sector.
3.1 The saving and investment identity
The saving, investment and current account in an economy are linked by construction.[8] Table 3 sets out the relation between the components of saving and total investment and provides a numerical estimate of each element. By construction total saving in the economy must be equal to net investment - in practice there is an adjusting element (referred to as a statistical discrepancy) which reflects the fact that there difficulties with measurement.
Saving by the private sector (households and business) plus saving by the government (the budget surplus or deficit) together comprise national savings. When allowance is made for consumption of fixed capital, saving within the domestic economy can be expressed as net national saving. The extent to which net national saving is greater or less than total investment is reflected in the current account balance.
In the upper part of Table 3 net national saving in 1981 was less than total investment; the difference was made up by an inflow on the external capital account in the form of borrowing or direct equity investment by foreign savers. Foreign savings were some 45% of total saving; in other words domestic savings covered about one half of New Zealand's net investment needs.
By 2012, the dependence on foreign savings had increased substantially; approximately 85% of net investment in New Zealand was covered by foreign savings. A fall in domestic savings in the absence of a commensurate change in investment implies greater reliance on foreign savings and a rise in external liabilities.
New Zealand's total net external liabilities (termed the Net International Investment Position, NIIP) was 70% of GDP in 1992, and 71% in 2012, having reached a peak of 86% in 1998 (see Appendix Table G.1).
| A. 1981 | |||
|---|---|---|---|
| Total saving 1,748 |
Current account deficit 792 |
Foreign saving 792 |
Investment 1,739 |
| Net national saving 956 |
Government saving 535 |
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| Business saving 1,079 |
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| Household Saving 412 |
Statistical discrepancy 9 |
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| B. 2012 | |||
| Total saving 10,460 |
Current account deficit 9,032 |
Foreign saving 9,032 |
Investment 9,973 |
| Net national saving 1,428 |
Government saving -3,619 |
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| Business saving 5,191 |
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| Household Saving -144 |
Statistical discrepancy -487 |
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Sources: Statistics New Zealand and authors' estimates.
Notes
- [8]See Claus and Scobie (2002) for the derivation of the fundamental identity that the current account balance is the difference between net national savings and total investment.
