Household consumption expenditure

IBISWorld forecasts household consumption expenditure to climb by 2.3% in 2025-26, to total $180.6 billion. Falling mortgage rates have begun to flow through to homeowners' disposable incomes this year. Nevertheless, a large portion of New Zealanders have fixed-rate mortgages and have yet to refinance, meaning that this cash rate low-point will still take some time to show up in consumption expenditure. Spending patterns have also changed as prior-year inflation spikes have bumped up household expenditure, especially from cost-push inflation due to volatile energy and import prices. Households spend more on essentials, like food, housing and household utilities and less on communication and recreation.

Population growth and disposable income are the main factors determining growing household consumption expenditure. The New Zealand Government's (Te Kawanatanga o Aotearoa) strict international border controls throughout the pandemic slowed migration into the country, constraining a key avenue for household consumption expenditure growth earlier in the period. Net migration then rebounded following border openings. Nevertheless, this has since slowed, with a large number of New Zealanders migrating to Australia, seeking out more readily available wage growth. Wage stagnation has been a major stifling mechanism to household consumption expenditure in New Zealand, with precarious financial conditions limiting domestic job transitions.

Despite slowing migration growth, household spending has been supported by money flowing through more active sectors, with the agriculture and healthcare sectors experiencing heightened demand. New Zealanders exposed to other sectors, like construction and non-food manufacturing, have struggled to generate activity, with real wages in these areas diminishing disposable income. The recent cost of living pressures have encouraged consumers to tighten their budgets, awaiting more noticeable relief from recent cash rate cuts to fully flow through. Overall, IBISWorld forecasts household consumption expenditure to hike at a compound annual rate of 2.4% over the five years through the end of 2025-26.