The Financial State of New Zealand Households October 2008

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1 The Financial State of New Zealand Households

2 Introduction Attached are the results of the social poll conducted through Research New Zealand s latest omnibus survey. These results are based on a nationally representative sample of n=500 adult New Zealanders, 15 years and older. These results have been weighted by age, gender and region to ensure the total sample is representative of the New Zealand adult population. Interviews were conducted by telephone, between 14 and 22. Results based on the total sample are subject to a maximum margin of error of plus or minus 4.5 percent (at the 95 percent confidence level). In the last section of this report, the results have been compared with those to the same questions asked in March and. Impact of the economy In the last 12 to 18 months, the New Zealand economy has tightened, the price of petrol and some food basics has increased, the real estate market is in a slump and some finance companies have collapsed or frozen their funds. Against this background, respondents were asked: How much of an impact, if any, would you say the state of the economy has had or is having on your financial situation and standard of living at present? The majority of respondents interviewed in reported the state of the economy is either having a big impact (28 percent) or somewhat of an impact (53 percent) on their current financial situation. Only one-in-five claimed the state of the economy was having no impact at all (19 percent). Household who earn less than $40,000 per year were more likely to say the economy is having a big impact on their current situation (34 percent compared to 16 percent of households who earn over $70,000). Households who earn over $70,000 were more likely to report that the economy is having somewhat of an impact of their financial situation (65 percent compared to 45 percent of households earning under $40,000). Research New Zealand 14 November 5

3 Of those who said the state of the economy had impacted on their present financial situation or standard of living, many qualified this by confirming at least one of the following impacts: The total value of their savings and investments had decreased (41 percent). The total value of their debts had increased (18 percent). This was more likely to be mentioned by people aged under 59 years of age (17 percent year olds, 24 percent year olds, 21 percent year olds, 22 percent year olds compared to only eight percent of those aged 60 plus). Sixteen percent had suffered a financial loss because of the slump in the residential real estate market. Six percent had suffered a financial loss because of the collapse of a finance company. This was more likely to be mentioned by those aged over 60 (16 percent compared to three percent year olds and one percent of year olds). Current and future financial situation Over half (56 percent) of all respondents interviewed in, believe their current financial situation is worse than it was at the same time last year with one-in-ten (11 percent) reporting that their financial situation was a lot worse. In comparison, one-in-five (19 percent) believed that their situation was somewhat better that 12 months ago. People under 59 years of age were more likely to say their situation was somewhat better (26 percent year olds, 18 percent year olds, 22 percent year olds, 24 percent year olds compared to only five percent of those aged 60 plus). However, almost half (48 percent) expect their financial situation to get somewhat better (38 percent) or a lot better (10 percent) in the next 12 months. Those respondents who felt as though their financial situation would improve in the next 12 months were more likely to be: Young people (18 percent of year olds felt their financial situation would be a lot better in the next 12 months compared to three percent of people over 50). Households with children (14 percent compared to seven percent of households without children). Research New Zealand 14 November 6

4 On the other hand, 32 percent feel their situation will continue to get worse in the next 12 months (compared to 20 percent in ) and 16 percent believed there will be no change to their situation in the next year. Older respondents (over 60 years) were more likely to believe their financial situation will get worse: Eight percent of those aged over 60 reported that their situation will get a lot worse in the next 12 months (compared to zero percent of year olds). Forty one percent of over 60 year olds believed their situation would get somewhat worse (compared to 17 percent of year olds). Middle income households (who earn $40,000 to $60,000 per year) were more likely to report that no change was likely to their financial situation in the next year (10 percent compared to 18 percent who earn less than $40,000 and 17 percent who earn over $70,000 per year). Managing your financial situation Approximately two-thirds (69 percent) of all respondents report having done something to help manage or improve their current financial situation. Respondents that were more likely to be doing something to help manage their financial situation were: Aged (87 percent compared to 65 percent of year olds and 69 percent of year olds). Had annual household incomes of over $40,000 (58 percent compared to 78 percent of $40,000-$69,000 and 78 percent of households who earn over $70,000). Living in urban areas (74 percent compared to 64 percent of those living outside urban centres). Of those who had taken steps to improve their current financial situation, three quarters (74 percent) were cutting back on non-essential spending such as entertainment and holidays. Those who reported they were cutting back on non-essential spending such as entertainment and holidays were more likely to be: Households with children (82 percent compared to 66 percent of households without children). People living outside of urban centres (81 percent compared to 68 percent of people living in urban centres). Research New Zealand 14 November 7

