New Zealand’s Savings Rate: Bottom of the World or Misunderstood?

New Zealand has been ranked last in a global comparison of household savings rates, according to a graphic circulating online from Visual Capitalist based on OECD data. The data shows New Zealand’s net household savings rate at negative 1.3 percent, placing it below countries such as South Africa at negative 1 percent and Latvia at zero percent. Sweden leads the comparison with a savings rate of 16 percent, followed by Hungary at 14.3 percent and Czechia at 13.7 percent. Australia sits in the middle of the table at approximately 6 percent.

The graphic has sparked discussion about the accuracy of the comparison, with economists noting that New Zealand’s data was drawn from 2023, a year marked by the beginning of an interest rate tightening cycle. Westpac chief economist Kelly Eckhold said the timing may have distorted the picture, as households were potentially drawing on savings to cope with rising costs. He added that more recent data from Westpac shows the savings rate has improved markedly since that low point.

Gareth Kiernan, chief forecaster at Infometrics, acknowledged that New Zealand has historically struggled with low savings rates by international standards. He noted that during much of the 1990s and 2000s, the country’s savings rate was frequently in negative territory, meaning households were spending more than they earned. Kiernan said the situation has improved somewhat since the introduction of KiwiSaver, which has increased the level of formal financial saving.

Kiernan also pointed out that a significant portion of household saving in New Zealand takes the form of property investment, driven by expectations of rising house prices. This type of saving is not captured in standard measures of household savings rates, which focus on financial assets such as bank deposits and retirement funds. The official figures may understate the total amount of saving occurring in the economy.

The cost of living pressures, particularly from housing costs and inflation, have been cited as factors limiting households’ ability to save. Reports indicate that spending continues to outpace disposable income for many New Zealanders, creating economic vulnerability ahead of the election period. Despite the negative headline figure, economists suggest the situation is more nuanced than the ranking implies, with both temporary influences and structural features of the New Zealand economy affecting the data.