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Household consumption expenditure indicator update

Key points

Household consumption expenditure is a key component of the New Zealand economy, accounting for around 60 per cent of all expenditure on goods and services in New Zealand each year (GDP expenditure) and represents a pressure on the environment.

State – In the year ending March 2011, real household consumption expenditure in New Zealand was $83.4 billion (in real or volume terms with the effect of inflation removed). On average, real household consumption expenditure per person was $19,047, and real household consumption expenditure per household was $50,439. The top three household consumption expenditure categories were housing, food and beverages, and transport.

Trend – Between 1992 and 2011, real household consumption expenditure per person increased by 40 per cent, while real household consumption expenditure per household increased by 35 per cent. Housing was the slowest growing expenditure category over this time period (at 4 per cent per person), while household goods and services grew the fastest (at 83 per cent per person). In 2009 and 2010, household consumption expenditure per person and per household decreased. In 2011, both returned to levels similar to that of 2009.

The overall increase in expenditure per person and per household show New Zealanders are buying a greater volume of goods and services than in the past (although the volume of goods and services purchased did fall in 2009 and 2010, reflecting New Zealand’s economic recession). This trend is similar to other developed countries.

Results

Household consumption expenditure per household and per person

Current situation

In the year ending March 2011, real household consumption expenditure in New Zealand was
$83.4 billion (table 1).1 On average, real household consumption expenditure per person was $19,047, and real household consumption expenditure per household was $50,439.

Table 1 Real household consumption expenditure, 1992 and 2011 (year ending March, 1995/96 prices)
Household consumption expenditure 1992 2011 Percentage change between 1992 and 2011

Per person ($)

13,574

19,047

40%

Per household ($)

37,377

50,439

35%

Total expenditure in New Zealand ($ million)

47,588

83,447

75%

Source: Statistics New Zealand, 2011a; Statistics New Zealand, Unpublished a; Statistics New Zealand, Unpublished b.

Trend

Long-term trends (1992–2011)2

Between 1992 and 2011, household consumption expenditure per person increased by 40 per cent (or $5,473), and household consumption expenditure per household increased by 35 per cent (or $13,063)3 (figure 1 and table 1). In this time, New Zealand’s total household consumption expenditure increased by 75 per cent (or $35,859 million) (table 1).

This means that, on average, each New Zealander and each household is consuming a greater volume of goods and services than in the past.

Recent trends (2009–2011)

Three more years of data are available since the last report card was released (see the new data presented in figure 1). In the years ending March 2009 and 2010, household consumption expenditure per person and per household decreased (figure 1).

This decrease in household consumption expenditure in two consecutive years reflects the five consecutive quarters of decline in New Zealand’s real GDP in 2008 and 2009, which placed the country’s economy in recession (Statistics New Zealand, 2011b).4

In 2011, household consumption expenditure per person and per household increased, to levels similar to those of 2009.

Figure 1
Real household consumption expenditure, 1992–2011 (year ending March, 1995/96 prices, 1992 = 100)


Figure 1 Real household consumption expenditure, 1992–2011 (year ending March, 1995/96 prices, 1992 = 100)

Year Household consumption per person Household consumption per household
1992 100 100
1993 99 99
1994 102 102
1995 107 106
1996 109 109
1997 112 112
1998 113 112
1999 115 114
2000 118 116
2001 119 116
2002 121 117
2003 125 121
2004 130 127
2005 134 130
2006 139 134
2007 140 135
2008 144 138
2009 141 134
2010 139 134
2011 140 135

Note: This index is calculated by the Ministry for the Environment using data from Statistics New Zealand.
Source: Statistics New Zealand, 2011a; Statistics New Zealand, Unpublished a; Statistics New Zealand, Unpublished b.

Key findings

Household consumption expenditure by category

Household consumption expenditure can be broken down into nine categories (table 2).

