Box B: Changes to the New Zealand household balance sheet statistics
This page contains information on changes to the New Zealand household balance sheet statistics from the May 2015 Financial Stability Report.
In March 2015, the Reserve Bank released a revised set of household asset and liability statistics.1 The new balance sheet statistics help to address a number of long-standing gaps related to the financial position of the household sector. There are two major changes:
- A wider definition of household assets. The definition now includes currency holdings, equity in unincorporated (trusts, sole traders and partnerships) and unlisted incorporated businesses and some unfunded superannuation benefits.
- A narrower definition of the household sector. Residential rental property assets and liabilities no longer appear on the household sector balance sheet. Instead, only the equity that households hold in the rental property sector is included.
The changes bring the household balance sheet statistics into line with the international System of National Accounts for compiling sectoral balance sheets. For the September quarter, the improvements result in an overall increase in household assets of $140 billion, and a decline in household liabilities (associated with housing loans of rental property owners) of $73 billion. Household net wealth (the difference between total assets and liabilities) increases by an additional $213 billion.
With the exclusion of the debt attached to rental properties the household debt-to-disposable income (DTI) ratio is now 108 percent, compared with 160 percent under the old methodology (figure B1). However, the methodological change does not fundamentally alter the Reserve Bank’s view of the risks associated with lending to the household sector. Debt held against rental properties is clearly important from a financial stability perspective, particularly given the full recourse nature of mortgages in New Zealand. The Reserve Bank will continue to discuss the broader definition of household debt in the Financial Stability Report, and publish statistics that allow users to compute household debt under the previous definition.
Figure B1: Household debt as a percentage of disposable income
Source: RBNZ Household Assets and Liabilities.