'This is going to be a tough 2022': Finance Minister Grant Robertson on slump in consumer confidence

"This is going to be a tough 2022," says Finance Minister Grant Robertson. Photo / Mark Mitchell.

Finance Minister Grant Robertson says he is not surprised consumer confidence has hit its lowest point since 1988, but believes the Government has hit the right balance in the support it has offered.

The Westpac McDermott Miller Consumer Confidence Index dropped 13 points to 78.7 in the June quarter - the lowest since the survey began in 1988.

Westpac's chief economist Michael Gordon said household budgets were being squeezed in a way they had not been in decades by a combination of rising mortgage rates and increases in living costs - and many households would find the pressure on their finances becoming more intense over the coming months.

Robertson said New Zealanders were facing the impact of global inflation pressures – but he believed the Government was doing enough with measures including temporary fuel tax cuts and a cost of living payment for those on low incomes.

The economic pressures were lasting longer because of the war in Ukraine and ongoing supply chain problems from Covid-19.

"This is going to be a tough 2022."

Robertson said there were varying expectations on whether New Zealand was heading to a recession after GDP shrank in the March quarter. A second quarter of negative GDP was not forecast by Treasury, but that could change.

"Those forecasts get updated regularly now."

The Budget extended fuel tax cuts out to the end of August and temporary cost of living payments of about $27 a week for those on incomes of less than $70,000 will be paid monthly from August 1 for three months.

Robertson believes the balance was right between supporting people handle cost pressures without further stoking inflation.

"We've been temporary, we've been targeted with our support, we continue to monitor it in the face of ongoing pressures but to make sure New Zealanders are supported I think we've done the right things."

Act leader David Seymour said the slump in consumer confidence was a signal a recession was looming and the Government's cost of living package and other spending would only add to inflation. He pointed out Treasury's advice was that the temporary $350 cost of living payment would put pressure on inflation.

"The Prime Minister blames a "tough international environment" for our downwards economic spiral, but she is only halfway to figuring out or acknowledging the catastrophic affect her government's out-of-control spending has had.

Robertson said if the cost of living support was not targeted or temporary it would exacerbate inflation "and those political parties who are promising across the board permanent tax cuts need to ask themselves whether they will be unnecessarily exacerbating inflation".