Seasonally adjusted, spending was up 1% to $60b, driven by spending on services and non-durable goods like groceries, partly offset by a decrease in spending on durable goods like motor vehicles.
Net disposable income – the calculation of all income sources minus tax – decreased 0.9% to $59b.
“With net disposable income falling in the June quarter, the household sector is funding the increase in spending through borrowing and drawing on existing funds,” national accounts industry and production senior manager Ruvani Ratnayake said.
Across all households, net worth dropped 2%, or $47b. That represents the value of all assets owned by households minus the value of all their liabilities.
The value of owner-occupied property decreased $21b or 1.8% this quarter, and equity and investment fund shares decreased $27b or 2.6%.
Household financial liabilities grew 0.7%, continuing a relatively steady increase in recent quarters. This was driven by a 0.9% increase in housing loans, and partly offset by decreases in consumer loans and student loans.
Westpac senior economist Satish Ranchhod said the data showed disposable income levels were up 4.7% over the year, lower than the 6% increases seen last year.
“Importantly, that growth in overall income levels has been boosted by the growth in the population.
“Adjusting for population changes, we estimate that disposable incomes for individual households rose by a more modest 2.8% in the year to June. That’s below the 3.3% rise in consumer prices over the same period.”
He said the data showed the average household now spent about 10% of their income on debt servicing, the highest since 2016. Of those who had mortgages, interest costs had hit 21% of spending, the highest level in more than a decade.
“That combination of slowing income growth, high interest rates and large increases in living costs over the past few years has been a significant squeeze on households’ purchasing power. Even for households whose incomes have kept pace with overall inflation, many have found that an increasing share of their incomes have been spent on non-discretionary items, like the costs of utilities, local council rates and insurance.
“That’s left less for discretionary spending in areas that add to households’ standards of living. For instance, the past year has seen sharp falls in spending in areas like dining out or household furnishings.”
The pressure on household incomes has seen savings dropping again over the past quarter. In fact, New Zealanders’ savings levels have gone backwards in six of the past eight quarters.
He said falling interest rates would help but would take some time to filter through, and in the meantime unemployment was still rising.
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