Here is how families are coping with inflation

Monday, 8 August 2022

A survey by Te Ara Ahunga Ora The Retirement Commission for Money Week 2022 reveals what families have had to do to cope with the rising cost of living.

Research from Te Ara Ahunga Ora the Retirement Commission has uncovered the different ways households have changed their spending habits to cope with the rapid rise in the cost of living.

First there’s people cutting back on luxuries, putting off home improvements, and limiting recreation spending.

But the research also highlights the desperation measures some families are forced into.

Money Week is the annual event organised by the commission, in which it tries to get households to think seriously about their money lives, and make changes for the better.

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Supermarket prices, cost of living, shopping, money, savings, inflation, stuff generic

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It’s usually focused on getting people saving, making better KiwiSaver choices, and weaning themselves off debt and on to budgeting.

But the cost of living crisis, in which inflation has risen faster than wages, prompted the commission to conduct a survey of more than 1000 people to see what coping strategies families were adopting.

Most families now hurting

Not every family is making cuts, but most are.

One of the first places people look to cut costs is eating out and socialising.

Roughly 7% of people surveyed said they were prospering despite inflation.

But out of every 100 people surveyed, 53 said they’re being more careful with money.

Reducing lifestyle spending

The most common place families made changes was in food spending.

Supermarket research shows that households lack control over many parts of their spending, and see their weekly shop as a place where they can make cuts.

Out of every 100 people surveyed, 45 said they had changed food shopping habits.

And 44 were eating out less.

Closely related was spending on socialising. Out of every 100 people, 27 said they had been socialising less. Seventeen said they had cancelled subscription services like gym membership, or TV streaming services.

Renovations postponed

Filling up your tank is about to get a lot more expensive – and there’s not a lot the government can do about it. (Photo by Phil Walter/Getty Images)

Sharp rises in the cost of doing anything around the house mean people are putting off plans to do up their homes, the commission found.

Out of every 100 people surveyed, 11 said they had put renovations on hold

What those renovations were, was not specified, but it could range from minor projects like getting a new kitchen, or redoing the deck, to major projects like adding rooms.

I have long believed food system change will not come about through regulation and compliance, writes Helen Darling.

Leaving the car at home

Dependence on cars has been expensive this year.

Petrol prices hit record levels in May. Thankfully, they have come down, but they are still high.

As a result, people told the commission they were driving less. In every 100 people, 40 said they had reduced their car use.

Pain and deprivation

Rapid rises in inflation are traumatic for people already struggling to make ends meet.

The commission found that 22 in every 100 people felt stressed about their finances, 11 had hidden their financial position from others, and 19 more frequently ran out of money before payday. Four in every 100 had taken on more debt. Three in every 100 said they had to move house.

It found 19 in every 100 had skipped doctor’s visits, and 14 had gone without food more frequently.

Given these hardships, it was not surprising 10 in every 100 said the cost of living increases had put pressure on their relationships.

Boosting incomes

Jarrod Kerr says with the global economic situation there is a risk of hiking interest rates too high

Only a small proportion had responded by trying to increase their incomes.

Seven in 100 surveyed said they had changed job, or taken a second job. Six said they had asked for a pay rise.

Can these figures be corroborated?

Surveys only show what people say they have done.

05052022 Photo: ROSS GIBLIN/STUFF Wellington bus commuters in Lambton Quay. GENERIC: transport, buses, workers, commute, city

But many of the answers are echoed in Kiwibank’s latest spending tracker, and the overall picture is similar to that shown in a survey published last week by the Financial Markets Authority Te Mana Tātai Hokohoko.

Banks can see what we’re all spending our money on, and Kiwibank makes its findings public each quarter.

The first thing that’s obvious from its latest spending tracker is that our “real” spend is rising more slowly than our “actual” spend. In other words, we are spending more money, but we are getting less for it.

“The slower rise in real spend may also suggest that Kiwi are tightening their purse strings,” Kiwibank’s economist team led by Jarrod Kerr says.

“Compared to a year ago, the value of Kiwibank credit card transactions is up by 6.1%,” Kiwibank’s report said.

“The number of transactions however is down 5.2%. Kiwi are tapping, swiping and inserting their cards fewer times.”

Greener, by necessity

Sam Garaway, Christians Against Poverty chief executive, says, ‘People in financial hardship spend proportionately more of their total income on essential living costs such as transport, food, and housing than the average household.’

Petrol prices are up, but spend on petrol is up less, Kiwibank found.

Kiwibank says its card data showed the number of visits to the petrol station was down 7.5% in the second quarter covering April, May and June.

Spending on public transport rose sharply, and that was despite the government’s half-price discount on public transport fares.

Yeah, nah for home improvement

Kiwibank’s spending data showed a 1.5% fall in housing-related spending.

Spending on hardware was down 5%.

The toughest end of town

The majority of families are coping with inflation, but some just can’t without enduring real hardship.

Sam Garaway, chief executive of Christians Against Poverty (CAP), says: “Rising living costs are causing further financial hardship for low-income and struggling households.”

CAP sees just how hard things are as it works with the impoverished to help them learn to budget and get out of debt. This includes negotiating with lenders to forgive, or write-off debt.

“It takes a lot of resourcefulness to manage a family budget with very little money,” Garaway says. “The emotional toll can be heavy as parents and caregivers constantly juggle their ever-shrinking resources to meet the needs of their families.”

“CAP clients are describing the stress of driving around with a fuel tank on almost empty,” he says.

“With the cost of fruit and vegetables increasing by 17%, many are unable to provide their family with nutritious food. For some, this can lead to health complications.

“Before the cost of living crisis, two-thirds of people who call CAP were already skipping meals, and three-fifths were disconnecting themselves from family and social events.”