The Reserve Bank of New Zealand (RBNZ) has been one of the world’s most aggressive central banks with respect to monetary tightening, lifting the official cash rate by 4.50% since October 2021:
This aggressive tightening has driven consumers back into their shells, according to Tony Alexander’s latest Spending Plans Survey.
A net 37% of respondents said they plan cutting back on their spending over the next 3-6 months. This is the second worst reading on record and a deterioration from a net 30% pessimistic reading recorded a month ago:
To make matters worse, the only area where consumers are spending more are groceries. “This is not because we love bread but because of the rising cost of the weekly shopping trolley and the need to keep paying that cost”, according to Alexander:
A net 8% of people also said they plan to cut back spending on a new home in which they will live. This is the second worst reading on record:
The main reasons why people are planning to cut back on expenditure is because they are mainly worried about what the future holds and their level of debt:
These results are understandable given the RBNZ has explicitly forecast further rate hikes and a recession in order to bring inflation down.
In doing so, the unemployment rate is projected to soar by 2%, with house prices forecast to plunge by 23% peak-to-trough.
Given such a poor prognosis from the RBNZ, no wonder New Zealand consumers have retreated back into their shells.
