Consumer confidence has fallen to the lowest point since the Westpac McDermott Miller Consumer Confidence Index began more than 30 years ago.
New Zealand's gloomy outlook is in line with what was being seen around the world. Photo: 123RF
Westpac McDermott Miller Consumer Confidence fell sharply in the December quarter, dropping 12 points to 75.6, the lowest point since 1988.
"Households finances are being squeezed as we head into the holiday season," Westpac acting chief economist Michael Gordon said.
"Importantly, for large numbers of households, the pain is still ahead of them," he said, with an economic recession forecast from the middle of next year.
"We expect that spending will continue to weaken over the year ahead as borrowing costs continue to push higher."
As well as increases in borrowing costs, the sharp rise in consumer prices was eating away at consumers' spending power.
"There have been particularly large increases in the cost of food, housing, and petrol prices over the past year, and those increases are being felt by every family across the country," he said.
"Consistent with that, the downturn in confidence has been widespread across age groups, income brackets and regions.
"Many borrowers are still on the very low mortgage rates that were on offer in the early stages of the pandemic. However, around half of all mortgages will come up for repricing over the next 12 months. In many cases, borrowers will face refixing at substantially higher interest rates.
"With prices charging higher and their finances being squeezed, many households have scaled back their spending," Gordon said.
McDermott Miller market research director Imogen Rendall said the lead-up to Christmas was usually more positive.
"Instead, there are no good news stories this Christmas, with consumer confidence at its lowest point since the Westpac McDermott Miller survey began," she said.
"Many respondents expect bad economic times ahead, not just over the next 12 months but for the next five years."
Rendall said New Zealand's gloomy outlook was in line with what was being seen around the world, with rapidly increasing prices, contracting supply chains and rising borrowing costs.
"But that knowledge will do little to lessen the pain for households this holiday season," she said.
The survey was conducted over 1-12 December 2022, with a sample size of 1559.
An index number over 100 indicates that optimists outnumber pessimists. The margin of error of the survey is 2.5 percent.