New Zealand households cut back on eating out and entertainment at the fastest rate in 35 years during the June quarter, a sign that the rising cost of living is still squeezing family budgets even as the worst of a mid winter price scare starts to fade.
The latest Westpac McDermott Miller Consumer Confidence survey, published on 17 June, found that a net 38 percent of households had pulled back on spending on dining out and other entertainment. The survey described that as the weakest result since 1991, the year the figures were first collected on this basis.
The headline index dropped 14.3 points in the quarter to 80.4, its lowest level since 2023. Any reading under 100 means more people are pessimistic about their finances than optimistic, so the number points to households that are wary about the months ahead rather than ready to open their wallets.
Westpac senior economist Satish Ranchhod tied the slump to a sharp rise in living costs through late May and early June. “In the wake of the Middle East conflict, fuel and other living costs have been pushing higher,” he said. “There has also been related upward pressure on borrowing costs and growing concerns about the outlook for economic activity.”
That survey was run between 1 and 12 June, right as petrol prices spiked on the back of the overseas conflict and the jump in oil prices that came with it. The timing matters, because a second and more up to date measure tells a noticeably different story.
The monthly ANZ Roy Morgan Consumer Confidence survey, taken later in June, found sentiment lifting to 91.3, back to where it sat in March before the conflict, though still well short of its January peak. ANZ chief economist Sharon Zollner put the swing down squarely to the petrol pump. “It’s pretty clear that’s what caused confidence to plummet, and that’s what’s causing it to bounce back,” she said, and any reading below 100 still points to pessimism.
The two surveys are not measuring exactly the same thing at the same moment, which is why they can point in opposite directions in a single month. The Westpac quarterly survey caught households at the peak of the fuel price scare. The ANZ monthly survey, run a fortnight later, picked up the relief that followed as oil prices eased back and pump prices started to come off their highs.
Read together, the message for retailers and hospitality operators is that the mood is fragile rather than broken. People are still nervous, they are still trimming the small luxuries first, and a single shock at the petrol pump is enough to send confidence tumbling. Eating out, takeaways and a night at the movies are among the easiest things for a stretched household to cut, which is why those categories tend to move first when budgets tighten.
The regional picture in the Westpac survey showed the pressure was not spread evenly. Wellington was the most pessimistic part of the country. Otago saw a sharp fall in confidence, with the hit to Queenstown tourism and hospitality weighing on the numbers. Canterbury held up a little better, helped along by a strong dairy season that is putting money back into farming districts and the towns that service them.
There is an awkward tension under all of this. Confidence is recovering in part because the Reserve Bank signalled in May that it had finished lifting the Official Cash Rate, which gave borrowers some hope that mortgage costs had peaked. Yet ANZ economists have since warned that the central bank may not be done after all. In a forecast released on 28 June, the bank said it now expects three more rate increases this year and a roughly 2 percent fall in house prices, as the Reserve Bank tries to keep a lid on stubborn inflation.
If those rate rises arrive, the feelgood factor that lifted the ANZ survey could prove short lived. Higher mortgage repayments would land on the same households that are already cutting back on restaurants and entertainment, and would give them another reason to keep their spending tight.
The backdrop is not all gloomy. The wider economy has been picking up, with official figures showing gross domestic product rose 0.8 percent in the March quarter, the strongest quarterly growth since late 2023 and faster than the pace seen in Australia or the United States over the same period. Job security remains reasonably solid and wage growth is historically strong, both of which give households a floor under their finances.
The problem is that those gains are being eaten up by prices. When the cost of fuel, food, rates and insurance keeps climbing, a pay rise can feel like standing still. That is the gap between the economic data, which is improving, and the way many people say they actually feel, which is still cautious.
For businesses planning for spring and the run into the election, the practical takeaway is to expect a careful consumer who responds quickly to any fresh cost shock and who treats dining out and entertainment as the first things to go. The recovery in sentiment is real, but it is thin, and it would not take much to knock it over again.
What are you noticing in your own spending heading into winter, and have you cut back on eating out or other small treats? Let us know in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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