KEY POINTS:
The days of spending beyond our means are over - at least until the middle of next year, economists say.
Holidays, new cars and flat screen TVs will be off the shopping list for many as the credit crisis brings an end to debt-fuelled spending.
But two years of tighter purse strings will help us save more of what we earn and leave our finances in better shape.
Westpac economist Dominick Stephens said the spending shut-down was the solution to years of unsustainable shopping. Economists knew it was coming, but the credit crisis had sped things along.
Like a hangover from a big night, the problem was not the painful after-effects of spending, but the carefree behaviour that went before.
New Zealanders had cut spending by about 1.3 per cent, he said. Falling house prices and a more careful approach to borrowing would continue that until 2010.
Mr Stephens said the New Zealand dollar would keep falling, meaning:
* Cheap imported goods, particularly from China, would cost more.
* People would keep their old cars and televisions for longer.
* People would take fewer overseas holidays and cut spending on clothing and shoes.
Mr Stephens said falling commodity prices had dashed hopes exports might get the country out of debt.
ANZ economist Cameron Bagrie said overseas borrowing - which funds about a third of national spending - was our Achilles heel when it came to the credit crunch.
Our spending had been based on the expectation assets and house prices would always go up.
"People need to go back to the good old days of budgeting and living within your pay packet," he said.
ASB's Nick Tuffley said tax cuts and lower average mortgage rates would ease pressure on households.
BUDGET MOVES
Five ways to tighten your belt:
* Make a list of everything you spend.
* Ask yourself if you really need to keep up with all the latest technology.
* Buy second-hand, and pay with cash.
* Take your lunch to work.
* Plan your Christmas shopping.
Source: Federation of Family Budgeting Services
