Most households either in financial crisis, or on the brink
The majority of households are in personal financial crisis, or are close to falling into it, with one in 10 having already missed a mortgage or rent payment.
Households have been hit hard by the Covid-19 economic crisis, an international survey including 3000 New Zealanders showed.
The impacts of the shuttered economy in March and April fell hardest on young families, Ma¯ori, Pacific peoples and people working on already insecure contracts, the research from the taxpayer-funded Commission for Financial Capability showed.
Those with capital in debtfree homes and savings and investments, were least impacted.
The survey, which was conducted during the level 4 lockdown in April, was also conducted in Norway and the United Kingdom, where households were feeling more secure than they were here.
‘‘It was a dark time for many, and we acknowledge that some may be feeling more optimistic now that we’re in level 2 and following the Budget announcements,’’ said Retirement Commissioner Jane Wrightson.
At that time 34 per cent of households were in difficulty and 40 per cent were at risk of tipping into hardship.
After more than a decade of economic growth, the lack of resilience of households was shocking, she said.
‘‘It shocked me,’’ Wrightson
said.
She said there were three broad groups identified by the the survey – the 26 per cent of households who felt ‘‘secure’’, and the 34 per cent in financial difficulty already, and the 40 per cent who were ‘‘exposed’’ and teetering on the edge of crisis.
‘‘There’s a new group emerged we are calling exposed. These are people who have been largely OK so far. They are disproportionately young. They have got heavy consumer or mortgage debt,’’ Wrightson said.
‘‘It shows you in reality the impact the housing market has had. If you have an enormous mortgage, and if you have a large travel time, and cost to get to work, and if you are trying to raise children as well, then you are very, very close to the wind,’’ she said.
Despite the survey having been done last month, Wrightson said the hard times were not behind households, with continued redundancies expected.
‘‘It is generally accepted that income loss will get worse before it gets better,’’ Wrightson said.
Low confidence was leading to decisions informed by panic, Wrightson said, such as taking out extra loans or trying to access KiwiSaver funds through hardship withdrawals.
‘‘High numbers had switched their KiwiSaver fund to one that was more conservative, thus locking in their losses,’’ she said.
In March alone $1.4 billion was switched from higher-risk to lower-risk funds.
Research by the Child Poverty Action Group released earlier this month showed families who relied on benefits could find themselves hundreds of dollars short every week.
As part of its Covid-19 package, the Government increased benefits by $25 a week and temporarily doubled the winter energy payment.
‘‘While these increases are welcome, we find they are still nowhere near enough to unlock all children from poverty and allow them to thrive,’’ the group’s executive officer Georgie Craw said.