A survey on New Zealanders’ financial wellbeing undertaken six months after the first lockdown has revealed the types of households most impacted by COVID-19.
Many working families in blue-collar and “pink collar” occupations were hit hard: couples aged 18-54 with children, renting, often with one parent at home and the other in occupations such as construction, retail, food and accommodation services were likely to still have reduced incomes compared to February 2020.
Knowledge workers and those working in the public sector have, by contrast, fared better than most.
The survey of more than 3600 households during two weeks in October was conducted by the CFFC as a follow-up to a similar survey conducted in April. It found that while many households had recovered lost income, overall the recovery was slow and uneven.
Key findings were:
• One in three households had not recovered their income to the February 2020 level, including 11% of households still on severely reduced income of more than 30%.
• The percentage of those still on reduced incomes compared to February 2020 was highest among households where the main respondent was aged 55 to 64 (37%), indicating this age group was having more trouble finding new jobs or extra work than younger workers.
• Māori and Pacific households were more likely to still have reduced incomes. Māori households had the highest proportion of those whose income was reduced by more than a third (14%) and Pacific households had the highest proportion of those whose income was reduced by up to a third (31%).
• While arrears had decreased since April, one in four households (23%) had some sort of arrangement with at least one creditor, such as a mortgage suspension or reduced repayments on other loans. This causes concern regarding the effect on households when those arrangements expire.
Head of the CFFC, Retirement Commissioner Jane Wrightson, said it was encouraging that income reduction was slowly improving overall, and many people who lost jobs in the first half of the year had found new ones. However, financial resilience was still a concern, with 41% of households still exposed due to high debt and low savings.
“Households in the exposed segment have increased their saving levels, which suggests some of them realised the precarity of their financial situation,” says Wrightson. “We need to encourage them to keep going so they are better prepared for the next financial shock.”
While there had been some increase in the use of free financial guidance such as Sorted and MoneyTalks among households in some difficulty, more could be gaining help from these independent services.
“We understand that households who have never been in financial difficulty before might not be used to accessing face to face help, but they should feel reassured that there is confidential guidance available for free through FinCap budgeting services,” says Wrightson. “Sorted also provides trusted online information and tools to help families in strife move forward.”
Wrightson said it was a relief to see in the survey that the high rate of inquiry about withdrawing KiwiSaver funds under hardship criteria had not, to date, transpired into retirement savings being drained.
“Your KiwiSaver is a long-term investment for your future that should only be accessed as a last resort. There is a lot of other help available, listed on the covid19.govt.nz website, that households can turn to first.”
Home ownership was a key factor among those doing better than other groups, reinforcing the importance of helping New Zealanders attain this goal.