Table 2 Household consumption expenditure categories
Category Description
Food and beverages Retail food and alcoholic and non-alcoholic drinks
Clothing and footwear Clothing, footwear, and clothing and footwear repairs
Housing(1) Rent, imputed rent of owner-occupied dwellings, rental expenses, and maintenance of rental dwellings
Household goods and services Fuel and electricity for the home, furniture, major appliances, floor cover laying, curtains, textiles, and tableware
Transport New and used vehicle purchase, vehicle repair, maintenance and operation, and purchased transport
Hotels and restaurants Food and beverages purchased in restaurants, takeaways, and accommodation
Recreation and education(2) Government education, private education, holiday recreation, retail recreational goods, and gambling
Health and medical(2) Medical services, charges, goods, and insurance
Other goods and services Personal goods and services, post and telephone, and services not classified elsewhere

Notes:
(1) Housing excludes house purchases and mortgage payments, but does include an estimated rent for owner-occupied dwellings.
(2) Data are unavailable for the recreation and education category and the health and medical category.
Source: Statistics New Zealand, Unpublished c.

Current situation

Table 3 provides a breakdown of household consumption expenditure by category in New Zealand for the year ending March 2011.5 Again, the data are reported in 1995/96 prices to remove any inflationary effect, and allow comparisons to be made through time. The top three consumption categories for the year ending March 2011 were housing,6 food and beverages, and transport. In Europe, these three consumption categories are identified as causing the greatest environmental impacts when their full life cycle is considered (European Environment Agency, 2007).

Table 3 Real household consumption expenditure by category (year ending March 2011, 1995/96 prices)
Category Household consumption expenditure per person ($) Household consumption expenditure per household ($) Total household consumption expenditure (million $)
Housing (1) 3,472 9,194 15,210
Food and beverages 3,144 8,327 13,776
Transport 2,688 7,118 11,776
Household goods and services 2,579 6,830 11,299
Other goods and services 2,169 5,743 9,501
Hotels and restaurants 1,276 3,380 5,592
Clothing and footwear 1,046 2,770 4,583
Recreation and education (2)
Health and medical (2)

Notes:
(1)Housing excludes house purchases and mortgage payments, but does include an estimated rent for owner-occupied dwellings.
(2)Data for the recreation and education category and the health and medical category are not available.

Source: Statistics New Zealand, 2011d; Statistics New Zealand, Unpublished a; Statistics New Zealand, Unpublished b.

Trend

Long-term trends (1992–2011)7

Expenditure per person

Between 1992 and 2011, real expenditure per person increased across all seven household consumption categories (figure 2). Housing, food and beverages, and transport were consistently the top three expenditure categories, in that order (figure 3). Although housing was consistently at the top, per person real expenditure on housing increased by only 4 per cent between 1992 and 2011, a much smaller increase than the other six categories (figure 2). The volume of per person expenditure on household goods and services (eg, electricity, home appliances, furniture) has increased the most since 1992 (83 per cent), followed by clothing and footwear (66 per cent).

Expenditure per household

Between 1992 and 2011, expenditure per household increased across all household consumption categories except housing, which experienced a small decrease (less than 1 per cent). Housing, food and beverages, and transport were consistently the top three expenditure categories, in that order. Per household expenditure on household goods and services has increased the most since 1992 (76 per cent), followed by clothing and footwear (60 per cent).

These increasing trends may reflect greater discretionary income and an increase in expenditure beyond that of basic necessity. It may also reflect increased incomes in low income households, enabling increased expenditure on basic items of necessity. Generally speaking, as household consumption grows, environmental pressures also grow.

Figure 2
Per person real household consumption expenditure by category, 1992 and 2011 (year ending March, 1995/96 prices)

Figure 2 Per person real household consumption expenditure by category, 1992 and 2011 (year ending March, 1995/96 prices)

Household consumption category 1992 expenditure per person ($) 2011 expenditure per person ($) Difference (percentage)
Housing 3,354 3,472 +4
Food and Beverages 2,295 3,144 +37
Transport 2,006 2,688 +34
Household Goods and Services 1,411 2,579 +83
Other Goods and Services 1,514 2,169 +43
Hotels and Restaurants 905 1,276 +41
Clothing and Footwear 630 1,046 +66

Source: Statistics New Zealand, 2011d; Statistics New Zealand, Unpublished a.


