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Left Side Story: What do New Zealanders actually earn?

Written By: - Date published: 7:02 am, August 12th, 2016 - 91 comments
Categories: blogs, economy, wages - Tags: , ,

Reprinted with permission, by Deborah Russell from Left Side Story:


What do New Zealanders actually earn? And why we need to understand these figures.

Before you read the rest of this post, get out a pen, and write down what income you think someone in New Zealand needs to earn to count as rich.  You could also write down what income you think the top 5% of income earners in this country earn, and what income you think the top 1% earn.  I’ve got some data on that at the end of the post, but you’ll find it more interesting if you test it against your own assumptions.

In Question Time on Tuesday 9 and Wednesday 10 of August, the Prime Minister responded to questions about Auckland house prices by listing the numbers of houses in Auckland that had sold at various prices in the last few months, and saying just how many were sold under the average price. For context, the average house price in the Auckland region is now getting close to a million dollars, and in Auckland city itself, it’s over a million.

Here’s how the PM responded to concerns about Auckland house prices on Wednesday 10 August.

I stand by my full statement in the House yesterday, which was: “If you look at the year to 31 March 2016 in Auckland there were 31,963 sales. Sales in the under $600,000 category of … homes were over 30 percent of that—9,638 sales. For … houses under $650,000 there were 11,842—37 percent of sales.” My point was that there is a significant number of Auckland houses selling for well under the reported average price. Source – Hansard

So 37% of homes sold at 2/3 of the average price. Those are the cheaper homes in Auckland, and they’re the homes that we would expect lower paid people to be able to buy.

Later on in Question Time, Metiria Turei, co-leader of the Green Party, made the point that principals and firefighters were finding it hard to afford houses in Auckland. This is one of the critical concerns with respect to outrageous house prices: soon the people we rely on to run our communities – teachers, police officers, fire fighters, and so on – simply won’t be able to afford to live in those communities.

Here’s what Ms Turei said, and what the PM said in reply.

Metiria Turei: Is that the excuse for unaffordable housing that he would give to the principal of an average-size primary school, who would have to spend about eight times their income to buy a median-priced house in Auckland; I mean, is the housing market working for that family?

Rt Hon JOHN KEY: Well, the member talks about an average principal of a New Zealand primary school, I think she quoted. If they live in Hamilton, 71 percent of all sales that took place were under $500,000. But if they lived in Auckland, 30 percent of sales that took place were under $600,000, and 37 percent under $650,000. My colleague before was just looking on TradeMe and the number of properties in Auckland that are under $500,000. There are many properties listed there. Source – Hansard

Putting a somewhat uncharitable gloss on this, the Prime Minister’s advice is for principals of Auckland schools to live in Hamilton, or for them to buy a house in the lower third of the market.

But we expect people to buy houses that are roughly commensurate with their incomes. That is, we expect, more-or-less, that people who are better paid to buy higher priced houses, and we would ordinarily expect people who are less well paid to buy lower priced houses. Of course, some of the least well paid people will rent houses instead. But in a property owning liberal democracy, where most people aspire to owning their own home, we might expect that higher paid people are buying houses above the average price.

So are principals among New Zealand’s higher paid income earners?

Yes. In fact, principals are in the top 10% of income earners in the country. The very lowest paid principals earn about $85,000 a year (Source: NZEI Principals Collective Agreement – pdf). And based on IRD data, the top 10% of income earners in this country earn $81,000 or more.

Here’s the breakdown of incomes in this country. These are incomes based on taxable income, that is, the amount that Inland Revenue thinks that each person earns.

incometable

This analysis excludes untaxed income such as capital gains, and it doesn’t adjust for the way business income can be calculated. There are no assumptions in this data: it’s just the cold, hard numbers collected by Inland Revenue. But let’s be very clear about this: most people in this country are wage and salary earners. This is as good a basis as any for assessing how much money people have available to spend, based on what they earn.

So what does this table tell us?

It tells us that school principals are in the top 10% of income earners in this country.  Yet our PM expects them to look for the less expensive houses in Auckland.  Is he really saying that people in the top 10% should only aspire to cheaper housing?

It tells us that based on the hard numbers that IRD collects, about half of all income earners in New Zealand earn less than $28,000 a year.

It also tells us that if we think that say, the top 10% of income earners in New Zealand are “the rich”, then we think that earning around $80,000 is enough to make someone “rich”.  Not just well off, but rich.  I strongly suspect that many of the people earning around $80,000 or so don’t feel rich, especially if they are living in Auckland.  Yes, I know that an income of $80,000 is massive compared to what many people earn, but I am talking about people’s perceptions here.

Some other information from the same source but not shown in the table: the top 5% of taxable income earners in New Zealand earn $107,000 or more, and the top 1% of income earners have taxable incomes of about $200,000 or more.

The PM’s glib answers in Question Time yesterday do him no credit.  They were fob-off answers that disguised the real problems with Auckland house prices: they are simply far too far out of reach for even people who are earning in the top 10% of incomes in this county.  It’s time for him to grapple with this problem, instead of treating it as just one more playing piece in the game of politics.

**************

Some caveats with the data: it’s for the year ending 31 March 2014, and it’s based on information collected by IRD up to September 2015. So there’s still some data coming in. But, if you look at the previous years, you will see that the same broad pattern holds: the top 10% band of income earners kicks in around $80,000 or so. The data does account for Working for Families tax credits, and income earned from benefits, but not for people with no income whatsoever, or people who earn only interest and dividends that are fully taxed at source.  You can see the bands I’ve used in the table are not exact 10% bands: I decided it was better to work as closely as possible with the raw data, rather than making assumptions about where to draw the exact line on some income bands.

