Richer than ever, except housing have-nots

The Government was elected on a platform of combating rising inequality and closing the gap between rich and poor. New Zealand had been a so-called ‘‘rockstar economy’’, but too many people weren’t feeling it, the argument went.

One part of this was a broader definition of wellbeing than just GDP growth, hence the Wellbeing Budget.

In part that was political rhetoric: GDP growth is only a focus for governments because of the ability it gives for the state to pay for things citizens want: a growing economy usually means higher wages, more economic activity and more opportunity. Even the most fiscally flinty administration focuses on growth because of what it usually implies about the rest of the economy: the direction of general wellbeing.

So it came as somewhat of a surprise that a new report from the Credit Suisse Research Institute on the state of global wealth showed New Zealand ranked fifth in the world for wealth per adult. It also showed the distribution was more equitable than in most other rich countries, and that inequality in New Zealand has actually decreased.

Finance Minister Grant Robertson celebrated ‘‘the solid fundamentals of the New Zealand economy’’ in Parliament yesterday. And well he might: the report also reckoned that, since 2000, wealth per adult had shot up by more than US$200,000 to US$304,102.

That’s the good news. The bad news is that much of that increase has been from housing. Well, bad news for anyone wanting to buy a house. And bad news for the balance of an economy skewed by an obsession with land, bricks and mortar.

And therein lies the rub for the Government – and it is a question that the Key government also could not find an answer to: How do you get people into houses without blowing up the housing market and turning New Zealand into the land of the long subprime housing crisis? How do you do it without another leaky homes disaster and ensuring that responsible land use practice is followed? Those are the practical regulatory and legislative questions.

How do you massively increase housing supply without driving councils, greenies and the resource management club mad is the political question.

Are houses more expensive than they should be? Yes. But there is a complicated regulatory tangle involving three levels of government with the Resource Management Act in the middle. After a positive start – and likely as a result of the Green influence – Labour has done little to date that would really move the dial on housing costs.

But the fact is that, thanks to low interest rates, affordability – how much you have to pay per week on a 30-year mortgage, compared to renting, say – is pretty good. The problem is kicking up a deposit to get started.

That’s where the real inequality lies: between those that come from the means or can get support to get into the housing market in the first place, and those who cannot. According to Credit Suisse, it has supercharged the wealth of those who do, and increasingly left behind those who don’t. It has now become a question of intergenerational inequity.

The Government is presiding over a strong economy, growth is comparatively good and wages are rising. But the Credit Suisse report suggests that, if it wants to fix real inequality, traditional Labour policies to just boost low incomes won’t get the job done.