Household finances in a vice

This reinforces Westpac’s expectations for subdued household spending and economic growth over coming months. While the Westpac McDermott Miller Consumer Confidence Index rose 5.4 points this month to 83.1, it is well below average.
Consumer confidence has been at low levels for more than a year across all regions, age groups and income brackets.

Westpac chief economist Kelly Eckhold says this is despite New Zealand’s strong labour market. Unemployment is 3.4% and disposable incomes have risen by 6.5% over the past year.

“Even as earnings have pushed higher, the majority of households are reporting their finances are being squeezed. In fact 43% of the households we spoke to in June told us their financial position had deteriorated over the past year, while just 14% had seen an improvement,” he says. 

The pressure on household finances is coming on two fronts including living costs, with consumer prices up 6.7% over the past year; a big chunk of which has been the costs of necessities – housing and utility costs up 7% in the year to March and food prices up 12% in the year to May.