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New Zealanders richer than ever

This quarter’s Spicers Household Savings Indicators show the strongest rise in average net household wealth for two years.

Thursday, June 15th 2006, 6:00AM
Driven by another strong quarter for housing, average net household wealth has jumped by 4.5% to $341,500 - a $14,800 increase over the previous December quarter and $42,250 higher than at March 2005.

"Rather than reducing, as has been widely forecast for some time, house price growth accelerated during the March 2006 quarter to its fastest pace in a year," Arcus Investment Management chief economist Rozanna Wozniak says.

Housing prices, as measured by Quotable Value, rose by 4.8% while an increase in the number of houses lifted the total value of housing assets by 5.2%.

Financial net worth rose 2% as bank deposits, investments in managed funds and private shareholdings all increased.

However, the rate of increase in net wealth may have peaked for now.

“There is clear evidence that both real estate turnover and the pace of house price growth are slowing according to data from Quotable Value and the Real Estate Institute of New Zealand.

"The two key issues for investors over the coming year will be the effect on net wealth of this slowing in house price growth and the proposed changes to tax on investments scheduled to come into effect 1 April 2007."

Wozniak says that on balance, the proposed tax regime will be better for investors.

"The winners should outnumber the losers and the net effect will be less tax collected on investment income.

"From a broad industry perspective, the proposed regime is an improvement on the current situation, but is still far from ideal.

A positive step is that do-it-yourself (DIY) investors will lose most of the advantage that they have over those who invest through qualifying portfolio investment vehicles, or PIEs, and the tax advantage that residential property has over shares will be reduced.

"Because the new regime is complex to administer for some DIY investors with offshore equity holdings, we may find that more investors opt to take the easier, professionally managed route. At first glance, it would seem that the new regime will result in greater diversification, which is both prudent and desirable. However, it is not entirely clear that this will be the final outcome. This complexity, and the fact that direct offshore holdings could be subject to greater tax than domestic investments, creates an incentive to bring some of these funds back home. If these funds remain in the sharemarket, Australia is likely to benefit more than New Zealand due to the wider range of opportunities available."

When New Zealand investors sit down and look at the whole picture of income, tax and superannuation to compare the financial future they could have here against one they could have in Australia, we note with concern that New Zealand continues to come a poor second.

A comparison of incomes shows that Australians earning the average wage are $322 a week better off, after tax (based on the recent changes announced in the Australian budget), than the average New Zealand wage earner. This does not take into account the additional benefit of compulsory Australian employer superannuation payments.

"A lower tax structure that better rewards initiative and investment, and leads to economic growth and higher incomes, should not be ignored as part of New Zealand’s future growth strategy," Wozniak says.

"With the Australian Government and private sector actively recruiting New Zealanders, the appropriate question is not ‘can we afford tax cuts’ but rather ‘can we afford to deny them?’"

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Institution Rate 33% 39%
ANZ 0.10    0.10    0.11
ASB Bank 0.05    0.41    0.42
ASB Bank 0.05    0.59    0.56
ASB Bank 0.05    0.61    0.64
ASB Bank 0.08    0.66    0.69
ASB Bank 0.08    0.72    0.75
BNZ 0.10    0.10    0.10
Heartland Bank 0.40    0.40    0.40
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Kiwibank 0.25    -    -
Nelson Building Society -    -    -
SBS Bank -    -    -
TSB Bank 0.25    0.25    0.26
Westpac 0.35    0.36    0.38
Westpac 0.05    0.05    0.05
Westpac 0.35    0.36    0.38

Term Funds

Institution Rate 33% 39%
ANZ Term Fund - 90 days 0.35    0.36    0.37
ANZ Term fund - 12 months 0.80    0.82    0.85
ANZ Term Fund - 120 days 0.45    0.46    0.48
ANZ Term fund - 6 months 0.80    0.82    0.85
ANZ Term Fund - 150 days 0.55    0.56    0.59
ANZ Term Fund - 9 months 0.80    0.82    0.85
ANZ Term Fund - 18 months 0.85    0.87    0.91
ANZ Term Fund - 2 years 0.85    0.87    0.91
ANZ Term Fund - 5 years 0.90    0.92    0.96
ASB Bank Term Fund - 90 days 0.35    0.36    0.37
ASB Bank Term Fund - 6 months 0.80    0.82    0.85
ASB Bank Term Fund - 12 months 0.80    0.82    0.85
ASB Bank Term Fund - 18 months 1.00    1.02    1.07
ASB Bank Term Fund - 2 years 1.00    1.02    1.07
ASB Bank Term Fund - 5 years 1.75    1.81    1.89
ASB Bank Term Fund - 9 months 0.80    0.82    0.85
BNZ Term PIE - 120 days 0.45    0.45    0.47
BNZ Term PIE - 150 days 0.55    0.56    0.59
BNZ Term PIE - 5 years 0.90    0.91    0.95
BNZ Term PIE - 2 years 0.85    0.87    0.91
BNZ Term PIE - 18 months 0.80    0.82    0.85
BNZ Term PIE - 12 months 0.80    0.82    0.85
BNZ Term PIE - 9 months 0.80    0.82    0.85
BNZ Term PIE - 6 months 0.80    0.82    0.85
BNZ Term PIE - 90 days 0.35    0.35    0.37
Co-operative Bank PIE Term Fund - 6 months -    -    -
Heartland Bank Term Deposit PIE - 12 months 1.00    1.02    1.07
Heartland Bank Term Deposit PIE - 6 months 0.90    0.92    0.96
Heartland Bank Term Deposit PIE - 9 months 0.90    0.92    0.96
Heartland Bank Term Deposit PIE - 18 months 0.95    0.97    1.02
Heartland Bank Term Deposit PIE - 2 years 1.00    1.02    1.07
Heartland Bank Term Deposit PIE - 5 years 1.00    1.02    1.07
Kiwibank Term Deposit Fund - 90 days 0.35    0.36    0.37
Kiwibank Term Deposit Fund - 6 months 0.90    0.91    0.95
Kiwibank Term Deposit Fund - 12 months 1.00    1.02    1.07
Kiwibank Term Deposit Fund - 150 days 0.60    0.61    0.64
Kiwibank Term Deposit Fund - 120 days 1.00    1.02    1.07
Kiwibank Term Deposit Fund - 9 months 0.80    0.82    0.85
Westpac Term PIE Fund - 150 days 0.55    0.56    0.59
Westpac Term PIE Fund - 120 days 0.45    0.46    0.47
Westpac Term PIE Fund - 18 months 0.80    0.81    0.84
Westpac Term PIE Fund - 12 months 1.00    1.02    1.07
Westpac Term PIE Fund - 6 months 0.80    0.81    0.84
Westpac Term PIE Fund - 9 months 0.80    0.81    0.84
Westpac Term PIE Fund - 90 days 0.35    0.36    0.37
Westpac Term PIE Fund - 2 years 0.85    0.87    0.91
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