by Paul McBeth
The estimated net worth of Kiwi households has fallen by about $0.7 billion - 0.3 per cent - over the last three months, thanks to falling house prices and rising debt.
The latest WestpacTrust Household Savings Indicators compiled by NZIER and Morningstar show that aggregate net worth is now about $206 billion. That's more than $10 billion below the peak reached nearly three years ago.
Households continued to move money away from term deposits to managed funds to help that sector rise by more than $1.1 billion. The value of managed funds held by Kiwi households rose by 9.1 per cent over the full year to September, an increase of $3.3 billion.
However, households also borrowed an extra $831 million, a 1.2 per cent increase, over the last quarter. That took the total level of additional borrowing to $4.5 billion for the year to September.
"Given households' high debt gearing, it is unlikely that a sharp rebound in spending activity will occur until net worth improves," said the bank's chief economist Adrian Orr.
"This subdued environment means that the Reserve Bank can afford to leave interest rates on hold for a while yet, despite the clear improvement in the external sectors of the economy and the rise in near-term CPI inflation."