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Topic 12: Living conditions

The living conditions New Zealanders have today are based on the environmental, economic, and social capital built up or depleted by past activity. Sustainable development requires that the living standard we seek to enjoy as a nation should not erode this capital base. Moreover, while the capital base may be maintained sustainably, it is also important that individuals and households have fair access to it.

Income and housing are important determinants of living conditions. Income enables individuals and households to purchase the goods and services that contribute to their overall well-being. In this topic we look at the total income level of resident New Zealanders and how equitably both personal and household incomes are distributed. We also look at how satisfied people are with their standard of living, and changes in the quantity of goods and services they consume.

Paid work is the main source of income for the majority of New Zealand households and is a key determinant of living conditions. International studies have found that low family income in childhood, if long lasting, is associated with a higher likelihood of negative outcomes in later life (Mayer, 2002). It can limit options for children to acquire skills and affect their chances of achieving a good standard of living in the future.

Main results

The increasing national income per person available to New Zealanders is consistent with a rising volume of consumption per person. However, the income of high-income households has risen faster than that of low-income households. The proportion of the population on low incomes has also increased as has the proportion of households spending more of their income on housing.

Table 12.1
Living conditions indicators – key results

 Living conditions indicators - key results.

What the indicators tell us

Real gross national disposable income per person (indicator 12.1)

Real gross national disposable income per person (RGNDI) measures the average income available to New Zealanders. A nation with a rising RGNDI per person will have a greater capacity to deliver a better quality of life and standard of living to the population.

The RGNDI of New Zealand per person has been increasing moderately. The level of increase has been relatively constant since 1988, apart from falls in 1991 and 1992. The increase in RGNDI between 1988–2008 is 35.0 percent. Since 2002 the increase has been 13.7 percent (see figure 12a).

 Real gross national disposable income and real household consumption expenditure, per person.

Please note that the y axis on figure 12a was incorrectly labelled but now reads $(000).

Real household consumption expenditure per person (indicator 12.2)

Real household consumption expenditure measures the volume of goods and services purchased for consumption by households in New Zealand. As such, it is an indicator of material well-being, but if increased consumption is accompanied by increased waste or pollution, it can also be an indicator of impact on the environment (see also topic 8).

Real household consumption per person has increased consistently since 1993. The volume of household consumption did not keep pace with population growth in 1990 and 1991 and dipped in 1992. However, by 2008 consumption per person was 38.9 percent higher than in 1988, tracking a similar path to RGNDI per person. Since 2002, the increase has been 19.7 percent (see figure 12a).

Income inequality (indicator 12.3)

The degree of income inequality is often regarded as an indicator of the fairness of the society we live in. Households with low incomes have fewer options for meeting economic needs than households with relatively high incomes. This indicator measures income inequality by comparing the ratio of high household incomes to low household incomes. (See ‘About the indicators’ below for how this is calculated). The higher the ratio, the greater the level of inequality.

Figure 12b shows that between 1988 and 2007, the income inequality ratio increased from 2.24 to 2.57. However, the rate of increase in income inequality has been slower since about 1994.

See also topic 10, for discussion on income inequality for those in paid work, by ethnicity and sex.

Income inequality, by selected years.  

Population with low incomes (indicator 12.4)

The proportion of the population living in households with a disposable income below a selected threshold (based on a median income), provides an indicator related to both fairness and the limits these people face regarding the choices available to meet their needs.

This indicator measures the proportion of the population living in households that have a real disposable income below 60 percent of the median income (see also ‘About the indicators’ below).

Figure 12c shows that since 1988, the proportion of the population in households living below the 60 percent threshold has risen slightly, from below 10 percent to 13 percent. However, there has been some variability during that time. There was a sharp rise in the mid-1990s, peaking at 23 percent in 1994. In 2001, the proportion was 19 percent and it has since declined further. This long-term rise has been partly attributed to increased housing costs as a percentage of income (see also indicator 12.5).