5 A further 58 percent were cutting back on basics such as food, power or fuel. This was most likely to be reported by: Females (66 percent compared to 49 percent of males). Households who earn less than $40,000 annually (65 percent compared to 49 percent of households who earn over $70,000). Two-in-five respondents reported that they were increasing their income by getting a new/second job or working longer hours (40 percent) or they were increasing the amount they save (39 percent). Those most likely to have taken on a second job or to be working longer hours included: Those with annual household incomes of less than $40,000 (50 percent compared to 32 percent of households who earn over $70,000). Households with children (52 percent compared to 30 percent of households without children). Those aged (65 percent compared to 28 percent of year olds). This age group (15-29) were also more likely to be increasing the amount they save (61 percent compared to 38 percent of year olds). One fifth of respondents (21 percent) were making life style changes such as downsizing their homes or changing where they live with a further 15 percent selling assets to raise cash in order to improve their future financial situation. Those with household incomes of less than $40,000 were more likely to be making life style changes (31 percent compared to 16 percent of households who earn over $70,000). Christmas spending Only seven percent of all respondents were planning on spending more on Christmas this year than last year, 46 percent planned to spend the same amount, while 45 percent said they would spend less than they did last year. Households with children were more likely to be planning on spending less on both Christmas and their holiday plan: Fifty one percent of households with children were spending less on Christmas (compared to 40 percent of households without children). Thirty nine percent of households with children were also cutting back on their spending on their Christmas holiday plan (compared to 30 percent of households without children). Research New Zealand 14 November 8

6 With regard to their Christmas holiday plans, 14 percent of respondents plan on spending more this year than last year, approximately half (48 percent) intend to spend the same amount, while one third (34 percent) plan to spend less than last year. Comparisons with March and Three independent surveys of New Zealanders have now been undertaken, using the same survey methodology (March,, ). Key trends are as follows: Across the three measures, about the same proportion of New Zealanders have reported the state of the economy is having a big impact on their financial situation and standard of living (between 25 and 33 percent). Notwithstanding this, a greater proportion than in May now report that, compared to their financial situation at about the same time last year, their current financial situation is a lot worse or somewhat worse (45 percent in March cf. 56 percent in ). Across the three measures, about the same proportions have reported taking steps to help manage their current financial situation or improve it for the future (between 68 and 75 percent). While about the same proportions of these people have been cutting back on essential purchases (e.g. 52 percent in March, 57 percent in and 58 percent in ), more now report cutting back on non-essentials (65 percent in March, 66 percent in and 74 percent in ). This may help to explain the results relating to Christmas. Research New Zealand 14 November 9

7 Table 1: Impact of economy on financial situation Q5 How much of an impact, if any, would you say the state of the economy is having on your financial situation and standard of living at present? March Base = % % % A big impact Somewhat of an impact No impact at all Don t know/refused may not sum to 100% due to rounding. Table 2: Reasons for financial impact Q6 Is this because of any of the following? Base = 471* 408* % % The total value of your savings and investments has decreased The total value of your debts has increased (not counting any home loans you might have) You have suffered a financial loss because of the collapse of a finance company 7 6 You have suffered a financial loss because of the slump in the residential real estate market Other None of the above may exceed 100% because of multiple response. *Sub-sample based on those feel the state of the economy has had an impact on their financial situation and standard of living. Research New Zealand 14 November 10

8 Table 3: Q7 Compared to your financial situation at about the same time last year, would you say your current financial situation is...? March Base = % % % A lot worse Somewhat worse Somewhat better A lot better No change Don t know Refused may not sum to 100% due to rounding. Table 4: Financial situation over next 12 months Q8 In the next 12 months, do you expect your financial situation to be? March Base = % % % A lot worse Somewhat worse Somewhat better A lot better No change Don t know/refused may not sum to 100% due to rounding. Research New Zealand 14 November 11

9 Table 5: Taking action to manage financial situation Q9 Have you or are you doing anything in particular to help manage your current financial situation or improve it for the future? March Base = % % % Yes No Don t know/refused may not sum to 100% due to rounding. Table 6: Specific actions taken Q10. Which of these have you, or are you, doing? March Sub Sub Sub Base = 377* 388* 347* % % % Cutting back on basics such as food, power or fuel Cutting back on non-essential spending such as entertainment and holidays Finding ways of increasing your income by getting a new or second job, or working longer hours Increasing the amount you save Making lifestyle changes such as downsizing your home, or changing where you live Selling assets to raise cash Other None of the above Don t know/refused may exceed 100% because of multiple response. *Sub-sample based on those who are doing something to help manage their current financial situation or improve it for the future. Research New Zealand 14 November 12

10 Table 7: Q11 Thinking now about Christmas in two months time. As a result of your current financial situation, do you plan to? Base = % % Spend less than last year Spend about the same Spend more 5 7 Don t know 2 1 Refused may not sum to 100% due to rounding. Table 8: Q12 And what about your holiday plan for Christmas? Are you planning to? Base = % % Spend less than last year Spend about the same Spend more Don t know 6 3 Refused may not sum to 100% due to rounding. Research New Zealand 14 November 13