Advice matters
Financial wellbeing: how is the world faring?

2022 started with high hopes, but as the year progressed, it soon became clear that there were new headwinds to face – including record inflation. To tackle the rest of 2023 with confidence, it’s worth looking back at last year and putting things into a wider context.

That’s what a recent global survey (by multinational professional services network Deloitte) has done. And here’s what they found.

Four in 10 respondents were impacted

Deloitte asked people from 24 different countries whether they felt that their financial situation had worsened in 2022. And on average, four in 10 respondents reported worsening personal finances.

It looks like Europe was the most affected, largely due to a combination of higher energy prices (driven by Russia’s invasion of Ukraine) and the first interest rate hikes in years.

In Poland, for example, 60% of people surveyed said their finances had been hit, followed by Ireland, the UK, Denmark, Italy, Germany, and France. People in Japan, Spain, the Netherlands and Canada were also affected more than the global average. Meanwhile, closer to home, over 40% of Australians surveyed felt the pinch.

Source: Deloitte Global State of the Consumer Tracker. China, Mexico, Norway, Belgium, Saudi Arabia, United Arab Emirates, and Brazil are not shown.

Another interesting finding is that, globally, both higher and lower earners were affected by worsening financial conditions – though at different levels and for different reasons.

Almost half of lower earners felt that their financial wellbeing had taken a turn for the worse in 2022, compared to 34% of higher earners. According to Deloitte, higher earners were mostly impacted by the negative investment market performance, whereas lower earners saw their available income fall significantly due to high inflation.

Purchase behaviours and spending intentions have changed

Source: Deloitte Global State of the Consumer Tracker.

As a result of worsening financial conditions, many people are reviewing how they spend and save money.

For example, discretionary spending confidence fell throughout 2022, particularly in Italy, the United States, the UK, Poland, Denmark and Germany. In October 2022, consumers estimated their discretionary spending to be 23% of their monthly budget, compared to 26% in September 2021.

What’s also interesting is that twice as many people were concerned about their level of savings, compared to a year before. Also, they were twice more likely to delay large purchases, and twice more likely to be concerned about upcoming payments.

This goes to show that record inflation is a global phenomenon, and certainly not unique to New Zealand. While different countries face different pressures, many share similar drivers.

According to the World Economic Forum, if inflation was initially driven by food, supply issues and energy costs in the wake of the Covid-19 pandemic, it has been exacerbated by the war in Ukraine. Ukraine is in fact one of the world’s largest wheat exporters, plus oil prices soared as a result of sanctions against Russia.

On top of this, many countries (including New Zealand) are experiencing tight labour markets, which pushed up wages throughout the economy and production costs with them.

We’re here to help

Where to from here? It’s too early to tell how long high inflation is going to last, and it’s likely that 2023 will require a fair share of planning due to rising costs and increasing interest rates.

This is where quality advice can make a big difference. If you have any questions about your financial life or would like to have a chat about the next few months, get in touch: we can give you the benefit of experience and expertise.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.