WELLINGTON – New Zealand has recorded a net household savings rate of -1.3 percent, the lowest among compared nations, signaling a structural reliance on property appreciation over liquid financial assets.
This negative rate highlights a systemic vulnerability in the domestic economy, where household wealth is concentrated in real estate rather than diversified portfolios. Such a position leaves the economy exposed to volatility in the housing market and interest rate fluctuations, and constrains how effectively monetary policy changes by the Reserve Bank feed through to household balance sheets.
Data based on OECD metrics shows a significant divergence in how different economies manage household capital.
| Country | Net Household Savings Rate |
|---|---|
| Sweden | 16% |
| Hungary | 14.3% | Czechia | 13.7% |
| Australia | ~6% |
| Latvia | 0% |
| South Africa | -1% |
| New Zealand | -1.3% |
Westpac chief economist Kelly Eckhold noted that the 2023 data may not provide a complete comparison. He stated that the figures were captured during a period when the interest rate tightening cycle was hitting households, leading many to draw from existing savings to manage increased costs.
Westpac data indicates that the savings rate has improved since that period, as mortgage repricing has slowed and inflation has started to ease. Even so, the underlying pattern of low voluntary saving remains largely intact.
However, the trend of low financial savings is a historical constant for the country. Gareth Kiernan, chief forecaster at Infometrics, stated that the issue has been long-term.
“In fact, a lot of time through the 90s and 2000s in particularly, it was in negative territory which means we were spending more than we were earning,” Kiernan said.
The introduction of KiwiSaver – the voluntary, work-based retirement scheme established under the KiwiSaver Act 2006 – has provided a baseline for financial savings, with compulsory employer contributions and automatic enrolment for many workers. But the prevailing domestic strategy remains rooted in the property market. New Zealanders frequently treat real estate as their primary savings vehicle, betting on capital gains rather than accumulating liquid assets.
“That’s not captured by the numbers here. If you’re getting wealthier through that asset appreciate in value, that’s been all well and good at times over the last three decades given what house prices have done.”
Kiernan warned that this strategy is not sustainable if property prices stagnate or decline. He noted that house prices relative to incomes remain high, and affordability is poor. A downturn in the housing market, he suggested, would not only erode household wealth on paper but also limit the ability of families to respond to shocks such as job losses, illness or further interest rate rises.
“It’s not a particularly sustainable position. You’re still left from New Zealand’s point of view in being in a structurally not a great position,” Kiernan said.
Other nations drive savings through different policy settings, such as more aggressive superannuation frameworks or a cultural bias toward shares and other financial investments. In those systems, governments and regulators deliberately tilt tax settings and retirement rules toward diversified, long-term saving rather than a single dominant asset class.
In New Zealand, the expectation of state-funded support in retirement further reduces the incentive for individual accumulation. Kiernan suggested that while the government provides a safety net through instruments such as New Zealand Superannuation, warnings are increasing regarding the sustainability of that model as the population ages and fiscal pressures intensify.
For policymakers, the weak savings profile raises questions about whether current tax, housing and retirement settings are encouraging households to take on too much leverage to get onto the property ladder, rather than building liquid buffers. Officials have periodically examined measures such as adjusting KiwiSaver default contribution rates or altering the treatment of investment income, but major structural change has so far been politically sensitive.
Potential improvements to the savings rate may depend on medium-term shifts, including increasing KiwiSaver contribution rates and a change in sentiment toward property as a guaranteed wealth generator. Any move to strengthen household saving would likely require a coordinated approach spanning retirement policy, housing supply, financial literacy initiatives and the signals sent by central and local government about long-term fiscal capacity.
A graphic circulating online from Visual Capitalist shows New Zealand ranked last in a comparison of countries’ net household savings rate.
Photo: Unsplash/ Li Rezaei
The current economic position remains a structural challenge, with household financial resilience tied predominantly to the performance of the residential property sector. Without a gradual rebalancing toward broader financial saving, economists warn New Zealand will remain more exposed than its peers to interest-rate cycles and housing market corrections.
