While the financial fallout from Covid was not as harsh as feared, it still led to a loss of life satisfaction and financial optimism.
The Ministry of Business, Innovation and Employment (MBIE) this week released the third wave of surveys tracking a nation’s spending and mood, surveying nearly 1,700 people at six-month intervals. The first survey was in March 2021, a year after the Covid onslaught, the third was in March 2022.
Covid would quickly change consumer concerns, behaviors and experiences, the initial study assumed. MBIE has decided to monitor these impacts, says Simon Gallagher, national customer service manager.
“We wanted to learn more about how the pandemic was changing consumers’ circumstances and develop and adapt our resources to support them.”
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MBIE examined 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 pay 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 spent on necessities like groceries, rent, insurance and gasoline.
In contrast, fun luxuries like entertainment, dining out and travel expenses were cut as high inflation followed the pandemic.
That’s according to Kiwi Wealth’s annual State of the Investor Nation report, released Wednesday, which found that 37% feel less wealthy than a year ago.
“Despite considerable optimism… [that] mental well-being would improve… in fact, mental well-being decreased with each round,” says Gallagher.
“Covid-19 has taken the world by surprise and 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, housewives or in full-time jobs did very well, the study found, with an increase in personal or family income. They were more likely to increase their savings or increase investment spending.
The hardest hit was a group described as at-risk consumers; Māori, Pasifika and younger participants, families with children, those who house or rent, and low-income families.
They were significantly more likely to be involuntarily unemployed, having lost their job in the last year, working less than they want or need to, or have had a decrease in personal and family income.
At-risk consumers are significantly less confident that they can pay for major household items, surprise bills, regular bills and necessities, as well as being able to find the items they want or need.
Meanwhile, a shift to online shopping has also caused problems downstream, such as a drop in consumer optimism, says Gallagher. There were more issues with late delivery or no delivery.
“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, the effect is that consumer optimism often drops. When asked if consumers expected their purchase confidence to improve over the next six months, the response was often positive, but the experience fell short of expectations.”
Mental well-being continued to decline. Less than half (49%) rated their mental well-being positively, down from 54% and 14 percentage points lower than before the first Covid-19 lockdown in March 2020.
And yet the employment landscape is more rosy; MBIE found that 89% of respondents who were working full-time in August 2021 were employed in the same way six months later. Only 5% were involuntarily unemployed.
According to the MBIE, some perceived their job as more vulnerable than it actually was, with 14% of respondents in August predicting they could lose their job within six months – while just 5% did.
Positive perceptions of overall financial well-being have significantly diminished with the arrival of Covid-19. Those who describe their financial well-being as good or very good are down 15 percentage points from before the first Covid lockdown to March/April 2022.
This was fear-based and understandable, says Janine Williams, a professor at the University of Victoria’s School of Marketing and International Business.
“When fear occurs in response to a threat in the external environment, uncertainty is felt. This results in a greater perception of risk and due to uncertainty about potential outcomes in the future, decisions become more risk averse.
“This is not all 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 well-being-enhancing options due to frugality.
“This response is often a result of previous guilt after making decisions and can be associated with fear and uncertainty.”
The MBIE found that income has increased since August, with 19% experiencing an increase and 12% a decline, meaning that the impact of Covid-19 on personal and household income changes has diminished over the past six months.
Feelings of job vulnerability remained, with 15% feeling they could lose their job by October, although respondents were significantly more likely to report working longer hours than they want/need (24%) than they did six months ago (12% ).
Nearly one in four described their overall life satisfaction as not so good or bad. A year ago that was one in six, six months ago, one in five.
Being unable to afford luxuries can have an impact on 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 these products for pursuing goals more related to pleasure or utility, but that doesn’t mean they’re mutually exclusive,” she says.
“Needs are often associated with more instrumental or functional purposes, 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 motivated by hedonic pleasure). ”
Hedonic consumption is related to pleasurable experience and positive emotion such as fun, fantasy and excitement, while utilitarian consumption serves a broadly functional purpose, says Williams.
Which is not to say that happiness always follows spending on luxuries.
“Interestingly, research has found that decisions motivated by hedonic goals are often associated with short-term pleasure, but can also lead people to feel negatively about themselves as a consequence,” says Williams.
They may feel bad or guilty after a spontaneous purchase, reflecting on themselves as indulgent or frivolous.
“Consumers trade their hedonic consumption decisions in terms of costs – for their savings or perhaps their health. Therefore, they are often associated with a lack of self-control.
“Consumers make predictions about happiness and how long it will last as a result of a purchase. These predictions are influenced by what is happening around them and are often inaccurate,” she says.
MBIE is conducting the survey in five rounds (every six months for two years) to track changes over time and compare predicted changes with actual changes. It will contribute to supporting the implementation of business and consumer policies and how to address their issues related to the pandemic.
The findings were shared with other government agencies, companies and NGOs to help with their work on consumer issues.
The findings support Consumer Protection’s hardship and accessibility campaign, which has just begun and will run over the next four to six weeks online.
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