Figure 3
Per person real household consumption expenditure by category, 1992–2011 (year ending March, 1995/96 prices)


Figure 3 Per person real household consumption expenditure by category, 1992–2011 (year ending March, 1995/96 prices)
Year  Housing ($) Food and Beverages ($) Transport ($) Household Goods and Services ($) Other Goods and Services ($) Hotels and Restaurants ($) Clothing and Footwear ($)
1992 3,354 2,295 2,006 1,411 1,514 905 630
1993 3,357 2,331 1,918 1,445 1,477 910 628
1994 3,354 2,353 1,959 1,554 1,475 964 649
1995 3,350 2,463 2,182 1,624 1,487 1,074 684
1996 3,351 2,522 2,357 1,664 1,610 1,105 684
1997 3,345 2,538 2,500 1,680 1,634 1,127 714
1998 3,350 2,552 2,311 1,702 1,687 1,138 742
1999 3,369 2,579 2,388 1,768 1,761 1,171 734
2000 3,401 2,671 2,468 1,837 1,868 1,202 775
2001 3,433 2,746 2,399 1,859 1,886 1,202 802
2002 3,449 2,771 2,533 1,917 1,937 1,232 834
2003 3,432 2,901 2,650 2,054 1,970 1,275 859
2004 3,426 3,030 2,872 2,183 1,987 1,301 889
2005 3,440 3,060 2,962 2,325 2,020 1,340 925
2006 3,457 3,175 2,981 2,438 2,080 1,353 980
2007 3,463 3,261 2,896 2,502 2,117 1,398 1,013
2008 3,478 3,275 2,938 2,563 2,180 1,408 1,039
2009 3,490 3,152 2,716 2,516 2,198 1,352 1,031
2010 3,481 3,130 2,651 2,521 2,183 1,332 1,021
2011 3,472 3,144 2,688 2,579 2,169 1,276 1,046

Source: Statistics New Zealand, 2011d; Statistics New Zealand, Unpublished a.

Recent trends (2009–2011)

In the 2009 and 2010 years ending March, per person and per household real expenditure across all seven household consumption expenditure categories declined in at least one of the years, most noticeably the hotels and restaurants, transport, and food and beverages categories. Reflecting this, the volume of total household consumption expenditure per person and per household decreased in both 2009 and 2010 (figure 1).

These decreasing trends across the consumption categories in this period may reflect lower levels of discretionary income and a decrease in expenditure beyond that of basic necessity. It may also reflect a decline in incomes in low income households, and a decrease in expenditure on basic items of necessity.

In 2011, per person and per household expenditure continued to decline in some household consumption expenditure categories (hotels and restaurants, other goods and services, and housing), while other categories showed signs of recovery (household goods and services, clothing and footwear, transport, and food and beverages). Overall, real household consumption expenditure per person and per household increased in 2011 (figure 1).

International comparison

Household consumption expenditure is widely recognised and used internationally as an indicator of the pressures that consumption can put on the environment. It is also easily assessed across countries, allowing international comparisons to be made.

Latest OECD data for 2010 shows that New Zealand’s household consumption expenditure was US$17,019 per person, which is 19 per cent less than the OECD average of US$20,958 (Organisation for Economic Co-operation and Development, 2011c). Figure 4 shows New Zealand’s per person household consumption expenditure ranking in the OECD, along with the top and bottom three ranked countries. Overall, New Zealand had the 12th lowest household consumption expenditure per person out of 33 OECD member countries. The United States had the highest household consumption expenditure per person in the OECD, almost twice that of New Zealand.

