KEY POINTS:
The rich are getting richer in New Zealand. Statistics NZ's latest survey of wealth distribution finds that we are getting steadily more "unequal". The richer half of the population now owns 95 per cent of the nation's wealth, up from 93 per cent at a previous survey in
2001. The richest 10 per cent own more than half the wealth, having increased their share from 48 per cent in 2001 to 52 per cent in 2003-04 when the latest survey was taken.
These figures will be seized on with a vengeance in university social science faculties and recycled for the next few years in every piece of research on our collective condition. The numbers will cause palpitations in the ranks of a Labour Party that has been in power for seven years now. The Government will say the figures do not catch the impact of its welfare package, Working for Families, since 2004, but social scientists will say those wage supplements have only widened the disparity for beneficiaries and low paid workers without children.
But pause a moment, let's wind back the rhetoric on social justice and consider what wealth really is. It is not, as social researchers seem to conceive it, a finite lump of physical resources that greedy people have grabbed for themselves. Wealth is the value that people create with their assets and energy, which vary widely and wonderfully in the variety of talents people have and the work they want to do and the price other people will pay for it.
The term "national wealth" refers to the total wealth created by the population, not to a notional limited quantity, a cake to be distributed as evenly as a state can manage. There is no such cake. This is not to argue that states should pay no regard to the distribution of wealth.
Everyone needs governments to maintain a certain degree of social contentment and common decency insists that the poorest of their population should have a reasonable living standard and access to essential services. To some extent the wealth in the economy takes care of this. The lifestyle of the lowest paid employees in rich economies is the envy of the vast majority in the Third World. But even in rich economies income gaps can be too wide for anyone's good. Is it becoming so here?
Statistics NZ does not know how much of the widening wealth gap may be attributable to real estate inflation in recent years but since 40 per cent of New Zealanders' net wealth is held in residential property, it seems likely. House prices have been rising far faster than incomes for several years, to the point that the average home now costs six times the average wage, which makes a mortgage too hard to service. Consequently the rate of home-ownership is dropping and fully 30 per cent of the population is now renting.
The good news is that rents overall have not risen at the same rate as house values, because people are investing in second houses for the expected capital gain. So the gap in living standards is probably not as great as the difference in asset wealth. But home-ownership has been regarded as almost a New Zealander's birthright. The Government is right to be looking for new ways to help the young get a foot on the ladder.
But in themselves the wealth distribution figures are not alarming. It is typical of developed economies that the richest 10 per cent own about half the total wealth. Many of them are taking business risks that most people prefer not to take, and carrying responsibility for the employment of many others. Let's not forget that those receiving the top 10 per cent of incomes pay nearly half the nation's taxation too.
