Kiwi consumer confidence at its lowest: Westpac survey

Highlights

• Consumer confidence in New Zealand lowest since 1988, reveals the Westpac McDermott Miller survey
• The drop is due to the high cost of living and rising interest rates
• According to the survey, this signals less spending this holiday season

According to the latest Westpac McDermott Miller Consumer Confidence Survey, New Zealand’s consumer confidence has dipped to an all-time low. The consumer confidence index was down 12 points in December to 75.6, the lowest since 1988.

Westpac said that the survey indicated more Kiwis were pessimistic about the economic environment than those who were optimistic.

With the rising cost of living, household finances are being squeezed even as New Zealand moves toward the holiday season. Adding to that are rising interest rates that are impacting households’ spending power, the survey said.

Despite good GDP numbers for the September quarter revealed on 15 December 2022, consumer confidence is at its lowest due to rising inflation and increasing interest rates.

Highlights of the survey are

• Consumer confidence lowest since 1988 on record
• The rising cost of living and increasing borrowing costs are the main concerns of consumers
• The weakness in consumer confidence is likely to weigh on household spending, further leading to a slowdown in economic growth
• The confidence level is low across all ages, income brackets, and regions
• For some households, pain is still ahead of them.

With interest rates set to rise even further, as the Reserve Bank indicated in its last monetary policy meeting, many households would face pressure on their finances.

According to the survey, many households still have not felt the pinch of high mortgage rates, as they are still on meager rates offered in the early stages of the pandemic. Many borrowers are soon likely to face the refixing of mortgage prices with higher interest rates.

Usually, during this time of the year, there is a boost in confidence as Kiwis look forward to the festive season and a long summer ahead of them. But this time, as per the survey, consumer confidence is at its lowest since the Westpac McDermott Miller Survey began.

Will this impact RBNZ’s stance?

The Reserve Bank of New Zealand (RBNZ) lifted the official cash rate (OCR) by 400 points since October last year. This included a record 75 basis point jump in the November policy.

The survey conducted between 1 December and 12 December comes after the RBNZ’s Monetary Policy statement of November, which had a forecast that inflation would continue to rise to 7.5%. Accordingly, the central bank would raise the OCR to bring inflation within its target levels.

Adrian Orr also admitted on 24 November 2022 that the central bank was hiking the OCR to engineer a recession. Orr had also warned New Zealanders to be wise in spending during the holiday season as they were bracing for difficult financial times.

Westpac economists believe that the OCR will rise in the next monetary policy meeting in February 2023.