Kiwis not so bad at saving after all
New Zealanders are not the poor savers they are often made out to be, but they also fear overseas investment unnecessarily, a new report asserts.
The report, from public policy think tank The New Zealand Initiative, sets out to debunk what it calls several "myths", including that a lack of saving is responsible for New Zealand's high debt levels.
In fact, the country's chronically large current account deficit is the legacy of government policies between 1974 and the mid-1980s, says author and institute fellow Bryce Wilkinson.
"It was triggered by large trade deficits in the balance of payments, not least due to spiking oil prices, and exacerbated by the largely ‘Keynesian' government deficit spending policy response."
Since then, the large "net international investment position" - the $146 billion difference between assets New Zealanders own overseas and overseas-owned assets in New Zealand - had kept the current account balance in deficit.
Interest on that debt was costing the country about 5 per cent of gross domestic product, despite large trade surpluses between 1988 and 2004.
Another myth was the idea that New Zealanders were poor savers, spending more than they earned, he said.
In fact, New Zealand's collective savings - from companies, government and households - had been "positive" for 38 of the past 41 years - in other words, its income was greater than its spending on consumption.
The savings figures did not include some forms of debt, though it did feature mortgage interest. But households' net wealth had also risen.
Wilkinson also rejected the idea that Asians were taking over New Zealand. In fact, said the report, as of last year Australians owned 55 per cent of foreign investment in New Zealand, while those from Asean nations owned only 3.1 per cent.
- © Fairfax NZ News
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