The New Zealand rich list twenty years on

ABSTRACT

Recent years have seen renewed interest in the dynamics of wealth accumulation and concentration. Questions arise as to how wealth is generated, held and perpetuated, and, following Piketty (2014), whether pre-existing wealth will grow more quickly than that generated out of the current economy. These questions have implications for the distribution of wealth (and income) and intergenerational mobility. To that end, this paper updates the analysis in Hazledine and Siegfried (1997) of the 1996 New Zealand ‘Rich List’ with analysis of the 2005 and 2015 Lists. We find that the wealth held by the richest 0.01% of the New Zealand population has risen from 6% of annual GDP in 1996 to more than 21% in 2015. There is some evidence that this wealth has persisted or will persist across multiple generations. However, there is also significant turnover in the make-up of the top 0.01%, and most of the fortunes are generated in industries deemed competitive.

KEYWORDS:

• Wealth
• capital share
• rich lists

Acknowledgements

The authors thank two referees for perceptive comments, and participants at the Annual Conference of the NZ Association of Economists, Auckland, 29 June- 2 July, 2016.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. As well as Hazledine and Siegfried (1997), there is Siegfried and Roberts (1991), Blitz and Siegfried (1992), and Siegfried and Round (1994).

2. New Zealand's richest person, Graeme Hart, should have made it onto the Forbes global list by around 2004, at least according to the NBR Rich List. At the start of the millennium, there was just one China-based billionaire, according to Forbes. By 2015, the total number of fortunes of $US1.8 billion or more exceeded one thousand, with nearly 100 of these from China.

3. Rashbrooke, Rashbrooke, and Molano (2017) analyse data collected in successive wages of Statistics New Zealand's Survey of Family, Income and Employment (SoFIE). They report that average (not threshold) net wealth in 2010 of the wealthiest 1% of survey respondents was just $4.3 million.

4. See NZ Herald, ‘How do the super-rich spend their money?’, September 16, 2016.

5. Piketty (2014), p. 437.

6. Estimated values for the power-law coefficient are −0.87, −097, −0.93 for 1996, 2005, and 2015.

7. That is, the c's in Equation (2) take negative values, so when moved to the other side become positive (two negatives make a positive).

8. A referee usefully suggests the fitting of maximum likelihood estimates of the Pareto Power Law distribution, perhaps using a readily available software package such as ‘EasyFit’: mathwave.com/easyfit-distribution-fitting.html. However, we note that the Pareto is a two-parameter distribution, and as such cannot be expected to necessarily fit the observed data better than our three-parameter function.

9. We will not consider prospective claimants, such as children not currently working in the family business and holding substantial shares in it.

10. Bryan Perry, in his Household Income in New Zealand reports for the Ministry of Social Development, uses a figure of 1.54 to allow for spouses. See https://www.msd.govt.nz/about-msd-and-our-work/publications-resources/monitoring/household-incomes/ for further details.

11. A 2006 newspaper article placed the number of benefitting family members (i.e. direct descendants by birth or adoption of Charles and Mary Todd) at 160, each receiving in that year $328,000 in income from the Trust. See http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10370174. At 8%, the capitalised value of this income is about $4.6 million. This sum, multiplied by 160/15, becomes $49 million, which is just above the 2005 cut-off for inclusion in the richest 0.01% of the population – $47.3 million (cf. Table 3). We are grateful to a referee for this calculation.

12. See Statistics New Zealand, ‘Top 10 percent of households have half of total net worth’, 28 June 2016, available at: http://stats.govt.nz/browse_for_stats/people_and_communities/Households/HouseholdNetWorthStatistics_MRYeJun15.aspx.

13. Max Rashbrooke (2015, p.40).

14. See http://www.rbnz.govt.nz/statistics/m10.

15. The five of the 184 2015 Rich-List fortunes that were originated ‘off-shore’ are not included in these figures, since the industrial origin of these fortunes is not known to us.

16. Just 24 of the 1996 FIRE-sourced fortunes were worth more than $50 million in $2015.

17. Of course, this is only an impressionistic conclusion on our part, suggested mainly by our reading of the NBR's accounts of the business accomplishments and activities of the Rich Listers.

18. For a longer account of these arguments, see Max Rashbrooke (2015), and various contributions to The Piketty Phenomenon: New Zealand Perspectives, Bridget Williams Books, Wellington, 2014.

19. Chapple, Hogan, Milne, Poulton, and Ramrakha (2015), pp. 73–78.

20. Geoff Rashbrooke et al. (2017).

21. Corak, (2013), pp. 79–102.

22. Max Rashbrooke (2015), p. 26.

23. Ibid., pp. 78–9.

24. Ibid., p.28.

25. UMR, Annual Review: Mood of the Nation, January 2014, available at: http://umr.co.nz/sites/umr/files/mood_of_the_nation_2013_release_2014_final_2.pdf