RBNZ cuts offer relief, but optimism still lags
Consumer confidence in New Zealand remained subdued in the September 2025 quarter, with households still grappling with cost-of-living pressures, a soft jobs market and muted house prices, according to the latest Westpac McDermott Miller Consumer Confidence survey.
Confidence index remains below average
The consumer confidence index edged down 0.3 points to 90.9 in September, effectively unchanged from the June quarter and still well below the long-run average of 100.
“Economic confidence in New Zealand has remained soggy,” said Westpac senior economist Satish Ranchhod (pictured).
“That lingering softness in consumer confidence in the face of falling interest costs highlights that factors such as softness in the jobs market, increases in living costs and softness in house prices remain big concerns for many households. Those concerns are also weighing on spending appetites.”
The subdued sentiment lines up with the latest NZIER Consensus Forecasts, which downgraded GDP growth for the year ending March to just 1.5%. Economists at ASB and Westpac also expect GDP to have shrunk in the June quarter, although both continue to forecast further OCR cuts to support recovery.
RBNZ cuts yet to flow through
The Reserve Bank (RBNZ) has cut the official cash rate (OCR) multiple times this year, most recently in the weeks before the survey. Mortgage rates have fallen sharply as a result, with most fixed rates now sitting under 5%.
“With around half of all mortgages coming up for re-pricing over the next six months, many borrowers will have the chance to secure a much lower interest rate when they next re-fix their mortgage,” Ranchhod said.
One-year fixed mortgage rates are around 160 basis points lower than a year ago, while two-year rates are down nearly 220bps from 2023.
“But while those falls in mortgage rates will be welcome news for many households, it will take time for their full impact to flow through to households’ back pockets,” Ranchhod said.
Household finances under pressure
Despite easing borrowing costs, household finances remain under strain.
“Against that backdrop, 42% of households we spoke to this quarter told us their financial position has deteriorated over the past year. In contrast, just 17% told us their financial position has improved,” Ranchhod said.
Surprisingly, fewer households now expect to be better off financially in a year’s time compared to the previous survey, with financial stress particularly acute among lower-income families.
NZIER also pointed to household spending as a key area to watch. With around 77% of mortgages due for repricing in the next 12 months, repayments are expected to fall further, supporting a gradual recovery in discretionary spending.
Spending still restrained, but some green shoots
Households continue to cut back on non-essentials.
“Very few of the households we spoke to this quarter think it’s a good time to make a major purchase,” Ranchhod said. “Similarly, most reported that they’ve been winding back their spending on activities like dining out or in bars over the past year.”
However, there are signs of recovery. Retail spending has picked up modestly in recent months, including in discretionary categories such as household goods and hospitality.
Ranchhod said spending is likely to gradually firm toward year-end as more households roll on to lower mortgage rates.
Regional shifts in confidence
Confidence levels vary across the country. Auckland has emerged as the most upbeat region, while Wellington households remain pessimistic.
Confidence in many rural areas has softened, although dairying regions such as Waikato, Southland and Canterbury continue to report firmer sentiment thanks to strong commodity prices. In contrast, labour market weakness is weighing on confidence in Whanganui-Manawatu and at the top of the South Island.
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