Consumer confidence drops to lowest level since 1988 in Westpac report

Consumer confidence has dropped to its lowest level since 1988, with significant nosedives among people aged between 30 and 49, Westpac research has found.

The Westpac McDermott Miller Consumer Confidence Index released on Tuesday revealed a fall of 13 points to 78.7. Anything below 100 indicated there were more people pessimistic about the economy than optimistic.

In March, the index was 92.1. The last time it was in the 70s was in 1988, making the June quarter's consumer confidence result the lowest in 34 years. 

"Household budgets are being squeezed in a way that they haven't been for decades," Westpac acting chief economist Michael Gordon said. 

"With many respondents expecting bad economic times ahead for New Zealand, as well as an expectation that their own financial situation will worsen, it looks like we are in for a bumpy ride."

As well as the cost of living, the Westpac report described rising interest rates as compounding the pressure on household budgets. 

"The combination of rising mortgage rates and increases in living costs has already taken a large bite out of disposable incomes," Gordon said. "And with interest rates set to rise even further, many households will find the pressure on their finances becoming more intense over the coming months."

Westpac found consumer confidence was low across all New Zealand demographics.

"Those aged 30-49 have been cautiously optimistic for the last three quarters but this June quarter that optimism nose-dived 26.1 points to 77.1," McDermott Miller market research director Imogen Rendall said. "Household finances of those in this age group are likely to be being put under significant strain as prices continue to rise and mortgage rates go higher."

Confidence among those aged between 18 and 29 also dropped 5.9 points to 86.1, while optimism for people over 50 declined 4.8 points to 71. That age group had declined every quarter for the past year.

Men's confidence shifted significantly from the last quarter (down 21 points to 78.9) while women's confidence dropped 6.2 points to 78.5.

"Rising prices and interest rate increases are having an impact on the financial position of both men and women but when it comes to their own financial situation improving in a year's time, men are far more pessimistic," Rendall said.

Statistics NZ in April reported inflation was at a 32-year high and the economic situation has continued to worsen, largely driven by Russia's invasion of Ukraine and the economic fallout from COVID-19. New Zealand's Gross Domestic Product (GDP) also fell 0.2 percent in the March quarter. 

The Government has said the "tough international environment" was behind the current economic situation. 

Prime Minister Jacinda Ardern acknowledged on Monday that "a number of really difficult" economic factors were being created by the Russia-Ukraine war but said the "underlying fundamentals for New Zealand are strong".

The Government slashed fuel excise tax by 25 cents in March which was subsequently extended to August to help ease some of the pain in Kiwis' back pockets.

Facing questions over whether the Government would extend that tax cut beyond August, Ardern told AM she didn't "want to give a prescriptive, 'If X happens, if Y happens'".

Finance Minister Grant Robertson last week, responding to New Zealand's latest GDP results, said the Government had eased COVID-enforced border restrictions to help businesses and the economy rebuild.

"While the domestic economy is resilient and the annual GDP figure is strong, we know many New Zealanders are struggling with higher prices," he said in a statement. "This is why we have reduced fuel excise duty, road user charges and halved public transport fares, as well as introducing a temporary, targeted cost of living payment.

"Unemployment is at a record low and we are in a strong fiscal position.

"Exports are still 1.9 percent up on a year ago, so the March quarter fall shows just how volatile the global situation is."