Covid-19 affects everyone's finances, albeit differently. Many of us can see the day to day effects. Depending on your personal situation that could be decreased income or increased income, better house prices or house prices out of reach, rising prices, new insurance exclusions, saving/investing more or less, better financial habits/discipline, or spending more to live in the moment, and so on.
People with savings and investments have done better than those on the lower financial rungs. The pandemic has widened inequality as we've seen. Examples of that are lower decile school students having to leave early and get a job, and women suffering the majority of job losses in industries such as tourism.
No one can 100 per cent predict the 'long Covid' effects on our finances. Unlike this time last year, however, the crystal ball gazers have a pretty good idea of how the pandemic will pan out financially for us.
Most of the long term effects are more likely to be over before five years is up, says Westpac NZ's chief economist Dominick Stephens.
There is no reason the economy won't bounce back. The main hangover will be the money the government borrowed for wage subsidies and other economic intervention, which will eventually have to be paid back in higher taxes, or reduced services, says Stephens.
There are wild cards of course as there are with any unpredictable event. ASB's chief economist Nick Tuffley says the most obvious wild card is how long the pandemic will last and our borders remain closed. Another wild card could be further level 3 or 4 lockdowns, closing some of our economy down.
Short term we haven't necessarily been behaving rationally over our money. As Tuffley points out we've stockpiled cash in the bank, even at historically low interest rates. As we know, house and share prices have been going gangbusters, or as an economist would say rising strongly.
Investors and borrowers with money in KiwiSaver, the share market or property have benefited. But that honeymoon period is nearly over, Tuffley says. We're most likely facing a future where savings and investment decisions are going to become more difficult and less financially fruitful.
If you're dependent on term deposits or similar for your living expenses then life has become increasingly difficult to finance with interest rates falling closer and closer to zero. You might be looking down the barrel of eating up your capital.
Investing in property to build up a nest egg may also prove less fruitful. "The rates of return you can get out capital gains may look quite difficult to sustain that for the next 10 to 15 plus years," says Tuffley. House prices have become very high compared to income.
Share market investments are going to be more dependent on how companies grow their profitability, which is interconnected with economic growth.
Tuffley points out that the majority of people's finances are chugging along fine. There is a tail of people, however, who are still radically affected by the borders being closed, such as those who typically worked or had businesses in tourism and international education.
Those people will need the borders to open for their financial fortunes to look up, or move to another industry as some are.
Not everyone has savings or investments. Some in work, no savings, people will benefit from the minimum wage increase. Inflation, or a lack thereof, will help with affording the basics of life, says Tuffley. Housing costs, however, will remain a challenge. He can't see the pace of rental inflation slowing.
The good news is that Tuffley believes we're past the period where we will see overall increases in unemployment; and on a positive note we will start to create new jobs.
Finally, we're not facing financial Armageddon as a whole, as some may have feared a year ago. As Tuffley says, however, we need to be prepared for further challenges that come along. It's important that we are adaptable, flexible, and responsive.