Household Economic Survey: Year ended 30 June 2007

Introduction

The Household Economic Survey (HES) was conducted on an annual basis from 1973 until the year ended March 1998. Since the year ended June 2001, it has been conducted triennially. The HES provides a comprehensive range of statistics relating to income and expenditure, as well as demographic information on households and individuals.

Survey design

Scope

The target population for the HES is the usually resident population of New Zealand residents living in private dwellings. This means that the population does not include:

• overseas visitors who expect to be resident in New Zealand for less than 12 months
• people living in non-private dwellings such as hotels, motels, boarding houses, hostels, and homes for the elderly
• patients in hospitals, or residents of psychiatric and penal institutions
• members of the permanent armed forces
• people living on offshore islands (excluding Waiheke Island)
• members of the non-New Zealand armed forces
• overseas diplomats.

Children at boarding schools are not surveyed, but expenditure on behalf of those children is included in the record-keeping of the parent or guardian.

For survey purposes, a ‘household’ comprises a group of people who share a private dwelling and normally spend four or more nights a week in the household. They must share consumption of food or contribute some portion of income towards the provision of essentials for living as a group.

Survey components

There are five survey components to the Household Economic Survey, and they are:

• a household questionnaire
• an expenditure questionnaire
• an income questionnaire for each household member 15 years and over
• expenditure diaries for each household member 15 years and over
• an Economic Living Standards Index (ELSI) Short Form for one member per household who is aged 18 years and over.

Recall and reference periods

The survey was carried out over the period from 1 July 2006 to 30 June 2007. Respondents were asked about their spending up to 12 months before the interview.

Expenditure data was collected by the following methods:

• 12-month recall (for single payments of $200 or more)
• latest payment (for regular commitments such as electricity, telephone, rates, rent, insurance, and superannuation)
• 14-day diary keeping.

Note that expenditure data collected by the diary covers a one-year period (from 1 July 2006 for households interviewed in that month, to 30 June 2007 for those interviewed then). Expenditure data collected by recall in the Expenditure Questionnaire covers a two-year period (one year back from 1 July 2006 for households interviewed in that month, through to 30 June 2007 for households interviewed then). Reported expenditure has not been adjusted for the effects of that difference in coverage.

Similarly, for information on income, each household member aged 15 years and over was asked about their income in the year before their interview date. As a result, income data covers a two-year period, depending on the month each household was interviewed.

Changes since 2003/04 and data comparability

Between 2003 and 2006, the HES underwent significant redevelopment, with many changes to all aspects of the survey cycle. This redevelopment included user consultation, reviews of current collection and output methodology, as well as the creation and application of new classifications and standards. The major changes were:

• a move to computer-assisted interviewing (CAI)
• the introduction of a new expenditure classification
• the inclusion of a questionnaire to capture information on the material standard of living for New Zealanders (ELSI Short Form)
• the rebase of population weights.

These changes are outlined in more detail in the following pages.

Other changes include the creation of a new storetype classification, updates to reflect real world changes and a move to align with classification standards in other areas of the survey eg for individual and household demographic variables. For further details on the results of the redevelopment, please read the paper Changes to the Household Economic Survey on the Household Economic Survey web page.

As part of the Making More Information Freely Available (MIFA) initiative, further HES statistics are available on Table Builder. Additional Excel tables containing expenditure and storetype information are also available via this link.

For the period 2007/08 onwards, Statistics New Zealand will run a shortened version of this survey called HES (Income). HES (Income) will be conducted annually in the years between the full HES, and focuses on three areas of the full HES survey: household income, expenditure on housing costs, and living standards.

Introduction of computer-assisted interviewing

Computer-assisted interviewing (CAI) has now been implemented for the HES. It is the first time Statistics New Zealand has made use of CAI to administer, collect and store information for this survey. The CAI strategy involved a change in the mode of data collection from traditional pen and paper interviewing, to interviewers entering survey responses into laptop computers at the time of receipt. The only component of the survey to remain in paper form is the expenditure diary, where the paper responses are manually entered into an electronic processing system in the office.

