New Zealanders Are Not Recession Ready, Latest FSC Data Reveals

Early data from the Financial Services Council’s (FSC) 2023 Financial Resilience Index reveals New Zealanders are alarmingly less prepared for a recession than they were in 2022.

This shows the precarious position many are in, and coupled with the recent RBNZ OCR increase to 5.25%, means that many New Zealanders are facing extremely challenging times in their household finances. There is much work to do to get Kiwis recession ready.

Being able to access money in an emergency is a key indicator for being financially resilient and prepared, but the data shows 39% of respondents (up 5% since 2022), equivalent to over 1.5 million Kiwis, could not access $5,000 within a week without going into debt if they had to pay for something unexpectedly.

In 2022, this figure was 34%, indicating that we’re less prepared for financial shocks than we were a year ago. The reality is there are trade-offs between balancing shorter-term and longer-term needs, and there are really tough decisions to make to balance them.

FSC Chief Executive, Richard Klipin, says, “The last year has been incredibly tough for Kiwis with the cost of living going up, the increasing interest rates, and the growing risk of the economy tipping into recession, the focus has clearly gone onto household finances.

“However, as we continue to experience an uncertain economic period, getting recession ready is important for all New Zealanders. Preparing isn’t just about looking after your money - it’s also about looking after you and those you love.

“Kiwis should take this time to become recession ready, which means leaning into that famous Kiwi resilience, looking after our wellbeing, and getting clear on how we can navigate our finances over the coming months.

“If you are concerned about your finances, the first and most important thing to do is to take stock, and if you have any questions speak with your whānau, friends, bank, insurer, KiwiSaver or investment provider, and if you have one, your financial adviser” says Klipin.

Top Tips to get Recession Ready:

• Stress test your rainy day fund:
  It’s times like these when rainy day funds come into their own. If you haven’t had to dig into it yet, there’s no better time to start funnelling a bit of each paycheck into a savings account.
• Prepare for mortgage interest rate rises:

If you’ve been on a fixed rate mortgage that’s coming up for renewal soon, talk to your mortgage adviser or bank about what you can do to prepare.

• Don’t neglect your KiwiSaver: 
  Preparing longer term is as important as making sure you are recession ready in the shorter term - review your KiwiSaver settings and if you have any questions, talk to your provider or your financial adviser about your options.
• Talk to someone:
  MoneyTalks (0800 345 123) offers a free service for those needing help with day-to-day money matters such as managing debt or budgeting.
• Things will get better:
  Remember that the markets fluctuate and undergo cycles. If you are doing it tough, remember that while things might be challenging right now, eventually the pendulum will swing the other way.

The Financial Services Council’s 2023 Financial Resilience Index research report will be released on Wednesday 3 May 2023.

© Scoop Media