You can download the data yourself from the Research and Tax Statistics page on the IRD website.  There’s a wealth of information available there.

91 comments on “Left Side Story: What do New Zealanders actually earn? ”

  1. weka 1

    The other factor is how many people have low accommodation costs ie older people who’ve paid off their mortgage are obviously way better off than their same income peers, both in terms of being ‘wealthy’ and in terms of what they can afford to buy.

    I realise that might complicate the argument but it would be interesting to know if figures on that are available given the boomer spike.

    • mac1 1.1

      Good question, Weka. Here goes.

      Ownership costs at a lower level are $65 per week (rates $1200, home insurance $600, maintenance $1500 all per annum).

      Rents range from $130 upwards to NZ average of $384 per week, and beyond.

      Therefore, depending on the actual rental, there could be a differential per week between $65 up to $320, and higher.

      The average NZ renter pays rent of $384. A couple owning a $500,000 average house incurs home ownership costs of $110 per week, The difference is $274.

      At the low end, a low rent payer might pay $130 per week for a council house, against the housing costs for a low cost house of about $65 per week. The difference is $65 per week.

      A renter is not eligible for up to $600 per annum from a low income rate rebate, a difference of up to $12 per week.

      Baby boomers who are superannuitants earn after tax $385 for a single living alone and $591 for a couple.

      • weka 1.1.1

        Hi mac, I was meaning the numbers of people mortgage free. But those figures are interesting. Accommodation Supplement will complicate things further. Plus the low income people that the govt helped buy a house up until the early 90s will be retiring in the next decade and after that there will a further spike in retirees who have high accommodation costs.

        The whole couples/single thing is interesting too. Although some people will find their situation improving upon turning 65.

    • Sacha 1.2

      The rate of retirees who are mortgage-free is projected to decline (can’t recall which govt/academic report I found that in).

      Future retirees – including boomers – will not have that advantage. They will also tend to live longer after retirement age, and run up larger health/disability support costs.

      • weka 1.2.1

        Given the huge increase in house prices and the size of mortgages now relative to income that’s not surprising. What was the time frame?

  2. Psych nurse 2

    Key always dominates Question time with his arrogance, glibness and confabulation.He makes the headlines with his performance, no one questions his truthfulness.
    Just think how much he would hate it if no questions were asked of him.He would have to sit there like a dummy.No adoring applause or media fawning.Direct questions to those less able to deflect them.

    • AmaKiwi 2.1

      Psych nurse

      Excellent idea!

      Obviously you’ve learned a lot about managing conversations working on the psych ward. I just hope the Opposition MPs do it.

      • Leftie 2.1.1

        Effectively gagging the ringmaster from holding court on behalf of his ministers/mps and forcing them to stand on their own feet to provide answers would be a good way to unravel the myths that surround the Nats and it would really show them up.

    • smilin 2.2

      Yes watch him answering always from the script then the school boy smart arsed attack on the opposition and its all nothing but emotive rubbish like hes on stage entertaining the world
      No ones laughing John youve sold us out

    • weston 2.3

      Right on the money Psych nurse

    • Leftie 2.4

      +1 Psych nurse. Excellent strategy that would work.

  3. Wayne 3

    I note that the table is based on the IRD assessments of every taxpayers income.

    At 3.5 million taxpayers it is around 75% of the total New Zealand population. As I read the table it includes children, retirees, students, part-time workers.

    A better approach, if we are using this measure as a proxy of the ability of people to afford homes, would be the earnings of people in the workforce between the ages of 18 and say 65. Virtually all home buyers, certainly those purchasing their first home, come from that group. Thus the median income for full time wages and salaries was $51,000 (June 2014, NZ Stats). The average salary for those jobs advertised on Jobseek was $75,000.

    To specially look at teachers, the top of the scale (T10) is $75,949. Basically every teacher hits that level after ten years teaching, typically aged around 32 to 34. It does not include promotions or units of responsibility.

    So to take two people who are teachers, (or police officers, nurses or in qualified trades) at around 30, it is likely the household income will be $140,000 to $150,000. The Kiwisaver incentive, plus direct savings from salary mean that a $100,000 deposit is an achievable goal at around this age. A mortgage of say $500,000 has an annual cost of about $30,000.

    I appreciate that this will be difficult stretch. It takes a 5 year plan. At the time the house is bought it will be common for the family to go to one income, which is quite likely at around that point in life. I guess it explain why people remain in the workforce part-time even with young children.

    Also there is a big risk if interest rates go up. It would certainly be prudent to lock in the interest rate for a good 5 years.

    I also appreciate I have described what most people would regard as well qualified middle income earners. I do not see how lower income earners could buy a house in Auckland without parental help, or in the past spending some time in Australia at the mines, especially for the deposit.

    So you can see why Don Brash and others say prices are too high. Many would say that the $600,000 house should really cost $450,000, which is a 33% reduction.

    Could this be achieved in Auckland. Possibly if more land was freed up, which is why the adoption of the Unitary Plan is crucial. A section price of $250,000 (300 meters) and a house build price of $200,000 garage and landscaping included. It will mean living as far out as Kumeu or similar. I would assume Auckland Transport will push the electric trains to Kumeu and Pukekohe.

