[Sitting date: 02 December 2014. Volume:702;Page:1. Text is subject to correction.]

1. IAN McKELVIE (National—Rangitīkei) to the Minister of Finance : What reports has he received showing New Zealand households are using rising incomes to save more and pay down debt faster?

Hon BILL ENGLISH (Minister of Finance): The household economic survey for the year ended June 2014 shows that New Zealand households are paying down mortgages faster, with a 14.8 percent increase in mortgage principal repayments in the 2 years to June. These faster principal repayments explain most of the increase in weekly mortgage costs. New Zealand households have been paying down debt since early 2009, and debt servicing costs as a share of household income are now 38 percent below the peak in September 2008, reflecting a sharp fall in interest rates. As I said last week, national accounts data shows that New Zealand household savings rates have now been positive for 5 consecutive years. This is the first time this has happened since 1994.

Ian McKelvie : How much have average incomes and wages increased for New Zealand households over the past 2 years, and what is driving this?

Hon BILL ENGLISH : According to the survey, in the last 2 years to June 2014 there was an average overall increase of 9.1 percent in average incomes and wages for households. This is driven by a combination of more people in the labour force, more hours worked, and wage increases. Wages and salaries were 7 percent higher over those 2 years, driven in part by a higher minimum wage and increases in New Zealand superannuation. This compares with inflation of 2.3 percent in the 2 years to June—that is, wages and salaries are 7 percent higher and inflation is 2.3 percent in the 2 years to June.

Grant Robertson : Given the Minister’s detailed knowledge of the survey, can he say whether it shows that housing costs are rising faster than incomes?

Hon BILL ENGLISH : I think it does show that, which is why the Government is taking an assertive approach to ensuring more land supply in our metropolitan markets, and is also reforming our State housing sector to provide more social and affordable housing. Housing costs have been rising faster than income for about 20 years. This has been one of the principal drivers of inequality in New Zealand, and this Government is setting out to change that.

Ian McKelvie : How do increases in incomes and wages for New Zealand families and households compare with the cost of housing?

Hon BILL ENGLISH : Statistics New Zealand reports that total housing costs increased from $256 per week to $284 per week in the 2 years to June, or 11 percent. By comparison, average annual household incomes increased by $141 per week before tax. Higher household costs were driven in part by higher council rates, interest rates rising off 50-year lows, and higher average weekly rental payments, which were up $17 to $290 per week. The report notes that more than one in three households that rent spends over 30 percent of its income on housing costs. This is part of a long-run trend in which people on lower incomes are seeing housing costs consume an increasing proportion of their incomes. That is why, starting 3 years ago, the Government set about to change our planning system, our housing supply, the regulation of our housing markets, and State housing—because we must turn around this 30-year trend.

Ian McKelvie : What steps is the Government taking to support further income and wage growth and limit increases in the cost of living?

Hon BILL ENGLISH : The Government is following the example of New Zealand households by committing to responsible management of its expenditure, maintaining a path to surplus, and paying down debt. This helps to keep interest rates lower for longer, to take pressure off the exchange rate, and to support business investment and job growth. Our goal is to maintain moderate growth through this economic cycle, and we are on track to achieve this with projected economic growth of 2 to 3 percent over the next 4 years. In the last year there were 72,000 more jobs, and an average wage growth of 2.3 percent, which was ahead of inflation at 1 percent.

Grant Robertson : Is it correct that the household economic survey shows that the average household incomes of the bottom 20 percent grew by 2.9 percent in the past year and that that of the top 20 percent grew by 14.7 percent in the past year, and does this not demonstrate that inequality is widening in New Zealand under his watch?

Hon BILL ENGLISH : No, it does not.

Hon Phil Goff : No? Yeah, right!

Hon BILL ENGLISH : Well, I invite the member to look at the Child Poverty Monitor that was published yesterday or today, which shows a number of measures of income distribution, all of which have slightly improved in the last couple of years. It is simply not correct to say that income inequality is getting worse; in fact, it is getting mildly better.

© Scoop Media