Leading economist has a grim outlook for New Zealand's economy with latest consumer confidence survey at all-time low

A leading economist has a grim outlook for New Zealand's economy as events here and around the world push consumer confidence to an all-time low.

The latest ANZ-Roy Morgan Consumer Confidence survey Darkest Before the Dawn showed consumer confidence plunged 16 points in February to 81.7 - the lowest level since the survey began in 2004. 

Brad Olsen from Infometrics told AM on Wednesday, there is "fear and uncertainty" in households in New Zealand, which will lead to businesses having to work harder than ever for customers going forward. 

"At the moment, households are feeling the economic outlook is worse for them now than even during the depths of the global financial crisis," Olsen said. 

"That definitely does put some big worries on where the economy might go. We know that spending has been trying to crawl its way back before Omicron, but it has taken a big hit now. 

"We know with the cost of living, inflation going up also interest rates going higher and the housing market turning around at some stage, all that suggests… people don't feel flush with cash and don't want to go out and spend it as much."

Olsen said there is potential for New Zealand's economy to bounce back but we're going to need to be very forthright in convincing New Zealanders to spend their money.

He said it wasn't all doom and gloom with some light at the end of the tunnel once New Zealand gets over the Omicron outbreak peak.

"We are certainly hoping that the New Zealand economy does have that ability to come out of what is effectively a de facto lockdown at the moment," Olsen told AM. 

"We've got a lot of people with COVID, a lot of people isolating as household contacts, some people moving around like normal but a lot of New Zealanders are keeping themselves at home, keeping themselves away from COVID-19. 

"They're not travelling, they're not going out to spend, so the indicators at the moment look fairly grim." 

One major issue making it hard for the New Zealand economy to bounce back is the cost of living crisis.

Kiwis are spending, on average, an extra $4000 to $5000 in the past 12 months on basics such as food, rent and fuel. The majority of the increase is fuel, with an extra $678 a year at the pump on average.

Olsen said it's a challenging time at the moment with everything going on in New Zealand and around the world.

"The indications from overseas are certainly there is that ability to bounce back to have people get out and about and we are hoping we might well be about a month-or-so away from that," he told AM. 

"What is concerning at the moment is that confidence amongst consumers, amongst households, is quite low. 

"Omicron is playing on things, the war in eastern Europe is also dampening thing down, then you've got this cost of living crisis that is coming forward, all that is starting to add to those woes households are feeling. 

"But you do hope, once we get out the other side of Omicron, people are feeling like they can get out and about, they can spend that cash they have been saving up over recent times."