    What effect would it have on other prices higher up the scale. I don’t know, probably some but not a 33% reduction, since the proposed houses at $450,000 sit in a specific market.

    • RedLogix 3.1

      Possibly if more land was freed up,

      From where I’m sitting it is entirely impossible for us to ‘free up’ enough land to satiate the demand to launder dirty money out of China.

    • Sabine 3.2

      How many million people do you think NZ could accommodate? or is that something you don’t want to pontificate about?

    • adam 3.3

      I noticed you did not include disabled there Wayne. Or people who get injured at work and go on ACC, or children (well a little).

      To me it just a whole lot of wishful maths. I get you have start somewhere, but when the mark(et) you purpose as a target – is in reality a pipe dream for the majority, then what are you actually arguing for?

      Because society is made up of 100% of the people, 100% of the time.

    • mac1 3.4

      A question to which i do to know the answer, Wayne, but which will affect the usefulness of your argument based as it is on all income earners aged from 18-65.

      How many in the latter part of this age group will be contemplating first home ownership?

      The use of the 18-65 demographic may distort your argument. Firstly, the older members will be mostly at the top of their earning power, as opposed to the 18-35 year olds. Secondly, as the prospect of a 25 year mortgage takes the prospective first home owner into the 65+ age bracket that is still paying a thirty thousand mortgage on a combined superannuation of $30,742, this must surely decrease the uptake of first home ownership in the forties, more for the fifties, and the sixties especially?

      The consequence, if this is true, is that your figures for the $150,000 threshold which makes home ownership barely possible at $30,000 annual mortgage must be discounted to a lower number of people who are of an age and an income to achieve it.

      • Wayne 3.4.1

        mac1

        You make a fair point, which is why I focussed on people around 30 as they will the first home buyers. Over a 30 year period there will be enough wage inflation so that at the end of the mortgage, the payments will only be a small proportion of the income.

        However, people inevitably trade up, and make all sorts of life choices so I suspect the size of the payment in 30 years is not that relevant. The real issue is the first 5 to 10 years, which also covers the likely time of one and a bit full time incomes.

        • Stuart Munro 3.4.1.1

          You are living in an idealised past Wayne – the job volatility in present day NZ is substantial – unless you’re a shabby little trougher on a sinecure – a 30 year mortgage can be expected to undergo at least six job changes in the current environment – any one of which can break it. NZ is broken, the shameful incompetence of this government has crushed the poor and is now immiserating the former middle class.

          • Ross 3.4.1.1.1

            Yes Stuart, Wayne ignores the fact that many workers start of a 90 day trial which gives employers the ability to fire at will.

            Many jobs are casualised which means they offer little or no job security and are possibly among the lowest paid jobs.

            Wayne has this fantasy that all workers can aspire to become a teacher or police officer but the reality if quite different.

        • mac1 3.4.1.2

          Waiting for wage inflation over a thirty year period will be how much? Wage inflation at the moment is 1-2%, inflation is 1%, but where I live, a small provincial town, the July-July inflation has been 13%.

          I talked to a real estate agent today. She says that houses here are 20% above RV, that rental properties for sale turn over in a fortnight.

          Since the topic of this Left Side story is wages and house prices, Wayne, how long can we continue to have house inflation at some ten times above wage increases and expect ordinary wage earners to have a hope of home ownership?

          This puts pressure on rents since again in our little town 5% more rent than did ten years ago. How will super annuitants fare, along with other beneficiaries, in a rental market driven by speculation, investors and profit takers?

          Does not that figure of 5% increase in renters here in a provincial SI town indicate the difficulty that people are under? That ordinary NZers aren’t making it into home ownership? Does the 13% figure here not show that this is a NZ wide problem, and not confined to Auckland?

          Meantime, accommodation is still to be found for thousands of vineyard workers needed here in the near future, but employers are not stumping up to the counter with decent wages or acknowledging their role in providing accommodation, hiding instead behind contractors. Again, this puts pressure on ordinary workers/low income earners as the housing market deals with over-demand against supply.

          Historically, a low wage economy here, pressure by large seasonal labour demands, and 13% house increases is a huge worry- for workers, super annuitants, beneficiaries alike.

        • As someone who’s currently 30, I can absolutely confirm what Stuart is saying. Job insecurity is incredibly real, if you’re not highly qualified or experienced you’re lucky to be on more than a fixed term contract, and there’s little to no opportunity to make your way upwards in an organisation without significant investment in qualifications at your own expense, as most learning and development spending is restricted to those who are already reasonably qualified. Basically unless you have a useful degree or get promoted into middle-management you are SOL on climbing the wage ladder. Good luck to people who don’t manage well in a tertiary education environment I guess, because essentially it’s necessary to get a lot of the secure jobs that are available in cities. (You could learn a trade, but again, apprenticeships are more difficult to come by too, although probably not as hard as breaking the graduate barrier)

          People in better-paid professions and who are simply older are really underestimating the extent to which inter-generational warfare is real. This is going to be the first generation that is poorer than its parents, (which of itself isn’t terrible, it’s just that we’re still legislating like every subsequent generation will be richer and will have its own turn having it good) and you’re sitting here assuming that it’s okay to look at a dual income household where both earners are in the top 20% of wage earners in order to calculate who can own a home and thus have security of where they live. Some of the people I went to school with are buying houses or setting up businesses, that’s true. But I had expected back in the day that almost everyone would be at that stage of their life by now, and it’s probably less than half.

