New Zealand's savings rate has sparked a fascinating debate, leaving many to wonder if we're truly at the bottom of the global savings ladder. While a recent graphic suggests we're the worst, there's more to this story than meets the eye.
Unraveling the Savings Mystery
The data, sourced from the OECD, paints a bleak picture for Kiwis. With a savings rate of -1.3%, we're seemingly spending more than we earn. However, this snapshot may not tell the full story.
A Closer Look
Kelly Eckhold, Westpac's chief economist, raises an important point. The data for New Zealand was collected in 2023, a year marked by interest rate hikes and potential household withdrawals from savings. This context is crucial, as it suggests the numbers might not accurately reflect our long-term savings behavior.
Historical Perspective
Gareth Kiernan from Infometrics highlights a long-standing issue. New Zealand has historically struggled with savings, often dipping into negative territory in the 1990s and 2000s. However, the establishment of KiwiSaver has improved financial savings.
The Property Puzzle
One intriguing aspect is our tendency to 'save' through property investment. Kiernan notes that this form of saving, driven by the expectation of rising house prices, isn't captured in the official savings data. While this strategy has worked in the past, the sustainability of relying on house price appreciation is questionable, especially with affordability concerns.
Policy and Behavior
Policy settings, like those around superannuation, can significantly influence savings rates. Some countries encourage savings through financial assets, while others, like New Zealand, lean towards property. Additionally, our trust in the government to provide for our retirement needs may impact our personal savings behavior.
A Complex Picture
In my opinion, the savings rate debate is more complex than a simple ranking. It involves understanding our historical context, behavioral patterns, and the unique role of property in our savings strategy.
Moving Forward
To improve our savings rate, we might consider increasing KiwiSaver contribution rates and shifting our focus towards financial assets. This could lead to a more sustainable and diverse savings approach.
Final Thoughts
While the data suggests we're at the bottom, the story behind the numbers reveals a nation with a unique relationship with savings. It's a fascinating insight into our financial behavior and one that warrants further exploration and discussion.
