Spending confidence low and likely to fall further

More than 40% of households who took part in the latest Westpac McDermott Miller Consumer Confidence say their financial position has deteriorated over the past year.

Thursday, September 18th 2025, 8:37AM

by Sally Lindsay

In contrast, just 17% say it improved. That is up slightly from 15% last quarter, but still low,” Satish Ranchhod, Westpac senior economist says

“Surprisingly, despite the continuing fall in interest rates, the number of households who expect to be better off financially this time next year has actually dropped back since the last survey.

“And with New Zealanders holding large amounts of wealth in the housing market, it’s another factor that could be weighing on confidence,” he says.

Concern about financial pressures is widespread and is particularly acute among households on lower incomes.

The confidence index edged down 0.3 ppts in September to a level of 90.9 – effectively unchanged from the June quarter and still a fair way below historic averages. A level below 100 indicates there are more households who are pessimistic about the outlook than those who are optimistic.

The index shows although falls in mortgage rates are helping boost many households’ disposable incomes, their spending power is being squeezed by increases in the cost of food and other essentials.

At the same time, the labour market has been softening.

The RBNZ has signalled the OCR is likely to further and by more than it had previously signalled by the end of the year.

At the same time about half of all mortgages are coming up for re-pricing over the next six months, and Ranchhod says it will give many borrowers the chance to secure a much lower interest rate.

For example, one-year fixed mortgage rates are around 160bps lower than this time last year, while two-year fixed mortgage rates are close to 220bps lower than in 2023.

“While those falls in mortgage rates will be welcome news, it will take time for their full impact to flow through to households’ back pockets,” he says.

“It’s also notable that despite interest rate falls over the past year, house price growth has remained muted.”

Few households think it’s a good time to make a major purchase. “Most say they have been winding back their spending on activities like dining out or in bar over the past year,” Ranchhod says.

While spending appetites certainly aren’t strong, he says signs of recovery are starting to appear. After stalling in the early part of the year, the past few months have seen modest increases in retail spending.

“While spending growth is likely to remain patchy over the next few months, we expect it will gradually firm as we approach the end of the year and more borrowers roll on to lower interest rates.

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