KEY POINTS:
Saying no to debt-fuelled spending is paying off for some young renters and savers.
Despite stinging food and petrol increases, economists say higher interest rates, cheaper imports and retail bargains are making life easier for those with cash in the bank.
Westpac economist Doug Steel said the roughly two-thirds of households that did not have a mortgage were doing well in the present climate - provided they had some savings.
This included younger people who were yet to buy, and older people with mortgage-free homes.
"Renters and savers have done better over the last year than homeowners, who have seen their asset stay flat at best," he said.
Rents had risen only one fifth as much as house prices over the past five years, while returns on savings had increased, said Mr Steel. "Anyone with savings in the bank is cashing in on a higher income flow."
David Dickinson, 29, his partner and 14-month-old child are among the renting households hoping years of saving will now pay off. For the past four years the couple have saved 10 per cent of every cent they earned - even down to saving 10 per cent of a student allowance. Dickinson said the family had always lived within their means.
"I've never carried interest on my credit card and I've never had a hire-purchase. I spend what I can." Now, he said falling house prices and a drop-off in retail spending were opening doors for people with cash.
"You go to Bond & Bond and everything's on sale."
A 24-year-old Hamilton woman who did not want to be named said she had learned not to use her credit card after seeing friends struggle to pay off their debt. "I have no credit card debt and an interest-free student loan under $10,000," she said. "If I can't afford it, I don't buy it."
New Zealanders as a nation are poor savers. A 2006 Reserve Bank paper showed household saving had been falling away since the early nineties. In 1993, household saving went into the negatives, and never recovered. In 2005 the household sector spent almost 15 per cent more than its disposable income.
Those who avoided the trap of easy credit say they are relieved. A strict savings plan helped Noel Rodgers weather the credit crunch, despite having a mortgage and "a few" rental properties. The 49-year-old parts and service company manager went to see a budget adviser in 2002 because he felt his finances were out of control.
He traded his large home for a smaller house and mortgage, cut down on beer and coffee and began chipping away at his mortgage. With a debt of just a few tens of thousands, he can upgrade to a house as nice as the one he used to own.
"I feel relieved," he said. "I set a spending limit and didn't go over it."
Mr Rodgers said he would not be adding to his rental portfolio unless interest rates fell. "I only buy what I can afford, and I buy expecting interest rates to go up."
Economist Mr Steel said those with money to spend had been given a "pretty chunky" income boost by last year's dairy boom, which had kept the dollar high and cut the cost of imported goods such as clothing and electronics. Even petrol was cheaper than it could be.
"Believe it or not, petrol prices would be even higher if it weren't for the strong New Zealand dollar. Every dollar you have in your pocket now buys more stuff on the global market."
