The fall in the first quarter came as no real surprise as we started to see asset values fall.
Share markets around the world started to weaken (for example the S&P 500 fell 4.6% in Q1 2022) and the impact of falling markets was reflected in many people’s KiwiSaver balances.
At the same time house price growth came to a halt, with the peak in prices seen around November 2021. Since then they have fallen in most parts of the country, and continue to do so.
As well as seeing their net wealth decline, things on the international front took a dramatic turn for the worse with the Russian invasion of Ukraine.
Closer to home Covid 19 infection levels soared to a high of 17,552 new cases on 6 March, disrupting both work and personal lives.
But although we can’t pinpoint the causes with any accuracy, the largest impact may have come from the sharp rise in the cost of living. Prices have soared, with CPI inflation hitting 7.3% in the year to June, a rate not seen in decades.
Particularly for those on lower incomes, getting by abruptly became a lot harder. All up, the dive in the proportion of people feeling comfortable is unsurprising.
On a positive note, the last quarter has not fallen further.
Sharemarkets recovered some lost ground and KiwiSaver balances have followed suit. Wage growth has lifted substantially, with average hourly earnings hitting 7.05%.
But of course there’s a huge range of outcomes hidden by that average, and not everyone will have seen their purchasing power restored.
So from a financial wellbeing point of view what should people be doing? For KiwiSaver most of us can’t access those funds until we turn 65, so at times it’s best to just not look at your balance.
Make sure your fund type matches your risk appetite, and whenever possible continue to contribute. One way to look at it is that the fall in markets means you are buying many shares more cheaply than you could at times last year.
2. Meeting commitments
The measure of peoples’ ability to meet their commitments fell again in Q2, after the fall in Q1. We have seen a spike in inflation with the cost of many things rising.
While as discussed above, wages have risen sharply too, the reduction in our ability to meet commitments suggests that rises in income have not matched these increased costs for many people.