Figure 4
Household consumption expenditure per person among OECD countries, 2010 (current prices)


Figure 4 Household consumption expenditure per person among OECD countries, 2010 (current prices)
Country Rank among 33 OECD countries Household consumption expenditure per capita (US$)
Mexico 1 9,717
Estonia 2 10,309
Hungary 3 10,642
New Zealand 12 17,019
Switzerland 31 26,050
Luxembourg 32 27,293
United States 33 32,135

Source: Organisation for Economic Co-operation and Development, 2011c.

Countries with similar per person household consumption expenditure to New Zealand in 2010 included Iceland and Portugal. Looking to our closest OECD neighbour, Australia’s household consumption expenditure per person in 2010 was 26 per cent higher than that of New Zealand’s, and Australia had the 7th highest household consumption expenditure per person in the OECD.

While having the 12th lowest household consumption expenditure in the OECD might be considered relatively good from an environmental perspective, it might not be considered good from a social perspective (in terms of people’s standard of living), or from an economic perspective.

Background

Consumption is the purchase and use of goods and services. Household consumption includes the goods and services we buy and use on a daily basis in our homes, from furniture to household appliances, and the electricity to run them. Household consumption also includes the food and beverages we consume and the transport we use.

The Ministry for the Environment’s national environmental statistics programme produces a series of ‘report cards’ for New Zealand’s 22 core national environmental indicators. Household consumption expenditure is one of the indicators.

What is household consumption expenditure?

Household consumption contributes to a large proportion of New Zealand’s total consumption of goods and services. However, it is difficult to measure the physical volume of goods and services consumed by New Zealand households. Instead, we measure the expenditure on goods and services by New Zealand households. This is called household consumption expenditure.

In general, as household consumption expenditure increases so too does the use of natural resources, energy and transport; the generation of waste and greenhouse gas emissions; and air, water and soil pollution (see text box on environmental impacts of household consumption).

This indicator update provides information on recent trends in household consumption expenditure. Three more years of data are available since we last reported on this in 2009.

There are two ways household consumption expenditure can increase or decrease over time:

  • by changes in the average price of goods and services purchased (inflation or deflation)
  • by changes in the volume of goods and services purchased (see text box below).

Factors affecting household consumption expenditure

Demography and household consumption expenditure

A number of demographic factors affect household consumption expenditure in New Zealand. Household consumption expenditure tends to increase with an increase in:

  • population size
  • the number of households
  • the number of one-person households.

The more people and households there are, the higher the consumption of goods and services. Household size is also important – on average, one-person households use more goods and services per person than larger households (European Environment Agency, 2001b). For example, it takes the same amount of electricity to heat a living room for three people as it does for one person.

Between 1992 and 2012, the average number of persons per household in New Zealand decreased by 4 per cent, to 2.65 (Statistics New Zealand, Unpublished a; Statistics New Zealand, Unpublished b).

Other factors affecting household consumption expenditure

Other factors affecting household consumption expenditure patterns include:

  • increasing incomes and growing wealth
  • globalisation and the availability and affordability of goods and services
  • new technologies (eg, the internet and mobile phones)
  • individual choices (Ministry for the Environment, 2007; European Environment Agency, 2007).

Real vs. nominal household consumption expenditure

Household consumption expenditure figures are made up of two components – volume and price. Household consumption expenditure can increase because of a rise in the price of goods and services (ie, inflation), even if the actual amount of goods and services produced remains the same. This is an increase in the value of goods and services produced. Household consumption expenditure can also rise because of an increase in the volume of goods and services being produced, that is, the amount produced increases, even if prices remain the same.

Statisticians use volume and value data to work out how much of the growth in household consumption expenditure is due to more being produced (a volume increase), and how much is due to price increases (a value increase). The value series is called nominal consumption, while the volume series is called real consumption. Real consumption is adjusted for changing prices (ie, inflation) and is calculated by using the value of goods and services consumed for that year and the change in the price of that consumption from some base year (in this case, 1995/96) (adapted from Reserve Bank of New Zealand).

Why is household consumption expenditure important?

As incomes rise so does consumption and demand for more food and beverages, for larger, warmer and more convenient living spaces, for appliances, furniture and cleaning materials, for clothes, transport and energy (European Environment Agency, 2007, p266).

