Coronavirus: Survey reveals Kiwis living in financial difficulty, many missing rent payments during lockdown

The economic wrath of the COVID-19 pandemic hit hard during the alert level 4 lockdown, with a new survey finding 34 percent of Kiwis were already in financial difficulty.

The strict alert level 4 rules were implemented in late March and ran for nearly five weeks, forcing the closure of many businesses and requiring Kiwis to remain at their residences. While the lockdown has been recognised for stopping the transmission of COVID-19 in New Zealand communities, it added to economic uncertainty.

A survey of 3000 New Zealanders conducted across two weeks in April by the Commission for Financial Capability (CFFC) found 34 percent of households were in difficulty during the lockdown, while 40 percent were in danger of heading into hardship. 

Among the worst affected were Māori, Pacific Peoples, young people, and those in insecure forms of work before the crisis hit.

At the time, 10 percent of households had already missed a rent or mortgage payment, with housing stress the greatest in Auckland. Low confidence also led to Kiwis panicking, taking out extra loans, and considering accessing KiwiSaver funds through hardship withdrawals. Many also switched their KiwiSaver fund to a more conservative one. 

Despite that, free financial guidance and options to negotiate with creditors were under-utilised, the survey found.

The CFFC survey is part of a larger international study in eight countries. The UK and Norway have also reported back, but New Zealand was the worst affected of the three. In the UK, 28 percent of respondents were in difficulty while 37 percent were at risk of heading into hardship. Eight percent were in difficulty in Norway, with 30 percent at risk.

Kiwis' low financial resilience compared to respondents in other countries was put down to low levels of household savings before the crisis, low social welfare benefits, a large number of people in the massively hurt tourism and international education sectors, and the amount of Kiwis in insecure employment, like those in casual work. 

Retirement Commissioner Jane Wrightson, who heads the CFFC, said the results reflected the fragile finances of Kiwis near the end of alert level 4. 

"It was a dark time for many, and we acknowledge that some may be feeling more optimistic now that we’re in level 2 and following the Budget announcements," Wrightson said. "However, it is generally accepted that income loss will get worse before it gets better."

She said the 40 percent group at risk of slipping into financial difficulty if their income dropped in the next three months was concerning.

"They are the group that should be instrumental in helping to rebuild our economy – young couples with children and mortgages, most of them employed, self-employed or business owners. We need to help them bounce back so they can play a defining role in post-COVID New Zealand."

In order to try and ease the pressure of Kiwis workers and businesses, the Government introduced a wage subsidy scheme in mid-March that has paid out more than $10 billion and will continue for some of the most affected businesses until September. The survey found that at least one person in 40 percent of households surveyed was receiving the wage subsidy.

A series of other initiatives have been implemented to cushion the blow, including mortgage holidays and changes to rental laws to give renters certainty.

Unemployment is still expected to soar, however, to just below 10 percent by September. 

This week the Government announced a temporary payment scheme for Kiwis who lose their jobs during the pandemic. For 12 weeks, those who had their job cut due to COVID-19 and were working full-time are eligible for a tax-free $490 a week, while part-time workers can get $250 a week.

Wrightson said those payments will help Kiwis at risk of slipping into hardship "manage their high commitments while they seek new jobs or retrain".

She said looking ahead, Kiwis might need to be assisted with saving to build up their resilience against future financial shocks. 

"Our Review of Retirement Income Policies last year recommended that KiwiSaver accounts be built with a sidecar savings facility which could be drawn upon in emergencies.

"In the Review we also recommended a financial capability hub for KiwiSaver hardship applicants, so they could gain budgeting help and assess all their options before potentially damaging their retirement income.

"This crisis indicates a hub would be helpful in helping people take a breath and access other forms of assistance."

The CFFC will update the results when information from more countries comes in and is looking to do the survey again at a later date to see how Kiwis are faring.