Consumer confidence slumps, despite support from the government
Consumer confidence has hit its lowest point since 1988, and while Finance Minister Grant Robertson didn’t find this surprising, he believed the government has achieved the right balance in the support it has offered.
The Westpac McDermott Miller Consumer Confidence Index fell 13 points to 78.7 in the June quarter – the lowest since the survey began in 1988.
Michael Gordon, Westpac’s chief economist, said the combination of increasing mortgage rates and rising living costs were squeezing household budgets in a way they had not been in decades – and many households would feel more financially pressured over the coming months, NZ Herald reported.
Despite the impact of global financial pressures on Kiwis, Robertson said the government was enacting enough measures, such as temporary fuel tax cuts and a cost of living payment for those on low incomes. It was due to the war in Ukraine and ongoing supply chain issues from COVID-19 that the economic pressures were lasting longer.
“This is going to be a tough 2022,” Gordon told the publication.
There were varying expectations on whether New Zealand was heading to a recession after GDP declined in the March quarter, Robertson said. While the Treasury didn’t predict a second quarter of negative GDP, that could change.
Fuel tax cuts were extended until the end of August by the budget, while temporary cost-of-living payments of about $27 a week for those on incomes of less than $70,000 will be paid monthly from Aug. 1 for three months, NZ Herald reported.
Robertson believed there was the right balance between helping people deal with cost pressures without further stoking inflation.
“We've been temporary, we've been targeted with our support, we continue to monitor it in the face of ongoing pressures, but to make sure New Zealanders are supported, I think we've done the right things,” he told NZ Herald.
Act leader David Seymour said the slump in consumer confidence was a sign of a looming recession and the government’s cost-of-living package and other spending would only add to inflation. He cited Treasury’s advice that the temporary $350 cost-of-living payment would put pressure on inflation.
“The prime minister blames a ‘tough international environment’ for our downwards economic spiral, but she is only halfway to figuring out or acknowledging the catastrophic effect her government's out-of-control spending has had,” Seymour said.
Robertson said if the cost-of-living support was not targeted or temporary, it would make inflation worse “and those political parties who are promising across-the-board permanent tax cuts need to ask themselves whether they will be unnecessarily exacerbating inflation,” NZ Herald reported.