NZ recession: Down - but not out

Paul and Lisa Roberts had already taken measures to fix their finances before the recession hit. Photo / Greg Bowker

Mark McDonough, Andrew Hunt and David Jack are small-to-medium business owners who between them know the good, the bad and the ugly of the recession.

Paul Roberts and his wife Lisa both work to make ends meet and Roberts admits they are struggling. But he reckons they got into trouble with credit before the recession even hit.

Now they have handed their finances over to a budget service and are getting back on their feet. Vera Mummery is 85 and slightly puzzled. She's sure there is a recession, it's just she hasn't really noticed one.

Kiri Rodger is 35 and has definitely noticed. The high performer lost her job two weeks ago. These people are a cross-section of New Zealanders.

They might be your neighbours, your colleagues or run your cafe. They are a tiny snapshot of how middle New Zealand is handling the downturn.

Catherine Masters asked them about their perception of these hard times, and we will talk to them again in the coming months to see how they continue to fare as the worst global recession in 80 years plays out.

The recession veteran

Vera Mummery knows people are hurting.

"It's dreadful," the president of Grey Power Waitakere says, but almost guiltily because life for this active pensioner is fine.

And though the widow knows people are hurting, because she's heard it on television and read it in the newspapers, when push comes to shove she's hard-pressed to come up with anyone she actually knows who is in that boat.

This is despite being active in Grey Power in a working class part of Auckland. She knows some pensioners are doing it hard because interest rates on their investments have fallen so low their incomes have fallen.

They are out there, she's sure, but she thinks they may not be willing to talk about it. "You can, I think, get very proud as you get older."

Mrs Mummery doesn't want to give the impression that because she's alright she thinks everyone else should be. It's just that she has been very fortunate, she says.

She and her late husband worked hard all their lives - she interpreted morse code in England during the war - then when the pair came to New Zealand they both worked in the public service.

They each paid into a pension fund and Mrs Mummery receives some income from her late husband's fund, and gets the national super.

You can live on super alone, thinks the old lady who has been known to throw her windows open wide and dance to the Chattanooga Choo Choo, but you need a bit extra if you want to do a few things in your old age.

Though Mrs Mummery hasn't had to cut back on anything this recession, she does remember times being tough in the 1930s.

She was only about five but she recalls her mother being worried and her father meeting her from school because he was working reduced hours.

But none of her children, or their partners, or her grandchildren, have been affected by this recession, she says.

The newly jobless

Single mum Kiri Rodger lost her job two weeks ago. The recruitment worker, who was employed in the banking industry, thought twice about featuring in this story as the face of redundancy.

That would be a bit embarrassing, she thought, because of the supposed stigma. But when she thought again she realised there was nothing embarrassing about being laid off in these tough times.

The state of the economy is to blame. She was a high performer and exceeded targets. Her operations manager told her he was not often put in the position of having to let go of great team members.

But you still can't help feeling a bit stink, she says.

"Initially, it was like, 'oh my God, you know, I'm separated, I'm not two of us, I can't just say to my partner oh bummer love, I'm not going to get paid for a while."'

Rodger's role was to recruit staff for her bank's retail branches but the number of staff needed for the branches started shrinking, which meant her team shrank also.

It was tough to lose a job she loved, but she has been through the grief stage and is feeling more optimistic.

Now she is wondering what new doors might open.

And she says the bank was great in helping those made redundant, offering career transition services and counselling.

"What that meant was being able to go out there and talk to people about taking some time to reflect and think about what you want to do.

"From everything they say, there are jobs out there but it's taking longer to get them and you can't be boxed in about what you want to do anymore."

She's told her 12-year-old daughter she doesn't plan on being out of work for long - but that the reality is they may have to cut back.

Her daughter has been cool, she says. She has friends at school whose parents have been made redundant. It really isn't that unusual right now.

Rodger will probably attend a Winz Restart course for those made redundant since November last year. A friend who was laid off with her has already gone along and said she couldn't believe how many well-dressed, employable people were there.

"She said it was so busy someone had to go out and get more chairs to bring in for people to sit down.

"These are all people who - you've got 20 days from when you finish up (work) to register - in the past 20 days had been made redundant."

Instead of getting up and going to work, Rodger has a new routine.

She gets up at the same time and goes online to look for jobs.

