The ANZ-Roy Morgan New Zealand Consumer Confidence Index has been released, which has reported the lowest consumer confidence reading on record after plunging by seven points in December:
The ‘time to buy a major household item’, which has historically tracked closest with household consumption, also fell another two points to -33%, which was the lowest reading outside of the brief decline at the start of the pandemic:
Notably, the proportion of mortgage-paying households who think it’s a good time to spend continues to be lower than renters (-39% vs -26%).
Finally, house price expectations crashed to their lowest level on record:
ANZ noted that “there appears to some post-MPS [Monetary Policy Statement] shock value in these figures. The RBNZ [Reserve Bank of New Zealand] came out guns blazing in the November MPS, signalling further aggressive OCR [official cash rate] hikes in 2023 and a technical recession. That’s clearly spooked the horses”.
ANZ also explained that “consumers continue to grapple with significant headwinds. The outlook for interest rates is higher, house prices are expected to fall by more, and the economy is expected to slip into recession in 2023, with unemployment rising”.
Therefore, it is “no wonder consumers’ perceptions of where the economy is heading has weakened since November – our perceptions have too. All up, today’s data makes for some pretty grim reading to end the year on”.
New Zealand consumer confidence could fall further given the Reserve Bank has explicitly forecast a recession in 2023, a further increase in the official cash rate to 5.5% (from 4.25% currently), alongside a 20% peak-to-trough decline in house prices.
Westpac this week also warned that household finances will be smashed in 2023 as around half of all mortgages reset from their current low fixed rates to rates that are around double current levels.
“For example, borrowers who fixed for two years in 2020 may have secured a rate in the 2.5% to 3% range. Those same borrowers are now looking at a two-year rate that’s more than 3 percentage points above what it was back then”, according to Westpac.
All of which is terrible news for Prime Minister Jacinda Ardern, who will go to the election in late 2023 with an economy teetering on recession, housing wealth slashed, and huge numbers of households in severe mortgage stress and depressed.
