Saving falls despite earnings increase

National saving (from all sectors) fell to $1.3 billion for the year ended March 2007 from the recent highs of $5.9 billion in 2005 and $7.4 billion in 2004, Statistics New Zealand said today.

National saving is at itslowest level in fourteen years. Net investment income flows to the rest of the world increased to reach $11.9billion, a deterioration of $0.6 billion since the previous year.

Over the past decade, net investment incometo the rest of the world rose 63.3 percent, comparatively national saving fell 54.6 percent.Gross domestic product (GDP) in current prices increased 5.4 percent for the year ended March2007, following a 5.2 percent increase in the previous March year.Compensation of employees recorded the highest increase for nineteen years, up 7.8 percent for the yearended March 2007.

Business income also grew, with profits up 3.0 percent. National disposable income,which measures the total income available to New Zealanders (from all sources, both domestic andoverseas) for consumption or saving, rose 5.1 percent following a 3.7 percent rise in the March 2006 year.

Final consumption expenditure by both households and government increased 6.0 percent, eroding nationalsaving on the back of increased returns to foreign investment in New Zealand.

Household consumptionexpenditure increased 5.4 percent in the year ended March 2007, in spite of stronger earnings, the firstincrease below 6.0 percent since 2002. Household consumer debt interest on housing increased 21.7percent, up $1.8 billion.

External financing of capital investment improved, with net borrowings from the rest of the world down from$14.9 billion (9.5 percent of GDP) in the March 2006 year to $14.0 billion (8.5 percent of GDP) in 2007.Capital investment in fixed assets increased 0.9 percent.

Other construction has grown strongly, up 9.9percent in the March year 2007, following strong increases of 10.8 percent and 14.6 percent in the March2006 and March 2005 years, respectively.

Residential building showed an increase of 2.7 percent in theyear ended March 2007.

A paper outlining how saving is derived in the national accounts and its various relationships is available onour website: www.stats.govt.nz – Measuring Saving in the National Accounts.