Reserve Bank plunges New Zealand into consumer-led recession

Independent economist Tony Alexander’s latest monthly Spending Plans Survey for New Zealand shows that a record net 27% of the near 1,000 respondents plan on cutting consumption spending over the next 3 to 6 months – a sharp turnaround from late 2021 when there was a net 17% positive:

New Zealand spending intentions

New Zealand spending intentions plummet.

Tony Alexander explained that “household budgets are being pressured by the hike in the cost of living, rising mortgage rates, falling asset wealth, and crunched profits for business owners hit by shortages of staff and materials”.

Kiwi’s confidence about the future has also plummeted after the Reserve Bank commenced its rate hiking cycle and house prices began to fall, with “a net 29% pessimistic compared with a net 20% optimistic at the end of 2020 and 5% pessimistic at the end of 2021”:

Net confidence about the future

Confidence plummeting.

The survey shows that Kiwis plan to spend more on groceries – out of necessity as costs rise – but will cut back on discretionary spending like eating out, household renovations, household durables, and clothing:

Spending on groceries

A net 17% plan spending more on groceries – clearly out of necessity. Strong reductions are planned for spending on eating out… A record net 36% of people plan to reduce their spending on eating out…

For the third month in a row we have recorded net negative intentions of spending more on home renovations…

A net 13% of people plan spending less on motor vehicles. This is almost as bad as during the early days of the pandemic before the flush of money effect kicked in…

For spending on furniture and appliances things are much worse than back then even…

Plans for buying clothes and shoes have weakened anew…

Housing indicators have also deteriorated, with a record net 4.5% of people saying they plan cutting spending on a new (or existing) house to live in:

Housing spending intentions

Housing FOMO gone.

These results align with the collapse in New Zealand’s consumer confidence index to recessionary levels, with consumers particularly concerned about current and future economic conditions:

New Zealand consumer confidence

Consumer confidence has tanked to recessionary levels.

The collapse in consumer confidence is especially pertinent given its strong historical correlation with household consumption – the New Zealand economy’s biggest driver. Where household consumption goes, the economy generally follows:

Consumer confidence and consumption spending

Dangerous omen: Household consumption typically tracks consumer confidence.

Clearly, the Reserve Bank’s aggressive rate hikes are having a marked impact on consumers and the housing market.

The Reserve Bank needs to tread carefully on rates, otherwise it will plunge the New Zealand economy into recession.

Unconventional Economist
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  1. New Zealand is probably going to enter recession no matter who does what.
    There is nothing the RBNZ can do now except embrace the inevitable; get on with it, and try to make it short and sharp. Our economy needs re-setting in so many ways.
    FIFO and all of that.

    • Stats NZ data today showed falls in all sectors but one where spending increased . MBIE data ending 1 July showed fuel prices reaching new record highs . The price of diesel at 2.96 L is up from a.1.91L at year start, and has doubled on a Y/Y basis.The RBNZ started increasing the OCR some nine months ago, clearly it has had negligible if any effects on the price of fuel.and significant downstream effects.. Why the RBNZ has to “get on with it ” because New Zealand needs a recession is utter nonsense and bonkers. Maybe the RBNZ will start oil exploration and building homes as part of its mandate , alongside climate change et al.

      • What was utter nonsense and bonkers was the OCR being cut to the levels it was, and monetary setting being relaxed in tandem – cuts to the LVRs and delays to bank Liquidity ratio changes etc, during a period of enforced hibernation – the COVID Lockdown.
        Now we will have to pay the cost.
        It doesn’t matter what I think, but what’s going to happen. And nothing is likely to avert that now.

  2. Quantitative FleecingMEMBER

    Is the RBNZ plunging NZ into a recession or are they plunging NZ out of the worlds most unsustainable economic bubble? All a matter of perspective…

  3. Hugh PavletichMEMBER

    Kiwibank increases term deposit rate to 4%, putting it above competitors … Geraden Cann … Stuff NZ

    Recession is coming, commentators warn … Susan Edmunds … Stuff NZ

    ‘It will break many’: doctors’ survey paints clear picture of workforce crisis … Rachel Thomas … Stuff NZ

    Statistics New Zealand says retail spending – excluding fuel – dropped by 0.3% in June … David Hargreaves … Interest Co NZ

  4. Hugh PavletichMEMBER

    One Million Kiwis Set To Leave … New Zealand National Party / Scoop NZ

    Shocking data out today which shows more than 1 million New Zealanders are actively considering leaving the country shows the Government is taking Kiwis backwards, National’s Deputy Leader Nicola Willis says.

    The latest Consumer Snapshot from MYOB shows 1 million Kiwis are considering moving overseas, and 200,000 have already made plans to leave. Forty-four percent said they are considering moving for ‘a better quality of life or the cost of living is better overseas’.

    “New Zealanders are seeing their future elsewhere because they are going backwards under Labour. We have a cost of living crisis, our healthcare system is falling over, wages aren’t keeping up with inflation, owning a home is out of many people’s reach, violent crime is up and we have a labour shortage. … read more via hyperlink above …
    Take particular note of the major issues that concern New Zealanders … and those that don’t …

    17th Ipsos NZ Issues Monitor – June 2022

      • Hugh PavletichMEMBER

        NZ is seen by potential inbound migrants as a big fail on living costs, housing costs, immigration restrictions and unpredictable covid restrictions …

        Employers and Manufacturers Association says NZ’s high cost of living, housing putting overseas workers off … Ireland Hendry-Tennent … Newshub (regrettably VIDEO not available outside New Zealand)

        The Employers and Manufacturers Association says New Zealand’s high cost of living is putting off overseas workers.