          I’m tired of having housing insecurity. I’m tired of having job insecurity. I’m tired of insecurity in general, and I don’t mind the economic disadvantage of it, what I mind is the stress it adds to your life. The housing market is the most obvious reflection of the economic issues that are plaguing younger kiwis, and if the older generations can’t solve it, then there are going to be real problems on their hands, because at some stage we’re going to take over the political mainstream, and the longer we keep funneling money to baby boomers (and other members of the capital class) in the forms of tax exemptions and policy favours, the more painful things are going to be when we have to adjust policies to actually reflect the rest of the nation and solve the problems going on with the rest of society.

          • aj 3.4.1.3.1

            +1
            (Age 63 and fortunate enough to have had 40+ yrs full employement)

            • In Vino 3.4.1.3.1.1

              +2. But that said, I am 60+, and a baby-boomer who (apart from voting for Lange against Muldoon the first time when pretty well everybody was fooled and betrayed) has always fought against neo-lib policies.

              It amuses me when people blame baby-boomers. My experience is that the majority of every generation since have turned out to be short-sighted right-wing voters in the same proportion as baby-boomers did. More fools them. (Including us baby-boomers.) So more fools us all together.

              We were warned against the consequences of job casualisation (the abolition of permanent full-time jobs in favour of ‘flexibility’) way back in the early 90s, but too few people could see past their rugby and lotto ticket…

              • I don’t think all of the blame belongs to Boomers, (I’m pretty sure you’re not talking about me specifically anyway but the overall trend, right?) but it’s certainly been their responsibility to act on the various problems and make sure that the generation that comes after them does okay.

                What I do think is that an alarming number of Boomers don’t see anything wrong and think my generation are just lazy or whiners or something.

          • Gangnam Style 3.4.1.3.2

            Thank you Matthew, +++!!!, I amin a similar position to what you describe in your comment but 10 years older with children. I am OK for now, but I know (unlike most of my older colleagues) my job is not secure long term. Good luck!

          • Foreign waka 3.4.1.3.3

            Yes, and it is a world wide phenomena. My perception is that the economic model had it’s day and the current situation is quite similar to the 1920.
            As for the baby boomers, well maybe they had for a couple of years more fun and less care, the price they pay is high. They have joined savings programs with promises of better retirement planing and income. Low and behold, the money is gone (watch out kiwi savers). Of cause the 50-60 year old haven’t got a show in hell to get same savings scraped together after that loss and most are ashamed to talk about it. I have met a number of people how were close to killing themselves because they cannot see how they can, after a lifetime of manual labor, work many more years because they are not able to have enough income to support themselves and their families. What is often forgotten is that this constant decisive squabble about baby boomers had it so good, that it is in the end the whole family that suffers.
            Young people with degrees can travel the world as their skill is transferable. Many do and good luck to them. We need to first look at those with young kids that need a roof over their heads, clothes on their back and food on the table.
            If this ever increasing jealous professional lot is not getting this then nothing will ever change. Neither on the left nor right, as this is not a political but a humanity issue.
            PS Mind you, after the baby boomers supporting an anti authoritarian style, experimenting with less and less self discipline we will see a generation with a sense of entitlement that will take ones breath away.

            • Matthew Whitehead 3.4.1.3.3.1

              Yeah it is a worldwide phenomena. We’re lucky it’s not quite as bad here as the USA, (where unpaid internships are a common thing for new entrants to the labour market) but it’s still pretty bad. And yeah, you can definitely travel the world, especially if you’re one of the people who’s done alright in this generation, but on the other hand, globalisation has made the economic situation much the same the world over, wheras previously emigrating could be a way to get into a very different economy if this one didn’t suit you, so that freedom has come at a significant price.

              Losing retirement savings is definitely very hard. That’s absolutely the thing that concerns me the most about Kiwisaver as a policy is that many people are going to be vulnerable to market crashes and dodgy investment strategies. But I also find it hard to muster up my full degree of sympathy for retiring boomers, as you’ll have NZ Super which combined with any degree of savings and a house and you’re already in a very good position. People my age know that Super is going to be dramatically changed or gone by the time we retire, as it’s not affordable as-is. (It’s the single largest spending program the government has, and it’s not that far short of the education spend on primary, secondary, and tertiary combined, and is that big a liability despite having no associated revenue stream to pay for it. And it’s only going to get more expensive in the medium-term- I expect once all boomers reach Super age it’ll outspend education) I’m very worried about what happens to people whose Kiwisaver accounts get hit in similar downturns when Super isn’t as reliable anymore, because that’s going to be a huge problem. I hope people are switching to resilient investment profiles once they start having siginificant savings.

              Actually, as far as sense of entitlement goes, I think that’s actually trending downwards. People know first-hand they can’t expect everything their parents before them had, even if they’d like things to be fairer than they are now. They do expect that their freedoms be respected, but I’d hesitate to call that a “sense of entitlement” so much as a “sense of justice.” Most people don’t want a guarantee they’ll win in the economy, they just want an equal chance to participate.

              What confuses people is that we’re very attached to screens and other modern forms of media and find it more difficult to cope without them. Part of that is a generational shift to a different type of media, but another part of it is that the things that replace people’s intense focus on media, like starting a family, or owning a home, or having a fulfilling career, aren’t as available as they once were, so we’re “less engaged with society” because society doesn’t have as much to offer us as it did to previous generations. The love affair with technology and pop culture has nothing to do with entitlement, in fact it’s a reflection of escapism to deal with the fact that we can’t rely on a sense of entitlement any longer.

