Rate refixes, rising confidence set stage for higher spending
New Zealand households are opening their wallets again, with Westpac card data showing a strong start to the holiday shopping season and discretionary spending climbing across categories.
That pick‑up in spending is occurring as ANZ‑Roy Morgan New Zealand Consumer Confidence lifts to 98.4 in November – its highest level since June – with a net 21% of respondents expecting to be better off next year, and mortgage holders in particular reporting a stronger appetite to buy major household items as rate cuts flow through.
Westpac senior economist Satish Ranchhod (pictured) says the combination of sales events and lower mortgage rates is now showing up clearly in the bank’s Retail Spending Pulse.
Holiday spending picks up after “tough few years”
Westpac’s data shows a robust recovery in card spending heading into Christmas:
- In the three months to November, spending on Westpac‑issued credit and debit cards was up 8% compared to the same period last year.
- Even allowing for inflation of around 3%, that points to a solid rise in real spending volumes.
“After a tough few years, New Zealanders are dusting off their credit cards and heading back to the mall,” Ranchhod said in a Westpac report.
While media reports suggest Black Friday itself may have been a little softer than in previous years, Westpac notes that “there’s an increasing range of other promotions throughout the month (Cyber Monday, etc) that have been enticing consumers.”
Those shopping events come “atop large falls in borrowing costs that have been gradually boosting disposable incomes for an increasing number of New Zealand households.”
A separate Westpac survey of around 1,100 customers shows many households remain cautious, with 73% extremely or moderately concerned about the cost of living and 42% expecting to spend less this Christmas, trimming non‑essential items like dining out, shopping and travel to avoid a post‑holiday “debt hangover”.
Discretionary spending climbing across goods and hospitality
November’s lift was broad‑based, but the standout is discretionary spending:
- Spending on necessities such as groceries and fuel rose over the month.
- Clothing spending increased 5% compared to a year ago.
- Furnishings spending jumped 11%.
- Hospitality has also “taken a step higher”, with a **9% lift in spending in restaurants.”
“That lift in discretionary spending points to improving confidence as we head into the new year,” Ranchhod said.
From Canterbury to Auckland: spending strength broadens out
Spending is up nationwide, but regional patterns remain important:
- Rural powerhouse regions such as Canterbury, Otago, and Southland continue to see the strongest spending.
- Westpac links this to “firm commodity export prices, especially for dairy products,” which have boosted incomes and sentiment in many rural areas and “been flowing through to increases in spending, both on and off the farm.”
“In contrast to earlier in the year, the strength in spending has become increasingly widespread.” Spending is now on the rise in metro areas including Auckland and Wellington (though Wellington is “still running a little behind” most other parts of the country).
This broadening suggests that the benefits of lower mortgage rates and better income conditions are now reaching a wider range of households, not just export‑driven regions.
“Re‑fix in ’26” to further boost household spending
Westpac highlights that sharp falls in borrowing costs are boosting disposable incomes now – and are set to do much more over the coming year.
“Last week, the Reserve Bank signalled that the interest rate cutting cycle has likely come to a close," Ranchhod said. "However, the full impact of the large mortgage rate falls over the past year is yet to be felt. That’s because many borrowers are still on the relatively high fixed mortgage rates that were on offer in recent years.”
Key points from the Retail Spending Pulse:
- Around 32% of all fixed‑rate mortgages will roll over in the next six months alone.
- Many borrowers will refix onto much lower interest rates. Over the past year:
- The one‑year mortgage rate has fallen by nearly 130bps.
- The two‑year rate is about 250bps lower than in 2023.
Westpac concludes that “that ongoing roll over on to lower mortgage rates will help to boost disposable incomes for an increasing number of households over the coming year. And we expect that will also boost retail spending appetites.”
Confidence lifting, but caution hasn’t fully disappeared
The ANZ‑Roy Morgan survey shows that:
- Headline consumer confidence rose from 92.4 to 98.4 in November, the highest since June.
- A net 21% of respondents expect to be better off this time next year.
- The “good time to buy a major household item” gauge remains net negative at ‑9, but has improved, and recent gains have been driven largely by mortgage holders as lower interest rates start to ease pressure.
Inflation expectations ticked up slightly, with two‑year‑ahead CPI expectations at 5.2%, still well above current headline inflation. The survey notes that in recent years there has been a strong negative correlation between inflation expectations and consumer confidence, underscoring how unusual this simultaneous lift in confidence and lingering inflation concern is.
Consumers’ reluctance to spend in recent years “has certainly been felt by the retail sector,” but the latest card and confidence data indicate that picture is now changing as rate cuts filter through to household budgets.
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