Plastic cards busy in build-up to GST rise

Sales of big-ticket items rose last month in the lead-up to the increase in GST on October 1. Photo / Natalie Slade

Consumers gave their plastic cards more of a workout last month as they made big-ticket buys before the increase in the GST rate on October 1.

Retail electronic card transactions, which include spending on both debit (eftpos) and credit cards, rose 1.5 per cent compared with August when adjusted for seasonal effects, Statistics New Zealand said.

Core retail transactions, which exclude the automotive sector, were up 1.4 per cent on August, driven by a 4 per cent rise in spending on durables, the biggest since June 2007.

"At least some of the increase in the retail industries is likely to reflect additional spending ahead of the GST rise," Statistics NZ said.

Spending on fuel rose 2.9 per cent.

ASB economist Christina Leung said there had been a lot of publicity towards the end of the month that petrol would rise 7c a litre as a result of the increase in GST and excise taxes.

Spending on vehicles rose 2.3 per cent, on consumable items 1.1 per cent, on apparel 0.5 per cent and services 0.2 per cent (on top of a 3.1 per cent rise in August). "The broad-based nature of the improvement in spending in September suggests the recovery in retail spending remains in place," Leung said.

Deutsche Bank chief economist Darren Gibbs said the next card transactions report, for October, would shed light on how retail spending has performed since the GST increase and income tax cuts. He expects it to show a modest decline, led by lower spending on durables.

"Even so, this will leave spending on a modest uptrend, although the sustainability of that uptrend will continue to be questioned until employment and income growth strengthen and households become more comfortable with their levels of debt."

Electronic card transactions represent 61 per cent of retail spending. The proportion has been steadily growing; two years ago it was 59 per cent. But within it, credit card use has been declining over the past two years and now accounts for 44 per cent of card transactions, the smallest share since the series began in 2002.