              • Foreeign waka

                Matthew, I hear you. It is getting increasingly difficult for everybody.
                The world economies are on a crash course, the environment is damaged by ever increased consumption and the next “threat” is the full automation of the workforce.
                This will affect everybody, and I mean everybody.
                The younger ones as their skills are in oversupply for the jobs available and for the older generation because they haven’t got any chance to find work until they are 70 as most of them are worn out. One has to remember that this is a generation that grew up when there were no computers and most were employed in physical labor jobs. No sitting down and mentally pondering some academic subject there. Women were holding low paid jobs and worked the household, raising the kids.
                It should not come as a surprise that suicide stats will show you that it is the 65’s and up who kill themselves most often. So ask yourself why this is.
                So back to you, please don’t take this the wrong way – you need to try and stay away from the destructive self pitty. It stands in the way to make sure you understand that you have actually a voice, you can vote for the crowd in parliament that at least promises most of what you want.
                You also can use the new social media to actually meet and talk about options, ideas, community involvement etc.
                Above all – the society is an expression of many and one of those is you.

    • Henry Filth 3.5

      “So you can see why Don Brash and others say prices are too high. ”

      Possibly pay is too low? $80k a year puts you in the top 10%. Really? $80k a year makes you rich?

      Astounding! Frightening!

      • Wayne 3.5.1

        There is a difference between incomes of all people (IRD returns) and full time pay.

        “Pay” implies salary and wages or business income. The median full time pay is $51,000 (June 2014). So $80,000 and above will not be the top 10%, it is more like the top 25 to 30%.

        • Deborah Russell 3.5.1.1

          There is a difference between incomes of all people (IRD returns) and full time pay.

          “Pay” implies salary and wages or business income. The median full time pay is $51,000 (June 2014). So $80,000 and above will not be the top 10%, it is more like the top 25 to 30%.

          I agree with the point about the difference between pay (wages or salary) and income. The reason I’ve used income data is partly it’s the data that’s readily available to me, but also because what matters is total income. Someone might have wages of say $40,000 a year, and interest and dividend income of say $10,000 a year, giving them an income of $50,000. What matters to them in terms of whether or not they can afford a house is not the $40,000 of wages, but their total income.

          What really prompted the post was listening to the PM suggesting that principals, whom I know to be among the higher income earners in NZ, should buy lower priced properties. That mismatch seems wrong to me, an indication that either house prices are too high, or incomes are too low, or mostly likely, both house prices are too high and incomes are too low.

          Many thanks for your comments on the post, Wayne.

          • Brendon Harre -Left wing Liberal 3.5.1.1.1

            Deborah another issue you should explore with this mismatch is that if high income earners are buying below average houses then what are medium or low income earners buying? The answer is they are not buying -they have been rationed out of home ownership by high house prices. This pushes more people and families into renting and I suspect the same again happens. Medium income people take all the decent rentals and low income people -the working poor are increasingly being pushed out into garages and cars.

          • DH 3.5.1.1.2

            You’re not that far out Deborah. For only those earning wages & salary, from which PAYE was deducted, $81k is in the top 9%.

            The only caveat for that 9% is IRDs numbers would include some part time workers but not all – only part timers who pay PAYE.

            Interestingly, if you remove all of those earning below $30k (assuming they’re all part time) $81k is still in the top 16%. That would also give a median wage of $53k

            (those stats are calculated from IRDs wage & salary data)

            • DH 3.5.1.1.2.1

              “For only those earning wages & salary, from which PAYE was deducted, $81k is in the top 9%. ”

              Sorry, correction I missed a line in the spreadsheet calc – it’s 11% not 9% and 19% not 16%. Still supports Deborahs figures & rebuts Wayne’s though.

      • mosa 3.5.2

        What Don Brash also should have commented on is the LOW Wage economy and how that effects everything but no the right wing thinkers always ignore the poor in the room.
        The low wage of course benefits the banks because getting a credit card is easier than inhaling air and the low pay cant pay down the interest let alone the principlal and Brash of course would know this.
        The income table tells us what we already know that most wages and salaries are abysmally low and dont reflect the long hours and rate for the work we do and the people working two or more jobs to make ends meet because their main source of income is not enough especially when you are taxed at the secondary rate that hurts the wage -salary earner.
        Also more importantly the tax system needs a full review which wont happen untill we have a change in government that better reflects our miserable incomes.

    • Lanthanide 3.6

      Well here you go Wayne:
      “The calculator takes into account all types of income before tax and the number of adults (over 15) and children (under 15). ”
      http://www.stuff.co.nz/business/money/80229052/interactive-see-how-your-household-income-compares

      Knock yourself out.

      Seems that your $150,000 household income is actually in the 90th percentile of all household incomes.

      Now obviously it will be more than 1 in 10 Auckland households that have that income, since there are more high paying jobs in Auckland than elsewhere, but your figures show that buying houses in Auckland is hardly something that the average family could look forwards to.

    • Sacha 3.7

      I also appreciate I have described what most people would regard as well qualified middle income earners.

      Middle? You really have ignored the point of the original post.

    • weston 3.8

      450 000 k for a glorified jib board toilet …go for it folks

  4. Sanctuary 4

    Deborah Russell must be in parliament next election. The fact that the totally clapped out Trevor Mallard will be higher on the list so she probably won’t make it is an utter scandal, and neatly illustrates Labour’s ongoing crisis of entitled job for lifers shutting out new talent.

    • ankerawshark 4.1

      100% Sanctuary.

