Although the financial fallout from Covid was not as harsh as feared, it still resulted in a loss of life satisfaction and financial optimism.
The Department for Business, Innovation and Employment (MBIE) this week released the third wave of research into a nation’s spending and mood, surveying around 1,700 people, at six-month intervals . The first survey took place in March 2021, a year after the Covid strike, the third in March 2022.
Covid would rapidly change consumer concerns, behaviors and experiences, the initial study surmised. MBIE has set out to monitor these impacts, said Simon Gallagher, national director of consumer services.
“We wanted to learn more about how the pandemic was changing the situation for consumers and develop and adapt our resources to support them.”
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The MBIE looked at income, employment and financial status; personal well-being (mental and financial); confidence and ability to pay for essential and non-essential goods and spending behavior and priorities.
While employment and wages have not been hit as hard by Covid over the past 12 months as respondents feared, there has still been a decline in well-being, with more income being spent on necessities such as groceries, rent, insurance and gas.
In contrast, fun luxuries such as entertainment, restaurants and travel expenses have been cut off as high inflation has followed the pandemic.
That lines up with Kiwi Wealth’s annual State of the Nation Investor Report, released Wednesday, which found 37% felt less affluent than a year ago.
“Despite considerable optimism… [that] mental well-being would improve…in fact, mental well-being declined throughout,” says Gallagher.
“Covid-19 has taken the world by surprise, and it seems to have been felt by almost everyone in one way or another.”
Financially secure people reported the most positive impacts, while financially insecure people had a very different experience.
People with high incomes, homeowners or those in full-time jobs do quite well, according to the study, with an increase in personal or household income. They were more likely to have increased their savings or increased their investment spending.
The hardest hit group was described as at-risk consumers; Maori, Pasifika and younger participants, households with children, those living in apartments or rentals and low-income households.
They were significantly more likely to be involuntarily unemployed, to have lost their job in the last year, to work less than they wanted or needed, or to have a decline in personal income and household.
At-risk consumers are significantly less confident of being able to afford major household items, surprise bills, regular bills, and necessities, as well as being able to find the items they want or need.
Meanwhile, the shift to online shopping has also caused downstream issues such as lower consumer optimism, Gallagher says. There were more late delivery or non-delivery issues.
“Anecdotal evidence suggests this, but the surprise is that we are seeing more consumers making these choices because they have no other alternatives.
“When expectations are not met, consumer optimism often plummets. When asked if consumers expected their buying confidence to improve over the next six months, the answer was often positive, but the experience was below expectations.
Mental well-being continued to decline. Less than half (49%) rated their mental wellbeing positively, down from 54%, and 14 percentage points lower than before the first Covid-19 lockdown in March 2020.
And yet, the jobs scene is rosier; MBIE found that 89% of respondents in full-time employment in August 2021 were also employed six months later. Only 5% were involuntarily unemployed.
According to MBIE, some perceived their jobs to be more vulnerable than they actually were, with 14% of those surveyed in August expecting to lose their jobs within six months, while only 5% did.
Positive perceptions of overall financial well-being have declined significantly with the onset of Covid-19. Those who describe their financial well-being as good or very good fell by 15 percentage points between before the first Covid lockdown and March/April 2022.
It was fear-based and understandable, says Dr Janine Williams, a lecturer at Victoria University’s School of Marketing and International Business.
“When fear arises in response to a threat in the external environment, one experiences uncertainty. This results in heightened perception of risk and, due to uncertainty about potential outcomes in the future, decisions become more risk averse.
“All is not good…the virtuous self-control we exhibit can be detrimental to our well-being if we engage in such self-control to the extent that we do not consume life-enhancing options. well-being due to frugality.
“This response is often the result of prior guilt after making the decision to turn in, and may be associated with fear and uncertainty.”
MBIE found that incomes have increased since August, with 19% seeing an increase and 12% a decrease, meaning that the impact of Covid-19 on personal and household income changes has diminished over the past six months. month.
Feelings of job vulnerability persist, with 15% believing they could lose their jobs by October, even though respondents were significantly more likely to report working more hours than they expected. wanted/needed (24%) than six months ago (12%).
Almost one in four described their overall satisfaction with life as not so good or bad. A year ago it was one in six, six months ago it was one in five.
Not being able to buy luxury goods can impact your sense of well-being, says Dr. Williams.
Consumers buy some goods for more instrumental purposes, while others are consumed for more hedonic pleasure, she says.
“They consume such products as they pursue goals that are more related to pleasure or utility, but that doesn’t mean they’re mutually exclusive,” she says.
“Necessities are often associated with a more instrumental or functional purpose while hedonic choices are often associated with luxury (not to say that a lawn mower cannot bring joy to the owner but that some purchases are more driven by hedonic pleasure).
Hedonic consumption is linked to pleasurable experience and positive emotions such as pleasure, fantasy and excitement, while utilitarian consumption serves a largely functional purpose, Williams says.
Which is not to say that happiness always follows luxury spending.
“Interestingly, research reveals that decisions driven by hedonic goals are often associated with short-term pleasure, but can also lead people to feel bad about themselves,” Williams says.
They may feel bad or guilty after an impulse purchase, seeing themselves as indulgent or frivolous.
“Consumers trade their hedonic consumption decisions in terms of cost – for their savings or perhaps their health. They are therefore often associated with a lack of self-control.
“Consumers make predictions about happiness and how long it will last following a purchase. These predictions are influenced by what is happening around them and are often inaccurate,” she says.
MBIE conducts the survey over five cycles (every six months for two years) to track changes over time and compare anticipated changes with actual changes. It will fuel support for business and consumer policy implementation and how to address their pandemic-related issues.
The results were shared with other government agencies, businesses and NGOs to help them in their work on consumer issues.
The findings underpin the hardship and affordability consumer protection campaign that has just begun and will run online for the next four to six weeks.