Future not what it used to be

By Bill Kaye-Blake 26/02/2013

The Dominion Post leads off with a story about a Fairfax Media-Ipsos poll:

And the snapshot makes for grim reading: More than half (54.1 per cent) say New Zealand was a better place to live in 2003 than now. Almost 12 per cent were undecided or could not say.

The article then throws some numbers around, but without much structure or context to give them meaning. For example:

Back then, the average wage was $34,600 – 40.2 per cent less than today’s $48,500.

Averages are less meaningful in this context than medians and some information about income distribution. A look at the Stats NZ Table Builder, though, shows that weekly median income for the working-age population has increased 40% ($401 to $560) while average income has increased only 34% ($539 to $721), which indicates a decrease in income inequality.

These are also nominal dollars, not inflation-adjusted, so the gains aren’t that great. The article tries to cover itself by saying

However, the gain at face value has been quashed, with the cost of living rising considerably over the decade

and then it goes on to quote some price changes for individual products. What we really need is a generalised basket of consumer goods for comparison. Oh wait, Stats already collects that data for us. The CPI is up 26% in that time (2003Q4 = 924; 2012Q4 = 1169). So, the median income gain in that time has been about 11%, or 1% per year.

Of course, these numbers are medians and averages. Polls ask questions of individual people, whose experiences will be across the distribution. Some of them will be worse off, and some will be much better off than 1% per year. Housing is one of those areas:

In 2003, the median house price was five times annual earnings. Now it is almost eight times the average salary.

If you have been owning a house during this period, you are relatively richer. If you haven’t, your relative house-buying power has declined, probably enough to offset any income gains.

My guess, though, is that the poll is less about 2003 than about what happened afterward. Borrowing from Shamubeel Eaqub (NZIER) and a report, ‘Lessons from the Recession’, that he did for MYOB (available here):


We are better off than we were in 2003, but nowhere near where we thought we would be. It’s no wonder that respondents were grim.