    • mauī 4.2

      Agree. Dont know exactly how it works right now, but if the party membership have the responsibility of ranking the party list I can see the MP quality going up a great deal.

    • Mrs Brillo 4.3

      Yes. She has to be there. Labour: make it so.

    • Sacha 4.4

      Even service to the party is no guarantee. Last election, talented loyalists like Claire Szabo, Michael Wood, and Arena Williams were bumped down the list to preserve the sinecures of flatulent dinosaurs.

      • Anne 4.4.1

        I can concur re – Claire Sazbo. Currently CEO of Habitat for Humanity, she’s up there with Deborah Russell. Don’t know Arena Williams, but they are top drawer candidates.

        The list selection process has undergone some radical changes in the past year due to membership pressure having been applied at recent conferences. I understand the old system whereby serving MPS take the top list positions no longer applies. I hope it will have the desired effect and the most talented on offer get the best spots.

    • mosa 4.5

      Spot on Sanctuary.

    • Leftie 4.6

      “Deborah Russell must be in parliament next election.” Agreed. From the times I have listened to her speak, she is extremely intelligent and a very competent person, she knows what she is talking about. I see her as an asset to the Labour party.

  5. The Lone Haranguer 5

    Well I guess its hard to declare a taxable income of $150,000 when the loss offsets on your rental properties are taken into account.

    Perhaps a way simpler way to deal with house price inflation would be to offer rental property taxpayers the option of:

    1) offsetting the rental loss against other income, but paying tax on the capital gains on the property when sold (recognising the properties as a business deal)
    or
    2) Allowing no rental loss offsets against other income as purchase being a “long term investment” rather than a business transaction. Any sale would not be taxed (like the family home)

  6. Chuck 6

    “It tells us that school principals are in the top 10% of income earners in this country. Yet our PM expects them to look for the less expensive houses in Auckland.”

    Of course what is being over looked here by this post is the huge assumption that said principals are all first home buyers.

    To be a principal of a school would require many years of teaching and working his/her way up to principal level. So common sense would say a good % would already be homeowners…if they moved across town, they sell and buy on the same market.

    If a principal sold in say Hamilton to move to Auckland for a new position, they would still have a decent deposit…etc.

    The problem Turei has in these type of examples is there are many inputs that need to be considered. Its impossible for her to make a point as its so easily countered.

    • One Anonymous Bloke 6.1

      The problem the National Party has is that she’s right. As a signpost reading “I agree with the Prime Minister”, you bring precisely nothing to the table.

    • Ross 6.2

      The problem Turei has in these type of examples is there are many inputs that need to be considered. Its impossible for her to make a point as its so easily countered.

      Yeah you’re right, Chuck. With a deceitful, dishonest, do-nothing, intellectually lazy PM, any argument can be countered.

      • Chuck 6.2.1

        “any argument can be countered.”

        Only ill thought out arguments Ross.

        The point clearly goes over your head.

  7. indiana 7

    What about home buyers that are in a double income household – will that have any impact? I truly believe that an individual earning $81k and above will find it hard to service a $500k mortgage, but in a double income situation this changes drastically.

    • The Lone Haranguer 7.1

      The problem with double incomes and big debt is risk.

      Sure maybe you can get by on two incomes and a bigass mortgage, but sometimes things happen that you cant plan for, and your income drops and your financial world goes upside down super quick.

      Do you think the Westpac workers likely to lose their jobs (and the other banks always seem to follow) were feeling okay a week or two back? There will be some not sleeping well tonight – because $916m isnt enough profit out of NZ after all…….

      A local plumbing firm tipped up here in Chch last night. So theres a whole bunch of plumbers and TAs wondering where next months mortgage payments are coming from. And there suppliers will ge looking at their own exposure to it and maybe the suppliers own workers jobs are at risk too.

      In our “gimmee gimmee gimmee then throw it out” society, debt is a curse that folk tend to think is a blessing.

      • Chuck 7.1.1

        “The problem with double incomes and big debt is risk.”

        It always has been, no different today to 20 years ago.

        DINKS (double income no kids) at some point mum has a baby…

        Steps can be taken to mitigate as much as possible. Income protection insurance, redundancy insurance, rent out the spare bedroom, sell and downsize etc…

        “In our “gimmee gimmee gimmee then throw it out” society, debt is a curse that folk tend to think is a blessing.”

        Agree – the worst kind of debt…on the credit card or HP loan.

        • mosa 7.1.1.1

          It used too be save and wait…. now its pay twice for the original goods with easy credit and pick up the same day.
          One of the greatest fiddles of all time.

    • weston 7.2

      Until you …break a leg …contract cancer …have a relationship breakup ….be made redundant ….have a family emergency involving paying significant sums to fix ….buy a leaky house ….get ripped off by a business partner ……get shot by a passing nutter while you are opperating a stop go sign …..

  8. dave 8

    what ever way you look its sober reading there is no way nz income levels can support our house hold debt at those income levels a economic collapse is inevitable 1/2 trillion
    dollars the country is stuffed.

  9. McGrath 9

    I’m surprised the bands are so low. I was expecting the top 10% to be well over $100k.

    • I first ran the numbers on this about six months ago, McGrath, and I was astonished too. It’s worth remembering that the data excludes untaxed income, such as capital gains, but even so, I’d have expected the top 10% to be earning over $100,000. Most people do think that the top 10% income earners are into six figures. That’s why I have that opening paragraph about writing down the numbers.

