A New Year's resolution for Kiwis' financial well-being

While we don’t know for certain what the next 12 months will bring, early signs point to another intense year; one that will likely call for all the energy, resources, and expertise that financial advisers can muster. So, here are some insights to consider – and our New Year’s resolution for Kiwis’ financial well-being.

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Global economic change is underway

Over the past few years, a series of disruptive events have put significant pressure on the global economy. The result has been chaotic, with high inflation proving a lot more persistent than economists and policymakers anticipated. So, when will inflation go down?

From New Zealand to Nigeria, that’s the question that consumers all around the world are pondering over. But with so many variables involved – many of which are well outside the RBNZ’s control – no-one knows for sure.

The broad consensus among economists is that rising interest rates will, at some point, slow demand and see inflation start to fall; when and how fast is anyone’s guess. And in the meantime, a global recession seems increasingly likely.

Earlier this month, the World Bank reviewed its global economy growth outlook for 2023, from 3% to 1.7%. They also warned that the global economy is on a razor’s edge: any additional adverse shock may push the globe into a recession this year, including rising geopolitical tensions, higher than expected inflation, and a resurgence of COVID-19.

This is the wider context, the background. But what does this economic environment mean for people?

Consumers are adjusting their spending plans

Last December, Deloitte took a closer look at 2022’s impact on people’s financial wellbeing around the world.

According to the report, four in 10 respondents felt their financial situation had worsened in 2022. And interestingly, both low and high-income earners were affected, although for different reasons. According to the report, 34% of higher earners said their finances took a turn for the worse, largely due to investment markets underperforming. That’s compared to 47% of lower earners, who saw inflation reduce their income value.

Here in New Zealand, consumer sentiment dropped through 2022, and people have already started to adjust their spending habits. In November, data from Foodstuffs NZ (the company behind New World, Pak ‘N Save, Four Square and Liquorland) showed that customers were buying less, choosing cheaper brands, and cutting out non-essential items from their grocery lists.

This is not unexpected in an inflation period. More concerning is the fact that New Zealand may be one of only two countries with household savings dipped into negative territory in 2022. According to the latest Savings Report by global comparison site Finder, Kiwi households saved on average 5.54% of their disposable income in 2020, but that was predicted to drop to -0.2% in 2022.

These are just estimates and averages; once again, they don’t give an accurate picture of anyone’s individual circumstances. However, it’s a red flag that we can’t ignore, if we want to support Kiwis’ financial resilience through these unsettled times.

Our New Year’s resolution

According to our 2022 research, advised Kiwis are more likely to take steps to protect their financial future, be better budgeters, stay on top of their mortgage, and plan for the long-term. These are all skills and behaviours that can help greatly in the current environment – not to mention that advisers can be a sounding board for any ideas or questions that Kiwis may have.

So, here’s our New Year’s resolution for 2023, the same we’ve had since Financial Advice NZ was founded: highlight and advocate the value of quality financial advice as a cost-effective, client-first solution.

We know that perceived costs have long been a barrier to seeking advice and taking out cover. As consumers become more and more value-driven and price-sensitive, helping Kiwis see the transformative power of quality advice will continue to be our number-one priority. Against this backdrop of uncertainty, financial protection has never been more important.

Here to help

Financial Advice NZ was founded with a single-minded purpose: to help New Zealanders, and New Zealand as a whole, be financially better off. Visit financialadvice.nz to learn more about our initiatives.