For every Kiwi who is financially better off this year, there are two who are worse off, new research has found.
A survey has found consumer confidence remains grim as financial pressures weigh on household spending appetites.
The Westpac McDermott Miller Consumer Confidence Index rose 2.1 points to 77.7 in March, which is a fairly small rise after confidence fell to record lows last quarter.
In the December quarter, confidence fell to 75.6, far below the confidence threshold of 100. It was the lowest consumer confidence has been on this survey since it began in 1988, even worse than levels during the recession of the early 1990s and the 2008 Global Financial Crisis.
Despite the small rise this quarter, New Zealanders remain pessimistic about the economic environment.
While in March the index rose 2.1 points in the index to 77.1, this is within the margin of error (2.5 percent) for the survey, McDermott Miller Limited noted.
“For every consumer who is better off financially now compared with a year ago, there are more than two that are worse off,” McDermott Miller Limited market research director Imogen Rendall said in a statement.
“Consumers’ assessment of their own future financial prosperity as well as the economic future of New Zealand is ominous. Households will continue to come under significant financial pressure in the coming months and it is hard to see things getting better anytime soon.”
Many households reported they have scaled back their spending on leisure activities, like dining out, and the number of households who think it’s a good time to make a major purchase is languishing close to record lows, the report found.
By region, the only places where optimists outnumber pessimists were in Nelson, Marlborough and West Coast.
Households in areas affected by recent weather events were feeling very pessimistic about the outlook for economic conditions in their respective regions, the report found. It found the aftermath of Cyclone Gabrielle is also adding to financial pressure on households in the upper and central North Island.
Westpac Senior Economist Satish Ranchhod said the higher cost of living is squeezing every household across the country.
“The cost of necessities like food, housing and utilities have skyrocketed over the past year. And for many households, those increases have been compounded by a rise in borrowing costs,” Ranchhod said in a statement.
“Putting that all together, households are having to splash out more cash, but they’re getting a lot less bang for their buck.”
Housing and utility costs were up eight percent over 2022, while food prices jumped 12 percent in the year to February.
Westpac expects those mounting financial pressures on households are set to become more pronounced, resulting in an increasing number of households winding back their spending this year.
Consumer prices, including food prices, are set to continue rising rapidly over the coming months and many borrowers are set to refix their mortgages at substantially higher interest rates. Westpac said around half of all mortgages will come up for repricing in the next 12 months and, in some cases, borrowers will face interest rate increases of 2 to 3 percentage points.
The housing market is also declining, with house prices dumpling by an average of 17 percent since November 2021, Westpac said.
“Crucially, the pressure on household budgets is set to become even more intense,” Ranchhod said.