Pessimism reigns as NZ ponders 2022 economy with no elimination strategy

New Zealanders are pessimistic about the economy, worried about rising interest rates and the prospect of new Covid-19 strains, Westpac’s latest consumer confidence data shows.

The bank’s consumer confidence index fell 3.6 points to 99.1 in the December quarter. Any reading below 100 indicates that more people are pessimistic than optimistic about the economy. It follows an equally strong decline in the September quarter.

“It has been a stressful year for many New Zealand households,” said Westpac senior economist Satish Ranchhod. “With the combination of lockdowns, rising interest rates and now a new Covid variant, it is no surprise that confidence has fallen in recent months.”

He said that while the job market was in good health and spending started to pick up, the factors weighing on sentiment were likely rising mortgage rates, which rose rapidly in the second half of this year, and ongoing concerns about Covid.

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Infometrics chief economist Brad Olsen said it reinforced concerns that had been apparent since New Zealand moved from a Covid elimination strategy to more active suppression.

There was a sense of “HOGO,” he said — hesitation or hassle of going out in a changed environment.

He said that while 2021 was intended to be a year of recovery, it had instead been a year of closure for Auckland in particular and there was a sense that bigger changes were on the way and people were concerned about how the pandemic could be affected. would be managed, which made it more difficult to plan for the coming year.

Auckland was an area where confidence grew as restrictions were eased.

Ricky Wilson / Stuff

Auckland was an area where confidence grew as restrictions were eased.

He said that while it was likely a more pessimistic view would emerge next year, he hoped it would remain at the relatively low level seen in the survey.

Ranchhod said many households reported that their financial positions had deteriorated over the course of the year and that a growing number would come under pressure through their finances next year.

“Borrowing costs have already taken a bite out of the disposable income of many households, and many more will be re-locked in the coming year at higher interest rates. Also, a large number of households will come under pressure in their purchasing power from the rapid increase in consumer prices, which in many cases will outpace wage growth.”

Bay of Plenty had the strongest decline in confidence in the quarter, followed by Northland.

“Confidence is low in every part of the country and there are sharp declines in tourist spots such as Queenstown, Nelson and the Bay of Plenty. The combination of social distancing requirements and a lack of tourists from Auckland has significantly reduced spending in those regions.”

Auckland had a small confidence boost in the quarter, which Ranchhod said was due to the end of the lockdown.

Imogen Rendall, director of market research at McDermott Miller, said work on the investigation began just as news about omicron was reported internationally.

“With New Zealand not yet out of the delta forest, the potential implications of ommicron’s breach of Fort New Zealand and its spread to the community seem firmly in the minds of respondents as they completed the survey this quarter,” she said.

People earning less than $30,000 a year had the largest drop in confidence, down 4.6 points to 86.6.

Households earning more than $100,000 were still optimistic, but their confidence was down 3.7 points to 111.3.

Rating agency Fitch said it expected New Zealand’s economy to grow by 5.3 percent in 2021, but to moderate to 3.8 percent next year on the back of tighter monetary policy and a slight erosion in purchasing power. what would weigh on private consumption.

A 3.7 percent drop in GDP for the September quarter was the second largest decline since the series began in 1986.

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