She doesn't want to panic and take the first job that comes along and is still aiming towards her ultimate goal of helping youth get into employment, or doing the same with women who have been out of the workforce for a long time.

"It sucks," she says, "because I loved what I did, don't get me wrong. It's not like 'oh, great, I lost my job,' because it sucks. But at the same time, now it's what are the possibilities, what are the positives."

The deli owner

It's a busy afternoon at Zarbo Deli and Cafe in Newmarket. If the recession is biting, there's not much sign of it today.

Mark McDonough owns and runs the business and has noticed the recession, but it has not been that bad.

He has coped not through lay-offs but efficiencies and says good businesses do this anyway.

Many of Zarbo's goodies come from Europe and the cost of importing means he has cut back bringing some items into the country.

"The Euro has been down as low as 39, so it makes importation not viable. Just to get through that side of the business we've put some things on hold [which has meant] we've been able to utilise some staff in different areas.

"For example, people who are involved in the wholesale area can now work directly on the floor of the cafe and things."

The breakfast trade has quietened a little, he says, but the daily turnover is slightly up on this time last year so people are still doing lunch.

More corporate clients are saying they're not going to the bigger restaurants and people are still "definitely" having coffees.

One thing he has noticed is deli customers pulling back a bit from buying luxuries - but the upside is people are more likely to be entertaining from home.

"So we find that more basic ingredients like herbs and spices and breads you can't get from the supermarkets, there's definitely a pick-up on those sorts of things."

On a worried scale of one to 10, he's at an optimistic two to three.

"I'm pretty damn confident we can trade out of this.

"I think the next couple of months are going to be difficult, but I think, just talking to different people in business and to customers, that we're in a good position."

In fact, Zarbo has a big billboard at a site in Albany looking for a franchise and McDonough says there are three or four calls a week from interested parties "so there's definitely business out there".

Lessons in coping

In a Penrose industrial park, Andrew Hunt is upbeat. He owns and runs computer business Kinetics Group which has the logo "making IT work for you".

The recession is actually a good time to be in this business, he says, in his office with its old-fashioned but comfy sofa and chairs and big rug.

He's conscious that life is tough for some businesses "but our response has been to look at what we do for clients and how we add value to make sure we're relevant. But I think you should do that anyway."

In business, you have to trim your sails depending on which wind is blowing, he says.

The key is investing in innovative areas. For Kinetics Group, one way they are doing this is by offering a computer coaching service. They actively seek out clients and ask if they are using their computer as well as they might be, offering that instead of the client buying a new machine Kinetics Group will teach them how to better use what they have.

Hunt says the timing is right and there has been a great response.

The company is also about to launch what he calls a small business accelerator, which will offer a small business of five to 10 people the benefits of a server for a good price.

Potential clients are already ringing up and asking for this service, he says.

However, there has been quite a downside for his company. Some customers have not been able to pay their bills and Hunt has been badly stung.

"My current financial year... has been absolutely obliterated by bad debtors."

He won't go into financial detail but says the experience has been "painful".

"We saw a lot of that late last year. It's a little better now but late last year: no one could pay their bills, so company A couldn't pay company B, so company B couldn't pay company C, and you've got this huge blow-out in debtors letters.

"Companies like us had to go to the bank and try to extend our facilities and try to get out of this horrible loop that we're in."

Now, his company has had to become more aggressive in ensuring payment and have reduced the credit they lend, "because essentially you act as a bank for clients because they don't pay their bills for 30 days".

Hunt is far from gloomy, though. He started the business in 1996 working out of the spare bedroom and now employs more than 20 staff.

It has been a long, hard grind to get where he is and he says like all small businesses his makes do on the smell of an oily rag.

He gets his office furniture from Trade Me ("you can probably tell") and points out that small business owners are ordinary people who work hard.

"I will work 60 or 70 hours a week, easily, because you never turn off. I haven't had a holiday since 2004 - I'm not crying, what I'm saying is this is a business, everyone I know who runs a business works bloody hard, they've secured their debt against their houses, the family home, so if anything goes wrong with the business the family home is gone."

He hasn't laid anyone off and when clients did not pay he reduced his own salary, not that of his employees.

Feeling the pain

The stairs to David Jack's office in Panmure are lined with awards.

Printing firm Permark Industries picked up the supreme award for printing in New Zealand a few years ago. They were pleased with that, Jack says modestly.