      I was with a group of professional people a few weeks back, and I tried the question on them ie. what did they think the top 10% of people earned. After a bit of discussion they settled on $200,000. I’ve never yet had an answer to the question below six figures. So I think we’ve got quite a warped understanding of incomes. And it’s no wonder that people think they can afford Auckland houses. Even if people are not earning big incomes right now, they think that they *will* get into the top 10% one day, so they think that they *will* earn over $100,000 one day, so they think that they *can* afford the house.

      • Sacha 9.1.1

        I’m not surprised. We’re all coached into conflating income with wealth.

        What was that report about half NZ’s top 100 rich-listers not even being in the top personal tax bracket? One’s trust fund owns a Porsche, etc ..

        • Craig H 9.1.1.1

          That was IRD themselves who said that. They have a unit specifically for ensuring high wealth individuals don’t dodge too much, but if you own a lot of assets outright, your disposable income is much higher than someone else who has a mortgage, for example, so you don’t actually need that much taxable income once that has been achieved.

        • miravox 9.1.1.2

          “What was that report about half NZ’s top 100 rich-listers not even being in the top personal tax bracket?”

          I was thinking that. Wealthy people I know easily get things like student allowances because they have no income. They’d be in the bottom band.

          This behaviour has made me reconsider the value of targeted or universal benefits.

          I don’t trust tax-based statistics on income-related data anymore.

      • Sanctuary 9.1.2

        I had a similar FB conversation with friends. Almost everyone I know earn over 70K. That three quarters of New Zealanders earn less than 50K stuns most people in that income bracket.

        This disconnect is probably the number one reason why I spend so much time trying to puncture the bubble so many online commentators live in.

        • Lanthanide 9.1.2.1

          It always blows my mind, too. I think the disconnect is the shopping malls. They are so busy, with people mostly buying stuff they don’t need, stuff I myself don’t buy and I’m in the top 5% of incomes.

          I guess most people just have a lot of consumer debt.

        • Wayne 9.1.2.2

          Sanctuary

          You are repeating the fallacy of this whole post.

          The people you are talking about are in the workforce (I imagine). These IRD stats are not about the workforce, they cover all taxpayers, children, retirees etc.

          Most people with reasonable qualifications and a few years in the workforce will be on around $70,000.

          • Lanthanide 9.1.2.2.1

            Well Wayne, it turns out that Statistics New Zealand actually collect and publish that data, so we don’t have to listen to your hypotheticals, instead we can actually look at the data.

            http://www.stats.govt.nz/browse_for_stats/income-and-work/Income/NZIncomeSurvey_HOTPJun15qtr/Tables.aspx

            Data we want are in the Supplementary tables

            The average weekly income for full-time workers (30+ hours) in NZ regardless of sex or ethnicity, of all ages from 15 to 65+ is $1,209 per week, or $28.68 per hour. Assuming a 40 hour week, the average income is $59,654 per year.

            Since you seem interested in people who are aged 32-34 for some reason, we’ll just look at the 30-34 age bracket that stats NZ report. That figure is $1,174 per week, or $58,780 using 40 hours per week on the hourly average.

            So your claim that “Most people with reasonable qualifications and a few years in the workforce will be on around $70,000.” is not borne out by the available data.

            Note that this is the average figure, not the median, so the very few outliers at the top end will have a disproportionate impact on the distribution so we can assume that the average reported here is a couple of thousand higher than the (unreported) median, and it *still* doesn’t even reach $60k.

            For comparison, the 40-44 age bracket actually does earn $69,284 on average, assuming a 40 hour week. But that’s easily 20 years after these people have entered the workforce, not “a few years”.

            • dv 9.1.2.2.1.1

              Lanth that is hardly fair. Using real data to refute Waynes hypotheticals

              • Wayne

                Actually the figures cited by Lanthanide are pretty much what I have been using. The average wage quoted is almost exactly the same that I used from the NZ Stats June 14 figure.

                Of course the stats are for all people in full time work, irrespective of qualification.

                I specially referred to people with reasonable qualifications, by which I meant teachers, nurses, police officers and trades, such as electricians etc. So rather than Lanthanide’s figures disproving what I said, they actually confirm what I have been posting.

                Anyway the broader point of my posts is that policy in this area (housing) is not made on the basis of all income earners (the IRD figures Deborah has used), it is made on the basis of people in work, particularly at the age when they will be first home buyers.

                Hence for instance why there is a 5 year qualification in Kiwisaver before you can withdraw the money for a deposit and have it matched with a government grant. Labour had the same approach with Working for Families.

                I am pretty sure if Deborah gets to parliament and is a key policy maker in this area, she will inevitably have to pull back from looking at all income earners, and will have to focus on the circumstances of those people who are most likely to be, or aspire to be first home owners.

                After all Labour has a substantial policy for social housing for those people who may not be able to buy a home, due to their economic circumstances. That is what State Housing is actually intended to achieve – provide decent housing for people unable to buy their own home.

                • Lanthanide

                  So rather than Lanthanide’s figures disproving what I said, they actually confirm what I have been posting.

                  No they don’t, because you don’t actually have the figure for “people with reasonable qualifications”. You’re just guessing numbers and saying they’re correct without any evidence.

                  it is made on the basis of people in work

                  The figures I’ve quoted are for people in full time work. So you are not talking about “people in work”, you are talking about “people with high qualifications who are in full-time work”, which at the very broadest can only refer to 57% of people earning salary or wages, from table 4 in the stats excel sheet.

