Domestic travel and home renovations are top choices among Kiwis planning to spend more money over the coming months, a prominent economist says.
The latest Tony Alexander Spending Plans Survey which represents 1242 Kiwis across different ages and regions, shows spending intentions are on the rise, with many citing catch-up as the reason.
A net 25 percent plan to increase spending over the next three-to-six months, meaning there's a 25 percent difference between those intending to spend more, and those intending to spend less.
"This represents a partial bounceback from the 10 percent decline in April to 21 percent (from 31 percent in March), and is the first improvement since December," Alexander said in his report.
Survey results for May show the areas poised to benefit most from the increase in spending are domestic travel and home renovations.
Despite the opening of the trans-Tasman bubble on April 19 and confirmation of the Cook Islands travel bubble from May 17, a net 29 percent of respondents plan to spend more time exploring their own country, up from a net 25 percent in April. The small monthly rise follows a gradual drop in intention to spend on domestic travel from February.
A net 27 percent intend to dip into their pockets for renovations around the home, up from 19 percent in April, which the report refers to as a "big recovery". Intentions to spend on gardening equipment were also higher than in April.
"This means anyone experiencing difficulties securing a contractor for their renovations is going to continue to struggle," Alexander said.
In contrast, following the Government housing announcement, a net 9 percent plan cut back on investment property spending, similar to a net 10 percent intending to spend less in April.
Although the survey doesn't capture intention to buy investment properties, Alexander said the results indicate the policy changes (including phasing out the ability for landlords to offset interest expenses against income for tax purposes) "are having a sustained impact".
But it's not yet known whether a drop in investor activity will make room for more buying from owner-occupiers, with a net 4.3 percent intending to buy a home for their own use, up from 2.9 percent in April but down from 6.4 percent in February.
"Nevertheless, this is the second-strongest reading since November, so one might say some potential owner-occupier buyers are taking hope from the policy changes," Alexander said.
As wealth is a key driver of spending, the bounce in spending intentions suggests people don't expect house prices to fall, the report said.
In line with a rise in intentions to spend on house renovations, intentions to spend on furniture and appliances bounced back from October, with a net 2 percent planning to spend more.
A net 3 percent of survey respondents intend to spend more on cars, suggesting caution around future income.
Statistics New Zealand confirms spending on accommodation totaled $185 million in April, up 20 percent on March. Spending on travel agencies and tour operators totaled $31 million, up 29 percent. Total electronic card spending (seasonally adjusted) was $8.1 billion, up 4 percent.
Higher consumer spending intentions indicate a general improvement in confidence about the future, helped by the recent drop in unemployment and an improved global outlook.
