Kiwis spending $45 less every week - economist

Photo / Herald on Sunday

The average New Zealander is spending $45 less a week than they were before the recession in a bid to wipe out debt and inject equity back into their homes - a move which is hurting retailers.

NZIER principal economist Shamubeel Eaqub said the "deleveraging" of debt by households meant the country was better positioned to deal with economic uncertainty, but this had come at the expense of retail sales.

"We are not spending a lot and we are not consuming a lot. If it was a normal recovery we would be snapping back."

"We have got all the shops geared up for a much larger wallet than what they are getting."

Last month the Herald reported New Zealand's premier shopping district was punctured by empty stores, shops for lease and closing down sales and counted 15 shops that were closed or closing down.

Eaqub says retailers should be braced for a disappointing pre-GST hike spend-up and Christmas sales as consumers "made do".

"Since the late 1990s household spending has been trending up at a steady pace."

"Now instead of having two cars we might have one and it might be that we are buying Pams instead of Watties.

"There has been a lot of trading down done."

Eaqub expects it will be more than two years before the economy returns to pre-recession levels.

"In terms of real GDP per capita we think it's probably going to go back to pre-recession at end of 2012 or early 2013. We will still have growth, but because we lost so much during the recession it's going to take that long to get back to the old level."

"When we were consuming more and more and leading a more material lifestyle, we had very strong house prices gains and we knew we didn't need to save as much because we felt wealthier and knew we were covered."

As people realised the easy gains from property were gone, they had moved to pay down debt and inject equity back into the housing market, he said.

"At the moment we are spending $45 per person per week. If you multiple by 4.3 million people and by 52 weeks, that's a lot of money not going into retail sales."

"Reducing this level of debt means next time we have a recession or when the Reverse Bank raises interest rates the shock for households will be less.

It is a positive thing but if you are a retailer it really sucks."