                  Hence for instance why there is a 5 year qualification in Kiwisaver before you can withdraw the money for a deposit and have it matched with a government grant.

                  Actually the minimum time is 3 years, but I wouldn’t expect you to know that, since you already own your own home. You’re entitled to more money if you keep it in for 5 years.

                  • Wayne

                    Lanthacide,

                    I am not guessing what teachers earn. I checked the published salary scales, which is why my first post had $75,949 for T10. I know that police officers and nurses are on similar levels, though I did not actually check them this time. But it was something I always did when I was involved in policy formation, since they were seen as a highly representative.

                    These groups provide a good representation of income levels for people with good qualifications and 10 years in the workforce. You would expect that since there are tens of thousands of people in these groups, and thus have a big influence in salaries for this category.

                    So it is not just random guessing, it was based on an actual check of current teacher salaries before I posted and my broader knowledge of state sector salaries.

                    • DH

                      Here’s an addition to Deborah’s numbers, Wayne has been complaining they’re not representative of the typical worker so I’ve calculated the actual wage & salary numbers. This data is taken straight from IRDs data on wage & salary earners who pay PAYE. It is only for those who have PAYE deducted so it captures what we could call the typical worker.

                      The source data would include part time workers so I’ve removed all workers earning below $24k. The full time definition is a minimum 30hrs a week and at the minimum wage that starts at about $24k so we can assume everyone in the data is in fulltime work (or equivalent).

                      Income band, Number, Percentage of total

                      $24-$28k 96,210 6.4%
                      $28-$38k 280,720 18.7%
                      $38-$48k 290,350 19.3%
                      $48-$61k 292,950 19.5%
                      $61-$81k 279,670 18.6%
                      $81k+ …. 263,850 17.5%

                      Total number of workers is 1,503,750 which is a close match to the Household Income Survey number of 1,541,600 fulltime workers. There is a margin for error, some high earning part timers will be captured, but I think it’s a pretty accurate representation and one which supports Deborah’s argument.

                    • Lanthanide

                      Wayne, please quote where I said you were guessing what teachers earn.

                      You will in fact, not be able to quote me saying that, because I didn’t say it.

                      What I said was:
                      ou don’t actually have the figure for “people with reasonable qualifications”. You’re just guessing numbers and saying they’re correct without any evidence.

                      Unless your definition of “reasonable qualifications” is literally restricted to teachers, police officers and nurses, which I don’t believe it would be because by restricting yourself in that way you’d be undermining your own broader argument.

                      These groups provide a good representation of income levels for people with good qualifications and 10 years in the workforce.

                      You have no evidence for this.

            • Pat 9.1.2.2.1.2

              Is it possible to break those stats down to ascertain the average income of the following groups….cabinet ministers, barristers and commissioners?…..it may explain a certain disconnect.

          • Stuart Munro 9.1.2.2.2

            Fantasy.

      • dave 9.1.3

        even if you earned 100000 a year an affordable house is 300000 thousand dollars the disconnect between the realty of income and asset prices is a ticking time bomb

  10. The Chairman 10

    “It tells us that based on the hard numbers that IRD collects, about half of all income earners in New Zealand earn less than $28,000 a year.”

    That’s a staggering stat. Which would suggest there would be a good number of votes for a party that advances the living standards of this large group.

    • In Vino 10.1

      The depth of your insight is exceeded only by the shallowness of your sincerity.

      • The Chairman 10.1.1

        The shallowness of sincerity may be an insight into why Labour is largely failing to resonate with this large group.

        • Craig_H 10.1.1.1

          That group includes superannuitants, who are least likely to vote Labour.

        • ropata 10.1.1.2

          Don’t worry, FJK promised to help the underclass. He’s doing a great job
          🙄

          • The Chairman 10.1.1.2.1

            Considering the stat, he’s doing a great job of mustering voter support.

            • ropata 10.1.1.2.1.1

              if you you think disenfranchising record numbers of kiwis and throwing families into poverty is “a great job”

              • The Chairman

                One would assume a Labour Party would naturally appeal to those legitimately earning less than $28k. Therefore, considering the stat and the polling majority Key/National hold, one could argue its been Labour that have failed to connect with this large group. Resulting in disenfranchising record numbers, thus their poor election result.

  11. John 11

    Double income and big debt has always been and will always be a problem. I believe there’s nothing we can do about it. Loans or debts on credit cards are literally killing us.

  12. righty right 12

    see thats the problem there to many poor people there of no economic value to they want housing food medical care jailing
    we need a solution all these people have made poor life choices

  13. UncookedSelachimorpha 13

    Good post and good conclusions!

    The disclaimer:

    “This analysis excludes untaxed income such as capital gains, and it doesn’t adjust for the way business income can be calculated. ”

    Is actually an elephant in the room. IRD-declared income is likely a good indication for the poorer 50%, but not so much for the wealthiest 1% (particularly 0.01%). As mentioned in some of the comments, almost half of those New Zealanders with $50m or more wealth, have no income at all in the top tax bracket.

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    Kia ora koutou katoa and thank-you for the invitation to speak to you all today. I would like to acknowledge Local Government New Zealand President Stuart Crosby, and Chief Executive, Susan Freeman-Greene, Te Maruata Chair, Bonita Bigham, and our host, Mayor John Leggett. I also acknowledge all the elected members ...
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  • NZ-PNG Sign Statement of Partnership
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  • Prime Minister's Speech to NZIIA Annual Conference
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