The main benefits of CAI are improved data quality through better controlled interviews, and modest resource saving through the elimination of some processing steps.

Expenditure classification

The new expenditure classification is titled the New Zealand Household Expenditure Classification (NZHEC). It is based on the internationally recognised Classification of Individual Consumption According to Purpose (COICOP), but has slight modifications to better suit household spending patterns in New Zealand and the limitations of self-reporting using expenditure diaries.

The old and the new classification at the group level: 

Material standard of living questionnaire

The Economic Living Standards Index (ELSI)(short-form version) questionnaire collects information of material standard of living by asking questions on ownership of particular items eg a good pair of shoes or heating in most rooms, social participation, and the extent that people engage in cost-related economising. The respondents were also asked how they rate their standard of living.

The results from this questionnaire can then be used in conjunction with other measures (eg income, expenditure, or household demographics) to provide an indication of the material standard of living of New Zealanders.

Population weighting adjustments

The population weighting used for HES is Integrated Weighting, which was first introduced for the 2000/01 release. This statistical method adjusts the statistical output to match externally sourced population benchmarks. In particular, it takes account of undercoverage in the survey for specific population groups such as young males and Māori.

Key benefits to using Integrated Weighting:

• improvements to the robustness and accuracy of the survey estimates
• the reduction of the effect of bias in estimates resulting from undercoverage
• a decrease in the level of sampling error for benchmark variables.

For the HES 2006/07, the population used for the Integrated Weighting has been benchmarked to estimates based on the 2006 Census. Where a time series comparison is possible, estimates for the 2003/04 survey have been revised to be on the equivalent population benchmarks.

Methodology changes

The main alterations to the methodology from the 2003/04 release are:

• The sample design was enhanced to allow for better broad regional estimates, rather than only national estimates.
• There are no longer any specific questions on clothing and footwear, alcohol and restaurant meals in the Expenditure Questionnaire, which means the majority of these types of expenditure are now captured in the Expenditure Diary. The main reason for this change was to reduce the burden to respondents of recalling these types of purchases over a 12 month period. Removing an expenditure limit on what is recorded in the diaries compensates for the loss of the Expenditure Questionnaire captured expenditure.
• Net capital outlay (purchase and sale of property and related costs) has been excluded, as it was deemed out of scope of the survey.

Time series comparison

No time series comparison between 2003/04 and 2006/07 is available for expenditure estimates due to combined effects resulting from the redevelopment to classifications, methodology and the questionnaires.

Revised income and selected technology item ownership statistics have been provided in this release. These statistics were found to be relatively unaffected by the redevelopment, and so the 2003/04 and 2006/07 data can be compared over time for movements in these measures.

Some years of data before 2003/04 have also been mentioned in this release. The population figures for these years were benchmarked based on the 2001 Census results. Since only proportions of households were used when making these time series comparisons (and not weighted household numbers), comparability is possible.

Reliability of the survey estimates

The HES sample comprised approximately 4,500 private households, sampled on a statistically representative basis from rural and urban areas throughout New Zealand. Information was obtained for each member of a sampled household that fell within the scope of the survey and met survey coverage rules. For 2006/07, the overall response rate was 62 percent (provisional).

Two types of error are possible in estimates based on a sample survey: sampling error and non-sampling error. Sampling error can be measured, and quantifies the variability that occurs by chance because a sample rather than an entire population is surveyed.

Relative sampling errors are calculated for expenditure, income and region. For example, in 2006/07 the estimated average annual household income for wages and salaries was $50,235. This is subject to a percentage sampling error at the 95 percent confidence interval of plus or minus 5 percent. This means there is a 95 percent likelihood that the true value lies between $47,723 and $52,747.

The HES estimates are also subject to non-sampling error. Non-sampling errors include those arising from biases in the patterns of response and non-response, inaccuracies in reporting by respondents, and errors in the recording and coding of data. Statistics New Zealand endeavours to minimise the impact of these errors through the application of best practice survey methods and the monitoring of known indicators (eg non-response).

Under-reporting of expenditure

For some types of expenditure, the estimated amount for all private households is less than that reported from other data sources.

