Household Incomes in New Zealand: The impact of the Market, Taxes and Government Spending, 1987/88-1997/98 (WP 04/20)

Abstract

How well have New Zealand households fared over a decade of extensive economic and social changes? This study compares household incomes in 1997/98 with household incomes in 1987/88, using the concept of “final income”. Final income is a measure of the income accruing to households after adjusting for payments to, and benefits from, central government, whether these benefits are in cash or in kind. In particular, receipt of government health and education services is counted as adding to a household’s income, and payment of consumption taxes is counted as taking away from a household’s income. In all income deciles, the real final incomes of households were, on average, at least maintained between 1987/88 and 1997/98 and in most cases increased. Government intervention, through taxes, cash benefits and social services, has acted to protect less well-off households over a period of upheaval in New Zealand.

Acknowledgements

We are grateful to a number of people who read and commented on versions of this paper and in particular to Bob Stephens, Roger Hurnard, John Creedy and Dean Hyslop. We are also indebted to Matthew Bell, Katy Henderson and Ivan Tuckwell from the Treasury, who performed the TAXMOD modelling for this study.

Statistics New Zealand kindly made available the documentation and statistical programmes for their 1990 study. Many of the staff at Statistics New Zealand, John Scott in particular, made helpful contributions.

Ron Crawford began this study and undertook it over a number of years while employed at the Treasury.

Disclaimer

The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the authors. They do not necessarily reflect the views of the New Zealand Treasury or the Ministry of Economic Development. The Treasury takes no responsibility for any errors or omissions in, or for the correctness of, the information contained in these working papers. The paper is presented not as policy, but with a view to inform and stimulate wider debate.