Households are a major driving force in New Zealand’s economy. Household consumption expenditure is the largest contributor to expenditure on gross domestic product (a measure of economic activity) in New Zealand – in the year ending March 2011, expenditure by households accounted for 59.2 per cent of gross domestic product (GDP) expenditure (Statistics New Zealand, 2011a; Statistics New Zealand, 2011b).8

Household consumption expenditure is widely recognised and used internationally as an indicator of the pressures that consumption can put on the environment (see next section). It is also easily assessed across countries, allowing international comparisons to be made (see International comparison section).

Although recognising the economic and social aspects of this indicator, the information in this report card is assessed from an environmental perspective. For example, an increase in household consumption expenditure could be considered positive from an economic and social perspective, in terms of a growing economy and an increased standard of living. Conversely, an increase in household consumption expenditure could be considered negative from an environmental perspective.

Environmental impacts of household consumption

Household consumption patterns and behaviour have a profound effect on stocks of natural resources and the quality of the environment (Organisation for Economic Co-operation and Development, 2011a, p1).

The demand for goods and services by households is a major source of pressure on natural resources and the environment (European Environment Agency, 2001a). Our purchasing choices directly and indirectly involve the consumption of natural resources and the generation of waste, as goods and services are produced and delivered. The purchase of goods and services can also be directly linked to harmful environmental effects (for example, air pollution produced in manufacturing processes).

Generally speaking, as household consumption grows, environmental pressures also grow. Increasing household consumption can reflect:

  • an increasing demand for consumer goods (such as computers, mobile phones, televisions, kitchen appliances, and cars)
  • an increasing demand for the products and services associated with those goods.

An increasing demand for goods and services can result in:

  • an increased use of natural resources (land, water, minerals, plants and animals)
  • an increase in energy use
  • an increase in transport use and a demand for more roads
  • an increase in packaging waste, and overall waste generation
  • air, water and soil pollution, and greenhouse gas emissions associated with increased energy and transport use and waste management (European Environment Agency, 2001b; Organisation for Economic Co-operation and Development, 2001; Organisation for Economic Co-operation and Development, 2002).

Because New Zealanders also purchase imported goods and services, our household consumption patterns can contribute to environmental impacts in other regions of the world (Organisation for Economic Co-operation and Development, 2001).

However, the volume of expenditure on goods and services by households is not necessarily a direct measure of the environmental impacts of these goods and services. This is because the links between consumption, economic growth, and environmental impact are not straightforward. For example:

  • producers and consumers can reduce the environmental impact of household consumption by making and purchasing more resource-efficient and lower-waste goods
  • while economic growth can impact on the environment, it can also provide the means to fund public environmental protection expenditure.

Other actions to reduce the environmental impacts of consumption include:

  • specific controls at sites of goods’ production, use and disposal
  • transferring demand from higher to lower impact consumption categories
  • improved environmental information and labelling
  • green public procurement
  • market-based instruments (European Environment Agency, 2007).

Many countries are now adopting green growth policies and programmes, which should have a positive effect on the environmental impacts of household consumption. The Organisation for Economic Co-operation and Development (OECD) describes green growth as "fostering economic growth and development, while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies" (Organisation for Economic Co-operation and Development, 2011b, p6).

The New Zealand Government recently established and tasked the Green Growth Advisory Group to evaluate and advise on opportunities for green growth to contribute to an increased rate of economic growth for New Zealand. In December 2011, the Advisory Group released their recommendations in a report, Greening New Zealand’s Growth (Green Growth Advisory Group, 2011).

Data sources

Organisation for Economic Co-operation and Development. 2011c. Gross domestic product: Final consumption expenditure of households 2010. Per head, US $, current prices, current PPPs. (Retrieved 15 December 2011).

Statistics New Zealand. Unpublished a. DPEA.SEEC: Estimated Resident Population of New Zealand, Year ended 31 March, 1992–2011. Data set provided by Statistics New Zealand for the purpose of this environmental report card, 16 December 2011.

