Government policy needs to boost household resilience says study

While the resilience of New Zealand’s households is affected by government policy in many ways that is not an explicit focus of public policy, but a new report says that it should be

Government policy needs to boost household resilience says study

Financial resources including income, savings, assets and credit lines are an essential element of household resilience and are part of their ability to withstand shocks such as financial crises and inability to work, for example due to illness.

Deloitte and Victoria University of Wellington’s School of Government spent 6 months researching the resilience of households and their ability to rebound from shocks by speaking to advisers from the public sector, business, NGOs, government, media and academia.

Their findings highlight the growing costs compared to income which have left many New Zealanders struggling to meet everyday needs. This is exacerbated by volatile incomes with one in nine working age Kiwis suffering a significant fall in income each year.

“In any given year, Kiwis will suffer economic loss, health problems or adverse changes in the lives of those closest to them. From a household wellbeing perspective, these events can have as great an impact as any large-scale shocks,” said Victoria University School of Government Research Fellow Toby Moore.

The report says that while inflation appears to remain low relative to income increases, the costs for essentials such as health, housing and education are rising faster than luxuries which help keep the overall inflation rises lower.

Income inequality also means that while the median New Zealand household’s disposable income increased 32 per cent between 1982 and 2015, the bottom 10 per cent of households have seen a slight decrease.

The State of the State report study talks about the part that homeownership plays in the resilience of New Zealand’s households, as a source of wealth generation and retirement plans for many.

But it says that while 87 per cent of household debt is mortgage-related, some households are unable to afford to get on the housing ladder while others are taking on high levels of debt in order to buy, reducing their resilience.

While rising house prices are boosting the wealth of those able to become homeowners, for others they are only exacerbating the barrier to ownership.