Consumer confidence rose in September to the highest level in 32 months, the latest ANZ-Roy Morgan consumer confidence survey shows.
It’s the third straight month of improvement, but there remains a way to go, ANZ said.
Topline consumer confidence rose three points in September to 95.1.
“It is still well below par, but it’s at its highest level since January 2022,” ANZ chief economist Sharon Zollner said.
“Things are looking up, cautiously.”
The lift in confidence was driven by expectations about the future, rather than views of the here and now.
Zollner said consumers can see better times ahead now interest rates are falling.
A net 25% expect to be better off this time next year, up eight points.
House price inflation expectations rose from 2.8% to 3.2%.
Perceptions regarding the economic outlook in 12 months’ time lifted one point to -17%. The five-year-ahead measure rose six points to +9%.
However, the present outlook remained gloomier.
Perceptions of current personal financial situations rose two points to -16%.
“That’s very weak, but well off its recent low [-30% in February 2023],” Zollner said.
A net 25% think it’s a bad time to buy a major household item, down two points and “still sending soft signals about retail demand”.
The future conditions index – which is made up of forward-looking questions – rose another five points from 100.5 to 105.6.
In contrast, the current conditions index was flat and is much more subdued at 79.6.
“Things are likely to remain tough for some time yet. Unemployment is set to continue to rise, and given most mortgage debt is on fixed terms, there will have been little relief on the debt-servicing front yet,” Zollner said.
Zollner noted around half of mortgage debt will roll over within six months.
“Which is breakneck speed by New Zealand standards (and faster than we rolled onto higher rates as the Official Cash Rate was lifted), but it’s a much slower passthrough than in countries like Australia where the majority of debt is on floating rates,” she said.
On the plus side, inflation expectations are lower and house price expectations are lifting, she said.
“There’s no quick fix but the groundwork for a consumer recovery is being laid.”
The Reserve Bank next reviews the OCR on October 9.
Economists are picking 50 basis points (bps) of further cuts by year-end.
ANZ expects 25bps cuts at both the October and November meetings.
The Reserve Bank cut the OCR by 25bps to 5.25% in August – the first cut since March 2020.
RBNZ’s latest forecast rate track suggests the OCR will fall to at least 5% by the end of the year and to at least 4.5% by June next year.
Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics including retail, small business, the workplace and macroeconomics.
Nearly 90% of new mortgage lending in October was floating or fixed for a year or less.