Microeconomic analysis of household expenditures and their relationship with house prices

Release date
Vol. 70. No. 4. December 2007
Mark Smith
The use of microeconomic data sources can provide important insights into how household and firm behaviour influence developments in the economy. This article summarises some of the key features of household surveys produced by Statistics New Zealand, including the Household Economic Survey (HES). It then outlines recent work by the Reserve Bank that uses data from the HES to analyse various hypotheses for why a positive correlation exists between house prices and consumer spending. Findings suggest this positive correlation is evident for various age groups of householders, and for households living in rented accommodation as well as for owner-occupiers. There is some evidence of a wealth effect for older householders, with the pick-up in household expenditures for this group since the late 1990s occurring during a period of sizeable house price rises.