The main reasons for this are:

• expenditure by residents of non-private households or by those ineligible for the survey (for example, overseas visitors) is excluded from this survey
• respondents to the survey forget or omit some types of purchases – known items susceptible to under-reporting are clothing, cigarettes, alcoholic drinks, confectionery, newspapers, and public transport fares
• expenditure by children aged under 15 is not recorded in the survey
• there is a bias associated with non-response that affects some statistics.

For the HES 2006/07, as well as those usual expenditure types mentioned above, under-reporting has also occurred for education and restaurant meals.

No adjustments were made to the data to compensate for any under-reporting. Items for which under-reporting occurs in the HES are generally consistent with items that are under-reported in similar overseas surveys.

Standards

Rounding

This has been done to improve the readability of the data and to provide a more appropriate level of precision to this sample survey. Discrepancies may occur between the sums of the component items and the totals of the tables due to rounding.

Percentages

All percentages in the Hot Off The Press have been calculated from unrounded data.

Definitions

Expenditure: Total net expenditure refers to net of sales, trade-ins and refunds, where as total gross expenditure excludes these. All expenditure includes Goods and Services Tax (GST).

Actual rents: Those rent payments which were specified as being paid by the household, as opposed to imputed rent (the estimated benefit value from home-ownership of not having to pay rent, partly offset for home-owners by the expenses of home ownership). Imputed rent is out of scope of the HES.

Income: All references to income in this release refer to before-tax (gross) income. Income has not been equivalised, so in other words, it has not been adjusted to remove the effects of household size or household types, like the number of dependent children.

Quintile: One-fifth of the population. The bottom quintile in terms of income represents the 20 percent of the population with the lowest incomes, while the top quintile represents the 20 percent of the population who receive the highest incomes.

Decile: One-tenth of the population. The bottom decile in terms of income represents the 10 percent of the population with the lowest incomes, while the top decile represents the 10 percent of the population who receive the highest incomes.

Average weekly household expenditure: Sum of the weekly household expenditure of those reporting a type of expenditure, divided by the sum of the number of households in the population.

Percentage of households reporting: Sum of the households reporting a type of expenditure, divided by the sum of number of households in the population.

Wages and salaries: Income received from all current and previous wage and salary jobs held over the reference period, and any job related bonuses, commissions, redundancies or other taxable income such as honoraria or directors fees.

Self-employment income: Net profit or loss received from all current and previous self-employment jobs held over the reference period, including drawings (cash or goods the respondent takes out of the business instead of receiving a 'wage').
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Investment income: Net profit or loss received from investments such as rent, Māori land or other leased land, dividends from New Zealand companies, royalties, interest from the following: banks, other financial institutions, bonds, stocks, money market funds, debentures or securities.

Private superannuation income: Includes income received from both job-related superannuation schemes and other private schemes.

New Zealand Superannuation and war pensions: In addition to New Zealand Superannuation, this category also includes the Veterans, War Disablement and Surviving Spouse pensions.

Other government benefits: All family assistance payments such as those under the Working for Families package are included in this source category, as well as main benefits (eg unemployment benefit), student allowances, emergency benefits and supplements.

Other sources of regular and recurring income: Includes income received from trusts, annuities, alimony, educational scholarships, and income protection insurance.

Irregular income: Includes income received from inheritances, matrimonial settlement, lump sum life insurance pay outs, lump sum bursaries and prizes, and gifts of money from other New Zealand households.

Region: The HES sample design allows for a regional breakdown to the level of five broad regions. Auckland, Wellington and Canterbury regional council areas as separate regions, and the remaining regional council areas are grouped as Rest of North Island and Rest of South Island.

Rest of North Island: Consists of Northland, Waikato, Bay of Plenty, Gisborne, Hawke's Bay, Taranaki and Manawatu-Wanganui regional council areas.

Rest of South Island: Consists of Nelson, Marlborough, Tasman, West Coast, Otago and Southland regional council areas.

More information

For more information, follow the link from the Technical notes of this release on the Statistics NZ website.

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