Net worth on downward trend

By BRIAN FALLOW

New Zealand households' net worth - their assets minus their debts - fell in the first three months of the year, the fifth quarterly decline in a row.

The household savings indicators compiled for WestpacTrust by the Institute of Economic Research and Morningstar recorded a decline in net worth of $400 million, or 0.2 per cent, in the quarter, making a fall of $4 billion, or 1.9 per cent, for the year.

Households' appetite for taking on more debt continued the weakening trend of the past 18 months. Debt rose nearly $1 billion in the quarter.

Financial assets rose a similar amount, but that was offset by a $400 million fall in the value of the housing stock.

More than two-thirds of the increase in financial assets consisted of bank deposits.

But managed funds held their own despite the volatility of many international markets.

Over the year ended March, managed fund assets increased $1.2 billion, or 3.2 per cent, while bank deposits rose $1.8 billion (4.4 per cent) and the value of housing fell $2.5 billion (1.4 per cent).

WestpacTrust chief economist Adrian Orr said the decline in household net worth over the past year suggested that domestic spending would be reasonably subdued this year. .

"Although we still expect a rise in consumer spending over this year, it will be well below the growth rates experienced in the mid-1990s," he said.

With net wealth declining, asset prices weak and borrowing slow, Mr Orr said this was not an environment in which the Reserve Bank needed to worry about an outbreak of persistent inflation.