Reopening euphoria continues to dominate in New Zealand as retail strength extends beyond essentials like food and energy to travel and discretionary retail.

However, with a mortgage burden 113% of disposable income, households are at a greater risk of becoming overextended due to mortgage liability.

The Mastercard Economics Institute has released its annual forecast for 2023, titled “Economic Outlook 2023”, demonstrating how a new multi-speed global economy will impact growth and consumer spending behaviour. The report found in New Zealand:

• High rates & housing: after years of a housing boom, higher interest rates are expected to squeeze the cost of living budgets, shifting the way consumers spend broadly.
  • New Zealand is relatively high on the list where the mortgage burden is well over disposable income, making up 113% of disposable income
    • Because this number is above 100, this means households are at a greater risk of becoming overextended due to mortgage liability
  • In New Zealand, the housing-related share of spending decreased by 2.5 percentage points from 2019 to 2022 (spending at housing-related stories vs. total retail)

Consumers in New Zealand have weathered the macro headwinds better than other markets, likely boosted by a greater willingness to access excess savings, a tight labor market and a stronger recovery in credit spending.

Although consumers in New Zealand are remaining resilient in the face of inflation, a discretionary squeeze on consumer spending may be on the way.

Mastercard expects inflationary pressure to ease next year, with the average inflation rate of developed economies falling from 7.1% in Q4 2022 to 3.1% in Q4 2023.

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