Kiwis like buying houses more than buying businesses

Release date
09/11/2006
Speaker
Dr Alan Bollard

Talk to PricewaterhouseCoopers Annual Tax Conference

This talk looks at a very Kiwi phenomenon: householder investors who prefer to put their savings into houses rather than a broad range of financial investments, especially equities. Apart from having all their eggs in one basket, this also has implications for the level of gearing taken on by the household sector and the manner in which New Zealand's debt is funded. It has also meant that not much local equity is available for New Zealand business. The gap has been filled by foreign equity, which brings many development advantages for large businesses, but which is less conducive to supporting start-ups and other small businesses. It has also left the economy more vulnerable.

The Reserve Bank has the dual roles of promoting stability in prices and promoting stability in the financial system, to enhance economic performance. Both these concerns drive this talk. The bigger picture around financial stability will be updated when we release our latest Financial Stability Report on 15 November 2006.