Just-released pre-pandemic stats show that rises in disposable income have been matched by skyrocketing housing costs. And that poses a conundrum for the prime minister, writes Max Rashbrooke.
Jacinda Ardern’s critics, who see her as unable to solve the housing crisis or make meaningful progress on tackling poverty, will be emboldened by yesterday’s release of incomes data.
The Statistics New Zealand data, covering the nine months before the March 2020 lockdown, isn’t all bad news for the PM. The average household’s disposable income rose a healthy 3.9%, from $83,400 to $86,600, off the back of a similar increase the previous year.
But that increased income wasn’t evenly distributed. Central to this story is the graph below, which shows the income increases for nine groups of New Zealanders, running from the poorest on the left to the richest on the right. As can clearly be seen, the groups traditionally identified as “Kiwi battlers” – the predominantly working families on low to middle incomes – benefited the most, their income increases clearly outstripping those of the very poorest.
This is all, on one level, very predictable. We already knew that Ardern intended to govern for the centre, taking a cautious path towards social progress with her eyes firmly focused on a third term. So she’s looking after the middle. The very poorest? Not so much.
In the pragmatic world of elections, which are won and lost in the centre, it’s not always a bad approach. But it raises major moral questions – and some political ones, too.
Ardern has staked a lot on tackling child poverty, but many of her targets there are relative ones – that is, they measure how much income poor families have compared to the typical household, and therefore require incomes to increase more rapidly for the former than the latter. If current trends continue, Ardern will struggle to hit those targets, creating some awkward political problems, to put it mildly.
All this, of course, is based on data from before the economic pain of the last 12 months, which – although widely spread – seems to have been visited most on those who were already most vulnerable. Against that, though, the incomes of the very poorest New Zealanders, being made up mostly of benefits, are often fixed, and may actually have held up better than those of middle-income households affected by job losses.
We won’t know exactly how all that has washed out until the next data release in a year’s time. But there is nothing in this data to suggest that, pre-lockdown, the prime minister was barnstorming her way towards a brighter, less poverty-ridden future.
The second, equally predictable problem for Ardern concerns housing. In the new data, the share of family income taken up by housing costs, 20.8%, was unchanged from 2019 to 2020. But that implies that the 3.9% increase in the average family’s income was almost exactly matched by an increase in housing costs – as indeed it was, the precise figure coming in at 3.8%.
Ardern could argue that, despite the “crisis” rhetoric, housing costs didn’t actually outpace incomes in that year. But the point that will stick in most people’s minds is that, on average, any increases in income are being matched by housing cost increases (although the former start from a higher base, so in dollar terms people do have more left over).
And generally the housing stats are horrific. One in six New Zealanders spends more than 40% of their income on housing. Renters are twice as likely as homeowners to be in that unfortunate category. In the poorest fifth of the country, nearly one-third of people face that situation, as opposed to just 3% of people in the richest fifth.
Bright spots in the data are few and far between. Because the income increases were weighted more towards the middle than the top, inequality, as measured by the Gini coefficient, fell slightly, from 32.7 to 32.0. Wellingtonians, meanwhile, got the country’s biggest income boost, recording an increase of 9.6% even after housing costs. If the city is dying, it’s dying fatly (as Donald Trump would probably put it).
Mostly, though, the data will make difficult reading for Ardern and her ministers. In the coming years, they will be quick to point to coronavirus as an impediment to social progress. What this data shows is that, even before the virus hove into view, they weren’t doing a splendid job.