New Zealanders mostly better off but some doing it tough, bank says

Friday, 26 March 2021

Reduced spending has helped many New Zealanders improve their financial positions, ASB’s chief executive says.

New Zealanders’ financial wellbeing has improved about 8 per cent on average since this time last year, new research from ASB shows.

The ASB financial wellbeing study, which began prior to the first Covid-19 lockdown, looked at the fortunes of about 500,000 bank customers.

The bank worked with the University of Melbourne’s Institute of Applied Economic and Social Research to develop a measure that gave insight into New Zealanders’ financial wellbeing, using aggregated payment, spending, balance, and credit data.

The percentage of New Zealanders living from one payday to the next reduced in the year to February 2021.

* 5 per cent profit drop for ASB to $599 million in 'lower growth' environment

Six per cent of ASB customers were able to build up enough savings over the year to change this pattern.

But the ASB study also found that more than a third of customers frequently had balances of less than their average weekly expenses, and 15 per cent of customers always spent more than 80 per cent of their income.

Vittoria Shortt is concerned about the number of people without money in savings.

A third of ASB customers had at least $10,000 in savings, up on a year ago, with 4 per cent of them passing that threshold during the pandemic.

But data for February also showed nearly half the bank’s customers had less than $1000 in savings.

ASB chief executive Vittoria Shortt said the increase in wellbeing was driven by reduced spending, and the government support through the Covid-19 lockdowns.

“The past 12 months have been very challenging for New Zealanders and it is good to see that collectively our financial wellbeing has held up surprisingly well.”

The key to that was keeping people in jobs, she said.

But she said there were warning signs beneath the surface and many people were still doing it tough. More than a third were still living “payday to payday”.

“We know we are not out of the woods yet, there are more Covid-19 effects to roll through the economy and this research highlights some concerns. The fact that more than a third of people have less than a single week’s expenses available to them and almost half have less than $1000 in rainy day savings rings alarm bells for me. This puts them in a potentially vulnerable position.

“We would like to see people set aside more money. Saving can be daunting to people.”

She said many New Zealanders had their wealth tied up in housing. But it had become obvious that something needed to be done about the rapid rise in prices.

The Government move to offer $3.8 billion for infrastructure development was a good one to help, she said.

The removal of the tax deductibility of interest would be an important demand-side factor, she said, which could reduce investor appetite.

She said the investor focus on housing in recent years was understandable given the low interest rate environment and investors’ nervousness about other investment classes.