        It comes as industries across the country struggle with dire staffing shortages. Healthcare, agriculture, teaching and hospitality are being hit particularly hard.

        Speaking with AM on Wednesday National leader Christopher Luxon warned if the worker shortages aren’t fixed, New Zealand’s international reputation could be damaged.

        “The problem is that many of our tourism restaurants across New Zealand, our tourism attractions are actually not operating at full capacity.

        “It’s a real challenge and it won’t take much for some bad experiences to lead… New Zealand gets a bad reputation for poor service,” he said.

        But it seems our reputation might already be in trouble – but not in the way he warned.

        Earlier on Wednesday, head of advocacy and strategy at the Employers and Manufacturers Association (EMA) Alan McDonald said the country’s high costs are putting potential migrants off.

        “I think we’ve probably lost our lustre as a great place to come,” McDonald told AM’s Ryan Bridge. … read more via hyperlink above …

        Cost of living and salaries drive more workers to eye move offshore … Brianna McIlraith … Stuff NZ

        Cost of Living: MYOB poll shows more than 1 million Kiwis actively considering leaving NZ … William Hewett … Newshub

        Government warned 12 months ago New Zealand risked losing pilots if something wasn’t done … Ireland Hendry … Newshub

        • So ramming millions more immigrants into the country to replace people that want to leave following 15 years of policy failure from all govts in that time will fix thing?

          It’s very much in line with National’s/Tory/LNP MO – crush load country with immigration, blow housing bubbles, financialise everything while under investing in infrastructure. That’ll solve everything.

          Not that I am defending the record of the current govt as they have been objectively awful – it’s just the definition of insanity to expect National to do anything different than their ideology and past performance dictates.

  5. Hey MB peeps!!! I got a demand……

    I don’t care if you lock non members out of comments on articles, that’s all fair and all, but don’t start an article as open to comment and then close it, lolz that’s gey as. Seriously gey.

  6. Hugh PavletichMEMBER

    Desirable tenants become scarcer as ‘accidental landlords’ add to rental glut … Geraden Cann … Stuff New Zealand

    The rise of “accidental landlords” may be contributing to a rental property glut that is likely to tip the country into a renters’ market, CoreLogic head of research Nick Goodall said.

    Goodall said the pattern could be read from similar numbers of properties being removed from the market, where total listings were up 77% on a year ago, and a concurrent rises in rental stock.
    “What that brings is a rise in rental supply, less upward pressure on rents, and potentially downward pressure on rental rates too,” he said.

    A survey by economist Tony Alexander and property management company Crockers suggests landlords were finding it harder to find good tenants. … read more via hyperlink above …

  7. Hugh PavletichMEMBER

    New Zealand lost 11,000 people in a year, Stats NZ says … Susan Edmunds … Stuff New Zealand

    Almost 11,000 more people left the country in the year ended May than arrived, new data from Stats NZ shows.

    It shows a provisional net migration loss of 10.700 for the year, made up of 8400 non-citizens and 2300 New Zealand citizens.

    In the year, 47,500 migrants arrived but 58,200 departed.

    In the previous year, there was a net loss of 4200 migrants. … read more via hyperlink above …

  8. Hugh PavletichMEMBER

    Kiwis cashing up: Goodbye Auckland house prices, g’day Australia … Nikki Preston … OneRoof / New Zealand Herald

    Aucklanders are realising they can get more bang for their buck and earn more across the ditch.

    Home-owners are putting their houses on the market and tenants are handing in their notices as they ditch New Zealand in favour of cheaper property and better wages in Australia, agents have told OneRoof.

    Auckland real estate agents in the north and the south of the city say a large number of people selling their homes at the moment are relocating to Adelaide, Perth, Brisbane and Melbourne.

    Harcourts Glenfield agent David Ding sold three properties last month where the owners were moving across the ditch and he said there had been many more this year.

    “I’ve lost count. They go to Adelaide – it’s the most popular one, then Melbourne. Not many people go to Sydney. It used to be Brisbane, but Brisbane’s not as popular as Adelaide because Adelaide house prices are lower.” … read more via hyperlink above …

  9. Hugh PavletichMEMBER

    Government faces 60-year debt blowout after building costs explode … Thomas Coughlan … New Zealand Herald

    Housing Minister Megan Woods has been warned not to grant any future Budget bids to state housing agency Kāinga Ora for a time, after fears of unsustainable debt levels.

    A leaked document from the Ministry for Housing and Urban Development shows that spiralling construction costs have led to a debt blowout at Kāinga Ora, with fears the Government will be unable to completely repay the increase in debt over the next 60 years.

    The document, dated June 17, says Kāinga Ora is “investigating” cost-cutting measures such as pausing a programme to improve heating in homes or retrofitting old homes with improvements that make them accessible to people with disabilities. Officials said the ideas might result in some “cost savings” but they will not address the root cause of the blowouts. … read more via hyperlink above …