The old saying that a rising tide lifts all boats does not hold true of the New Zealand economy.

Household net worth data from the 2017/18 household economic survey, released last month by Statistics NZ, give us a picture of how unevenly wealth is distributed across households and how it has changed since the previous survey in 2014/15.

The surveys span a period which almost certainly represents the hump of the current cycle, in which the economy expanded by just over 10 per cent. That rising tide was a high one.


Over those three years, the average net worth (assets minus liabilities) of the richest fifth of households rose 26 per cent to $2.8 million per household.

But for the poorest fifth of households in both the 2015 and 2018 surveys, average total net worth was statistically indistinguishable from zero. That is, it was slightly negative but within the margin of sampling error.

The second lowest fifth, or quintile, were also virtually no better off than their counterparts three years earlier. Their average household net worth was $108,000, up $6000 on the 2015 level.

Overall, the richest 10 per cent of households possessed 53 per cent of the wealth in the latest survey, the same share as in 2015.

But again, given that the survey is based on a sample of 5500 households, there is a margin of error around its results which means the $6000 increase is not statistically significant — it might be real, it might not. Either way, it is a lot less than a 26 per cent increase.

Overall, the richest 10 per cent of households possessed 53 per cent of the wealth in the latest survey, the same share as in 2015. And the richer half of all households accounted for 94 per cent of the wealth, as they did in 2015.

To be clear, the two surveys do not cover the same sets of households. Each is its own representative cross-section of the community at the time.

Previous surveys which did track the same people over time found that nearly two-thirds of those in the bottom fifth of the population, ranked by income, in year one were still in that band five years later, while nearly three out of four in the top quintile still were five years on. Social mobility was greater in the middle of the range.

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A big driver of wealth inequality, unsurprisingly, is house prices.

The average household in the top quintile of households, ranked by wealth, saw the value of its owner-occupied housing rise 38 per cent to $939,000. Taking account of any mortgage debt, the increase was 40 per cent, to $647,000.

The middle quintile's owner-occupied housing assets rose an average $60,000 or 20 per cent to $355,000, and by $27,000 to $131,000 net of the mortgage.

For the bottom quintile the net housing equity numbers don't tell us much, as only about 6 per cent of households in that band are owner-occupiers.

Graphic / NZHerald
Graphic / NZHerald

Another way of analysing the survey's data is to look at how wealth is spread across households when they are ranked not by wealth but by income. Wealth is distributed much more unequally than income.

The Ministry of Social Development's 2018 household incomes report argues that as both income and wealth matter for a household's material wellbeing, this is a better indicator than the wealth-only data we have been discussing so far.

"The difference between the raw wealth distribution and the joint income-wealth distribution reflects in part the fact that people accumulate wealth over the course of their lives," says the MSD report's author Bryan Perry.

"Many older people have relatively high wealth (often in the form of a mortgage-free home in the main) but low income. Many younger households have lower wealth but higher incomes than many older people. Some of all ages have low incomes and low wealth levels." Last year's survey found that the bottom fifth of households ranked by income accounted for 10.7 per cent of total household net worth while the top quintile accounted for 39.3 per cent.

That compares with shares of 9.2 per cent for the lowest income quintile in 2015 and 39.6 per cent for the highest.

The lowest income quintile had household incomes up to $37,600 and 45 per cent of them were owner-occupiers compared with only 6 per cent of the poorest quintile ranked by wealth.

The highest quintile by income (more than $148,00 a year) had a higher percentage of their net worth in financial assets — 59 per cent compared with 41 per cent for the lowest income quintile.

The survey also gives us information about the distribution of wealth among individuals as distinct from the households they live in.

Unsurprisingly, perhaps, it found that net worth is strongly correlated with age.

The richest age group is 65- to 74-year-olds, who also enjoyed the strongest rise in net worth: at the median up $110,000 to $416,000 over the past three years.

This is likely to reflect the combined effect of house price inflation, in an age group where owner-occupancy is high (but declining), and what have been good years in the financial asset markets, where retirement funds tend to be invested. The more recent price signals suggest, however, that the next survey in three years' time might yield less cheerful results.

Meanwhile ethnic divergences are stark.

The median net worth among European New Zealanders — $138,000 — is 50 per cent higher than the median for the population as a whole and compares with medians of $29,000 for Māori, $15,000 for Pasifika people and $46,000 for Asians.