He is concerned, though, because the recession has hurt this usually booming little company.

Jack has owned the firm for the past 10 of the 40 years since the business began.

He reckons they started to see the recession coming in November 2007, and then in November last year it really bit.

First came a decrease in the number of New Zealand orders, then in December and January orders from Australia took a sudden and serious dive - though the Australian orders have since bounced back.

The recession is not necessarily affecting the markets in New Zealand and Australia consistently, he says, and this gives a lumpy, unpredictable effect.

"From a management point of view it's difficult to know what's coming in the next week, in the next month.

"Because you don't know what the future is like, it has been very hairy. We've certainly lost reasonable dollars through the three months December, January, February and if the next three months continue like that then we'll start to have some problems potentially."

He doesn't want to go into details of what will happen if things don't improve but does say there would have to be some other sort of scaling down.

"That's where it starts to get scary, and if it's a private company your house is backed into it ..."

He says "yup", it's possible he could lose his home but the worst-case scenario would be the bank coming in and closing the company down - though he points out the business has been very healthy and neither scenario is likely.

Jack has already worked through the logical steps to cope, such as not replacing people as they left through last year, and closing for longer around Christmas, which is usually a busy time. But he has also had to let people go and in a small, friendly firm now down to 40 people, where everyone knows each other well, that is tough to do.

In all, four people were not replaced and another five were laid off. He says his staff have been great and have fought alongside management to make the hard times as painless as possible. Though he hasn't cut wages, he has cut overtime and staff have complied in taking extra time off.

He's also found ways to cut fixed costs, such as by getting the cleaners in twice a week instead of once a day.

Jack thinks steps such as the Government's nine-day fortnight will help keep food on tables but it won't cure the recession. More important is for the Government to ensure the banks remain stable and to ensure trading lines are open.

And though it has been tough, Jack's optimism levels have increased. It's like going away on holiday and having bad weather, he says. You still have to get out there and do something and business is like that, too.

"You can't just sit and say 'tough times, it's not nice.' You have to get out and find what you can, run the place as well as you can.

"That's what management is about. You've got to say 'right, how do we do it, what are we going to do, why are we paying cleaners, we can empty rubbish bins ourselves'."

HURTING AT HOME

Paul Roberts doesn't blame the recession for his family's financial woes.

He and Lisa, who have a small son, got into dire trouble with credit and headed to the North Shore Budgeting Service in July last year, where they handed their entire income over.

"We owed Farmers Card, owed Visa card, we owed, you know, all kinds of bits and pieces," says Roberts.

The couple were among the many people who were tempted by the easy credit of the past few years and weren't living within their means.

It was a buy now, worry later mentality, says Roberts, who works for a small retail company.

Not that they were terribly extravagant, but when credit wasn't so tight they got a couple of loans with a finance company, giving in to the temptation of consolidating their debt.

But finance companies consolidate debt by giving more debt, he says.

Soon, they ended up owning about $18,000, and Roberts says when the interest on a loan is about 20 per cent, that's like paying a fifth of the total amount again.

So they are on Total Money Management with the budget service, where you hand over your pay and the service divvies it up and pays the bills, and seeks out deals and entitlements.

"It's really good because they take the pressure off your shoulders and they're good at negotiating. They can actually renegotiate with (the finance company) and there's a thing called hardship (with Winz)."

Roberts has learnt to shop around for the cheapest deals.

"You've got to. I got a size 20 chicken for $10.79 at New World. At Woolworths they had a size 16 for $17, so that's six bucks."

He'll put the chicken in a slow cooker and that feeds the family for one main meal, plus another night of stir fry and two days of sandwiches.

The family has also knocked takeaways on the head.

"I used to love KFC, McDonalds, Burger King. But apart from having McDonalds for breakfast the other week, we hardly ever. For my son and my wife and I to go out, that's like $25 and when you look at it, it's a quarter of your weekly grocery bill."

When the recession came along, it didn't hurt too much because the family were already with the budget service.

But Roberts has noted that more people on far higher incomes than his family's are getting budget advice since the recession.

He urges more to do the same. People who are struggling need to know such services exist and that they really do help, he says.

"The thing is swallow your pride and get on with it. Be realistic, don't go and keep buying caviar. The thing is, it's just being smart with money really. Sink or swim. And I think we're swimming."