According to Stats NZ, households recorded a deficit of $479 million, marking a concerning trend in personal finances.
In this quarter, household spending reached $60 billion, a 1 per cent increase from previous figures. This rise was largely driven by expenditures on services and essential non-durable goods such as groceries. However, there was a noticeable decline in spending on durable goods, including vehicles, indicating a shift in consumer priorities.
Compounding the issue, net disposable income fell by 0.9 per cent to $59 billion during the same period. The decrease in disposable income has led many households to rely on borrowing or depleting their existing savings to maintain their spending levels. This financial strain is exacerbated by rising home loan interest costs, which are at their highest in over a decade.
The overall net worth of households dropped significantly, down by $47 billion or 2 per cent. This decline reflects the value of assets owned by households after deducting liabilities. Notably, the worth of owner-occupied properties decreased by $21 billion, while equity and investment fund shares fell by $27 billion.
As household financial liabilities continue to increase, they rose by 0.7 per cent in the June quarter. A significant portion of this growth stems from housing loans, which saw a 0.9 per cent increase. In contrast, consumer and student loans have decreased, indicating a potential shift in borrowing behaviours.
Economic analysts highlight that while disposable income levels increased by 4.7 per cent over the past year, this figure is lower than the 6 per cent growth observed the previous year. When accounting for population growth, the increase in disposable income per household was more modest at 2.8 per cent, lagging behind the 3.3 per cent rise in consumer prices.
The financial squeeze on households is evident, with the average household now allocating about 10 per cent of their income to debt servicing, the highest level recorded since 2016. For those with mortgages, interest payments account for 21 per cent of total spending, representing the highest proportion in more than a decade.
This combination of stagnant income growth, elevated interest rates, and rising living costs has severely impacted household purchasing power. Many households are now compelled to spend a larger portion of their incomes on essential items such as utilities, council rates, and insurance, leaving less available for discretionary spending.
Consequently, savings have declined for six of the past eight quarters, indicating a troubling trend. While there is hope that falling interest rates may eventually alleviate some financial pressure, the benefits may take time to manifest. In the interim, rising unemployment poses additional challenges for New Zealand households.
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