 Proportion of population with low household incomes, by selected years.

Housing affordability (indicator 12.5)

Affordable housing is important for people’s well-being. High housing costs relative to income can leave people, especially those in low-income households, with insufficient income to meet other basic needs such as food, clothing, heating, transport, medical care, and education.

Between 1988 and 2007, the percentage of households that spent more than 30 percent of their disposable income on housing rose from 11.4 percent to 25.7 percent. The increase since 2001, when the proportion was 23.9 percent, has been more moderate (see figure 12d).

Other measures of housing affordability, which focus on purchasing a house and mortgage repayments show a slight improvement in housing affordability between 2007 and 2008.

 Proportion of households spending more than 30 percent of disposable income on housing, by selected years.

Household satisfaction with material standard of living (indicator 12.6)

Satisfaction with material standard of living is a measure of people’s perceptions of how well they can meet their material needs. Well-being depends not only on meeting basic material needs, but also on people’s subjective judgement of their living conditions. In addition to the other indicators in this topic, this indicator provides a fuller answer to one of the central concerns of sustainable development – how well do we live?

In the year to June 2008 (see figure 12e):

  • 70 percent of households were either satisfied or very satisfied with their material standard of living
  • 18 percent were neither satisfied nor dissatisfied
  • 12 percent were dissatisfied or  very dissatisfied.

  Household satisfaction with material standard of living, year ended 30 June 2008.

About the indicators

Real gross national disposable income per person and real household consumption expenditure per person (12.1, 12.2)

RGNDI measures the total income, adjusted for inflation, that New Zealand residents receive, not only from domestic production but also from the net income flows with the rest of the world. Real gross national disposable income is a measure of the real purchasing power of New Zealand’s national disposable income and is therefore a broad welfare indicator for the nation.

Real household consumption expenditure per person is a measure of the volume of current goods and services purchased by each person.

Both indexes are expressed in 1995/96 dollars and the measure per person is based on the estimated resident population of New Zealand (up to 1991 the population estimate used is usually resident population).

Data is from the New Zealand System of National Accounts.

Income inequality (indicator 12.3)

The information is derived from the Household Economic Survey. Further percentile and ratio analysis was carried out by the Ministry of Social Development.

The ratio is calculated by dividing individuals into 100 ranked groups (percentiles) on the basis of their household disposable income, after adjusting for household size and composition. The first percentile is the lowest income group. The indicator compares the incomes of those in the 80th percentile (a relatively high income group) with those in the 20th percentile (a relatively low income group).

Population with low incomes and housing affordability (indicators 12.4, 12.5)

The information is derived from the Household Economic Survey. Incomes are after deducting tax and housing costs, and after adjusting for household size and composition. The threshold used is 60 percent of the 1998 median household disposable income, with 25 percent deducted to allow for average housing costs. The threshold is adjusted for inflation to keep it fixed in real terms.

For housing affordability, the following outlays for the household as a whole are classified as housing costs:

  • rental costs
  • mortgage payments
  • property maintenance
  • rates and other service costs
  • energy costs for housing
  • other housing-related expenses.

Household satisfaction with material standard of living (indicator 12.6)

This indicator is a subjective measure since it is based on self-rating. The information is for a snapshot in time and is from the 2008 Household Economic Survey (Income). One usually resident member of the household, aged 18 years or over, was randomly selected to respond to survey questions relating to their material standard of living. Material standard of living is defined as the things that money can buy, and so does not represent the capacity to enjoy life or a person’s state of health.

It should also be noted that as judgements in level of satisfaction rise or fall in response to changes in aspirations over time, there can be an increase or decrease in ratings of material standard of living.

The General Social Survey will also provide information on this indicator from late 2009.

Table 12.2
Living conditions indicators – defining principles

 Living conditions indicators – defining principles.

See part C for the complete list of defining principles for all indicators.

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