Statistics New Zealand. Unpublished b. National Accounts Household Population, Year ended 31 March, 1987–2011. Data set provided by Statistics New Zealand for the purpose of this environmental report card, 16 December 2011.

Statistics New Zealand. 2011a. Use of Income, Final Consumption Expenditure by Household Item Type, expressed in 1995/96 prices (Annual-Mar). Table reference SNC068AA. Last updated 22 December 2011 10:45am. (Retrieved (13 January 2012).

Statistics New Zealand. 2011b. Gross Domestic Product: September 2011 Quarter. Table 2.1. Gross domestic product by broad industry group. Chain-volume series expressed in 1995/96 prices. (Retrieved on 20 January 2012).

Statistics New Zealand. 2011c. Use of Income, Final Consumption Expenditure by Household Item Type, expressed in current prices (Annual-Mar). Table reference SNC068AA. Last updated 22 December 2011 10:45am. (Retrieved on 12 January 2012).

Statistics New Zealand. 2011d. Use of Income, Final Consumption Expenditure of Households by Item, expressed in 1995/96 prices (Annual-Mar). Table reference SNC066AA. Last updated 22 December 2011 10:45am. (Retrieved on 13 January 2012).

References

European Environment Agency. 2001a. Environmental Signals 2001: European Environment Agency Regular Indicator Report. Copenhagen: European Environment Agency.

European Environment Agency. 2001b. Indicator Fact Sheet Signals 2001 – Chapter Household: YIR01HH03 Household number and size. (Retrieved on 20 January 2012).

European Environment Agency. 2007. Europe’s Environment: The Fourth Assessment. Copenhagen: European Environment Agency. (Retrieved on 20 January 2012).

Green Growth Advisory Group. 2011. Greening New Zealand’s Growth. Report of the Green Growth Advisory Group. December 2011. Wellington: Ministry of Economic Development.

Organisation for Economic Co-operation and Development. 2001. OECD Environmental Outlook. Paris: OECD Publishing.

Organisation for Economic Co-operation and Development. 2002. Towards Sustainable Household Consumption? Trends and Policies in OECD Countries. Paris: OECD Publishing.

Organisation for Economic Co-operation and Development. 2011a. Greening Household Behaviour: The Role of Public Policy. Summary in English. (Retrieved on 20 January 2012).

Organisation for Economic Co-operation and Development. 2011b. Towards Green Growth: A summary for policy makers. Paris: OECD Publishing.

Reserve Bank of New Zealand. Economy. Wellington: Reserve Bank of New Zealand. (Retrieved on 13 March 2012)

Statistics New Zealand. Unpublished c. Household consumption expenditure categories. Provided by Statistics New Zealand for the purpose of this environmental report card.

 



1 In current prices, total household consumption expenditure in New Zealand for the year ending March 2011 was $112,857 million, household consumption expenditure per household was $68,216, and household consumption expenditure per person was $25,761 (Statistics New Zealand, 2011c; Statistics New Zealand, Unpublished a; Statistics New Zealand, Unpublished b).

2 Trends are described from 1992 onwards, as this is when Statistics New Zealand’s ‘estimated resident population’ data set starts.

3 This figure is based on unrounded numbers, while figures in table 1 are rounded.

4 The common definition of recession is two consecutive quarters of economic contraction.

5 The recreation and education category and the health and medical category are excluded from detailed discussion because data for each category is unavailable.

6 Housing excludes house purchases and mortgage payments, but does include an estimated rent for owner-occupied dwellings.

7 Trends are described from 1992 onwards, as this is when Statistics New Zealand’s ‘estimated resident population’ data set starts.

8 Other categories of GDP expenditure include central and local government expenditure, capital accumulation by producers, and expenditure by private non-profit institutions serving households (eg, sports clubs; art and culture organisations; education providers such as kindergartens; social service providers; churches; environmental lobby groups; trade unions; and charitable trusts).