On consumption in New Zealand

I’ve just been playing around on the OECD stats site to keep abreast of relevant global economic data.  While I was there I decided to have a look at some ratios of consumption to gdp around the world, especially after realising how little my view on this and rebalancing in New Zealand has not changed in the past two and a half years.

So here are some graphs comparing us to some of our Anglo-Saxon relatives:

Nominal consumption to GDP

Real consumption to GDP (so doesn’t account for relative price changes)

That really puts the idea that we have been spending “too much on too many consumable goods” in perspective … actually, I find it hard to believe how stable private spending out of current income has been in NZ.

4 replies
  1. Blair
    Blair says:

    Matt, how do these data relate to the increase in govt spending over that period? Does consumption include consumption by govt?

    • Matt Nolan
      Matt Nolan says:


      Excellent point.  The data I used is just private consumption – on the OECD site the “consumption” figure includes government consumption as well, but I went into the breakdown and took the government figures out.

      If we assume Ricardian equivalence, we would expect private consumption to move the opposite way to government consumption – interestingly, if my mind serves me correctly, government spend as a % of GDP fell during the 2000’s.


      If we are only interested at looking at households – given the determination to say people aren’t saving enough out there – we should include residential investment.  Now residential investment as a % of GDP was WAY above historic averages during the 2000s.  Furthermore, the relative price of it went up a lot – implying that our nominal consumption ratios (including this) did look a bit historically high.

      Seeing this, I was under the impression that any “misalignment” was really in the residential property and building industry – and in mid-2009 I said I was expecting changes in this industry, and potentially the need for policy changes in this space, as a result.  This is what has happened – consents are historically very very low, house sizes are falling, and the government has tried to change the tax system to treat residential property like other investments.

      • ArmchairAnalyst
        ArmchairAnalyst says:

        Yup, debt (sourced mainly from overseas 2000-2008) used to invest in housing is no-doubt the main driver of our negative NIIP. Unfortunately housing doesn’t promote sustainable GDP growth and naturally doesn’t earn export dollars to offset offshore interest flows which widen the current account deficit (and further increase the NIIP deficit).
        Having said that, at least our housing is an asset, unlike certain European countires which borrowed from overseas, via the public sector, to spend essentially on consumption via public sector wages/benefits/too low tax rates etc.

        • Matt Nolan
          Matt Nolan says:


          In the NZ context, as you say housing does provide a stream of consumption – which can be valued by its rental equivalent.  The interesting question I have it whether it is more on the cost or quality side where we were overspending on property.

          The first has competition law/zoning implications, while the second is one of direct “overconsumption”.  Fascinating stuff.

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