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2021 ‘wealth surge’ fuels ‘generational divide’, say economists

COVID economy news

New Zealand apparently experienced ‘a significant surge in household wealth’ during 2021, creating a ‘generational divide’ that economists believe may never be seen again.

Stats NZ data revealed a marginal increase in household assets by $10.3 billion, or 0.4 percent, in the first quarter of 2024, with net worth rising by 0.3 percent to $2.34 trillion.

Pension assets, including KiwiSaver, were significant contributors to this increase, with the total value of insurance and pension assets rising by 5.5 percent compared to the previous quarter. The wealth rise from $1.82 trillion in June 2020 to $2.49 trillion in December 2021 has led to a permanent divide, independent economist Shamubeel Eaqub told state media. This divide benefits those with existing wealth and disadvantages those without, leading to a potential ‘generational lockout.’

Economists, including ANZ’s Miles Workman and ASB’s Mark Smith, told state media that a repeat of such a sharp increase in wealth is unlikely without a significant economic shock.

The primary source of household wealth, house prices, shows limited potential for near-term growth. The data also highlighted a 6.2 percent increase in household net disposable income over the year, while household spending grew by 5.6 percent. Rising mortgage rates, from 3.2 percent in 2021 to 6.3 percent, have strained household finances. With the cost of living challenges and erosion of incomes, the early Covid-era savings have been depleted, leading households to spend more than they earn. Households currently hold $243.7 billion in bank deposits and nearly $300 billion in total loans, primarily home loans.

Image credit: Unsplash+

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