Confidence dips as crisis‑driven fuel costs threaten recent relief
Consumer confidence has dipped again in New Zealand as war‑driven fuel price spikes cloud the outlook, just as many borrowers have begun to benefit from lower mortgage rates, according to the latest Westpac–McDermott Miller Consumer Confidence survey.
The confidence index fell 1.8 points in the March quarter to 94.7, remaining well below the 100 “breakeven” line that separates optimists from pessimists.
Senior economist Satish Ranchhod (pictured) said the survey, run in the first half of March, shows global events starting to weigh on sentiment. Households, he said, have “grown a little more nervous about the economic outlook”.
The softer mood comes against a backdrop of rising inflation risks, with Westpac now expecting annual CPI to lift to around 3.2% by mid‑2026 and ASB warning it could push above 3.5%, raising the chance of higher‑for‑longer interest rates.
Lower mortgage rates helping, for now
Despite the headline decline, more New Zealanders said their financial position had improved over the past year. Westpac attributes this to two key supports: strong export commodity prices, particularly dairy, and a significant drop in borrowing costs over the past 12 months.
Many mortgaged households are now rolling off the relatively high fixed mortgage rates set during the Reserve Bank’s tightening cycle and on to lower refix offers. Westpac notes that this “lift in the disposable incomes of mortgaged households has helped to boost spending in recent months”, with card data showing stronger discretionary spending on furnishings, dining out, and entertainment.
However, ASB’s latest inflation analysis suggests those gains may be fragile, with higher fuel, food and power costs likely to push CPI back above the RBNZ’s 1–3% target band over the next 18 months.
Those trends have underpinned better conditions in regions with strong rural or tourism backbones, including Gisborne, Hawke’s Bay, Waikato, Northland, and Queenstown. Lower interest rates are also supporting confidence in metro areas such as Auckland, although Wellington remains the most pessimistic region, with survey respondents there pointing to weak activity and job prospects.
Fuel costs and conflict cloud the outlook
The main new headwind is the conflict in the Middle East and its impact on petrol and diesel prices. Ranchhod said the drop in confidence “follows the outbreak of war in the Middle East and the related large increases in fuel costs”. The average price of 91‑unleaded is already about 63 cents per litre higher than before the conflict, with diesel rising even more. Jet fuel prices have more than doubled, pushing airfares higher.
Westpac and ASB both warn that if retail petrol prices push toward $3.50 per litre, as ASB forecasts, transport and imported cost pressures could quickly squeeze household budgets and keep mortgage rates elevated for longer.
Westpac cautions that the longer the conflict continues, the greater the disruption to economic activity and pressure on household finances is likely to be, which could see confidence fall further. Top of FormBottom of Form
See the full Westpac report here.
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