Cost-of-living crisis: Almost half of Kiwis going backwards financially

Cost-of-living challenges continue to bite for many. Photo / 123rf

Almost half of New Zealanders say their financial situation has worsened in the past year as cost-of-living challenges bite for many, according to a new survey.

It comes as rising inflation and unemployment, along with economic uncertainty, continue to erode both household spending power and confidence.

Recent data from fintech Revolut found 42% of Kiwis said their financial situation has worsened over the past year.

Meanwhile, more than half of respondents (54%) said they are finding it tough to manage their money.

“The cost of living is undoubtedly tightening belts across New Zealand,” Georgia Grange, head of New Zealand at Revolut, said.

“The data definitely shows a challenging environment for Kiwis.”

But Grange said women and the younger generation were feeling the pressure more acutely.

According to the survey of more than 1000 New Zealanders, 45% of women reported their financial situation had worsened compared with 39% of men.

Among the age groups, 71% of respondents aged 25-34 and 63% of 18– to 24-year-olds reported facing significant financial management challenges.

Grange said that was a “significant concern”.

“We believe it’s up to providers to also help guide [financial] education with their products and services.

“Kiwis have been left behind if we look at other countries and what their banks and financial services providers enable ... there’s many features available overseas that don’t exist in New Zealand yet.”

Grange said this includes tools around card management such as spending limits and protections from scams, as well as data tracking across different investment platforms.

Spending power squeezed

Last week, the Westpac-McDermott Miller Consumer Confidence Index showed economic confidence remained soggy, edging down 0.3 points to 90.9 in the September quarter.

Westpac senior economist Satish Ranchhod said factors such as increases in living costs and softness in the jobs market and house prices remain big concerns for many households.

“Households are still seeing their spending power squeezed by increases in the cost of food and other essentials,” Ranchhod said.

“The number of households who expect to be better off financially this time next year has actually dropped back since our last survey.”

In the same week, New Zealand’s Gross Domestic Product (GDP) was revealed to have slammed into reversed in the June quarter, contracting 0.9% – deeper than economist forecasts.

Food prices have also continued to rise, increasing 5% in the 12 months to August, according to Stats NZ.

The challenges have been compounded by unemployment being on the up. Unemployment sits at 5.2% for the June quarter, compared with 4.7% at the same time last year.

Story of adaptation

Despite the current economic challenges, Grange said Revolut’s survey also highlighted how Kiwis were adapting through shifts in managing their finances.

The survey found 41% of New Zealanders are diligently building an emergency fund. This was particularly strong among 25– to 34-year-olds (45%) and 35– to 49-year-olds (44%).

“Amidst the challenges, I think the key message is Kiwis are proactively taking control of their finances and their aspirations are shifting a little,” Grange said.

“Kiwis are working towards security through emergency funds, making deliberate spending choices, and maintaining their dreams of travel and financial independence.”

Cameron Smith is an Auckland-based business reporter. He joined the Herald in 2015 and has covered business and sports. He reports on topics such as retail, small business, the workplace and macroeconomics.