Financial confidence double dips but housing eases

Survey: Financial confidence double dips, but housing negativity eases

New Zealanders’ financial confidence has double dipped, with confidence about investing in the financial sector overall* dropping back to 2009 levels, a survey shows.

The RaboDirect Financial Confidence Index (FCI), which was released today, shows there has been a slide in the general public’s confidence in making financial investments. Levels are at net minus 58 per cent, compared to net minus 44 per cent in February this year. This current sentiment is close to the findings of the FCI in September 2009, when confidence levels were net minus 56 per cent.

In contrast, bricks and mortar have gained ground, with some return of confidence to investing in housing. At net minus 29 per cent - compared to net minus 47 per cent in February - housing is once again deemed a more attractive investment than the financial sector.

However the findings were good news for the mainstream banks, having gained further public confidence over the past six months. Banks were rated highly for their financial strength (80 per cent), people having confidence their money will be safe (84 per cent) and in the provision of good products and services (77 per cent).

Mike Heath, General Manager of online savings and investments bank RaboDirect, says people remain conservative in where they are choosing to put their money.

“The findings show very little appetite for investing outside of mainstream banks and managed funds – the latter result likely to have been boosted by Kiwisaver.

“People are also split over how they think they will fare financially over the next six months. A quarter of New Zealanders expect things to improve and another quarter expect things to get worse. The remaining 50 per cent expect their finances to stay the same,” says Mike Heath.

The survey also canvassed opinion on fiscal policy changes made by the Government this year, which have been met with a mixed response. The rise in GST in conjunction with tax cuts has resulted in the majority (58 per cent) expecting to be worse off – this includes 48 per cent of people earning more than $80,000.

“While people are uncertain about how they will be affected by the changes, the findings did confirm that people were not planning to spend up large ahead of the GST rise, as was the case. In fact, a third of New Zealanders are planning to save more and spend less as a result of the changes.”

Before the Crown retail deposit guarantee was extended to its current more limited form, New Zealanders were split fifty-fifty about whether a deposit and investment protection was still necessary to maintain depositor confidence.

“The Reserve Bank Governor has continued to emphasise the importance of depositors needing to take full account of the risks, returns and credit ratings associated with their deposits. However, while half of those surveyed are familiar with credit ratings, only a third actually trust or use credit ratings in their investment decisions,” says Mike Heath.

“Banks and the majority of non-bank deposit takers are now required to hold and publish a credit rating. When used in conjunction with research about an institution, including risks and returns, credit ratings are a useful tool to help guide people’s investment choices.”

Finance companies continue to rate lowest on the RaboDirect Financial Confidence Index, particularly around safety of money (17 per cent) and acting with fairness and integrity (18 per cent).

ENDS

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