What we're worth

By MARK FRYER

How much is the average Kiwi worth? In short, not a lot.

More precisely, the average adult New Zealander has a net worth of just over $68,000, after totting up their assets and deducting any debts.

Those figures come from data compiled every three months by WestpacTrust, with managed funds researcher Morningstar and the Institute of Economic Research.

The numbers need to be treated with a little caution, as wealth is a tricky thing to measure.

But, despite their limitations, the figures have several things to tell us.

One, which will come as no surprise, is the high proportion of our wealth that is in housing.

According to the latest figures, as at the end of June, the average adult (for the purposes of these figures, anyone 15 or over) had just over 60 per cent of his or her assets in real estate.

While that is high, it is not as high as it was; 10 years ago it was over 70 per cent.

The figures also show we still have a strong preference for keeping our money in the bank, with the average adult having about $14,740 in term deposits, cheque accounts and so on.

That is about 40 per cent of all our financial (non-housing) assets, although that percentage is lower than it used to be, since bank deposits have grown more slowly than managed funds recently.

But it is not the actual numbers that matter so much as the way they have changed over the years.

At first glance, the past decade appears to have been a time of strongly rising net worth - up from about $56,000 for the average adult in 1991 to over $68,000 today.

But taking inflation into account, things look rather different.

In 1991 dollars, today's $68,000 is worth only about $57,380, meaning the average adult's net worth has risen by under $1400 (in 1991 dollars) in the space of 10 years.

Net worth did rise solidly through the mid-1990s, but has faltered since then.

Not only have house prices levelled off, but we have also taken on debt much faster than we have been building up our assets.

According to Reserve Bank figures, household debt more than doubled in the decade from 1990 to 2000, even after taking inflation into account, and debt rose twice as fast as our disposable income.

Since financial deregulation in the mid-1980s, we have been catching up with other countries' debt levels, to the point where we are now slightly more indebted than residents of most developed countries.

The events of recent weeks will have made the net-worth figures look even less robust, with falling share prices hitting many managed funds and superannuation schemes.

One thing the figures don't tell us is how wealth is distributed - whether net worth is reasonably evenly shared out, or whether the averages disguise a situation where a relatively few people have lots of wealth and a much larger number have very little.

One piece of evidence suggests it is more likely to be the latter; a WestpacTrust study in 1995 found a third of the people surveyed had a net worth of zero, meaning their assets and debts balanced out.

A further 14 per cent owed more than the value of their assets, leaving only half of those in the survey with any positive net worth.

We may be slightly richer than the statistics suggest, given that the net-worth figures do not count physical assets, apart from houses, and do not include the value of privately owned businesses.

On the other hand, they don't count business debt either.

But whatever our actual wealth, there is little to suggest it is growing fast.

* Contact Personal Finance Editor Mark Fryer at: Business Herald, PO Box 32, Auckland. Phone: (09) 373-6400, ext 8833. Fax: (09) 373-6423. e-mail: mark_fryer@herald.co.nz.