Kiwis cut spending and drive less while cost pressures rise
New research from Westpac NZ suggests Kiwi households are actively reshaping their budgets to cope with higher living costs and uncertainty from the Middle East conflict – and many borrowers have built sizeable repayment buffers.
A nationally representative survey of 530 people found 84% have already changed, or plan to change, their behaviour in response to the conflict, up from 74% in March. More than three‑quarters are worried about the financial fallout, with 44% somewhat concerned and 32% very concerned.
“Rising prices are clearly weighing on New Zealanders’ minds, but what’s encouraging is they’re so far adapting well and making a plan to get through it,” Westpac NZ chief executive Catherine McGrath (pictured) said in a media release.
The most striking shifts are in everyday spending: people cutting back on non‑essentials jumped from 28% to 43%, while the share driving less has lifted from 41% to 51%. More than a third now say they have changed how they shop for groceries.
Westpac’s card data mirror those trends, with reduced spend on discretionary items such as clothing and restaurant meals as households redirect more of their budgets towards fuel and food. Latest Stats NZ electronic card figures tell a similar story, with March retail spending growth driven largely by higher fuel outlays while core spending outside fuel is barely growing.
ASB’s latest oil‑shock modelling reinforces the pressure on household budgets, estimating that the current spike in fuel prices will add around $55 a week to average living costs over 2026, with high energy prices expected to spill over into other essentials and weaken retail spending through the year.
Mortgage customers lean on built‑up buffers
Despite these pressures, Westpac reports that many home loan customers are ahead on their repayments. Nearly two‑thirds of borrowers are more than three months in advance, and the median customer is 10.6 months ahead. That reflects a deliberate push during the 2024–25 period of falling mortgage rates to keep payments unchanged rather than reduce them.
“As a result, nearly half our fixed home loan customers are paying above their minimum, compared to a third when interest rates peaked in 2024,” McGrath said.
Those customers can temporarily lower repayments if needed to free up cashflow as fuel and grocery bills rise.
McGrath warned that the strain on many households will increase the longer disruptions from the conflict drag on, and urged anyone feeling stretched to contact their bank early, noting that the sooner issues are raised, the more options there are to restructure repayments or put a plan in place.
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