The number of New Zealand households that would go out and spend a $10,000 windfall fell to its lowest level in 20 years, suggesting consumers may have been scared off by the central bank's steep rate cut in August, the latest Westpac McDermott Miller survey shows.
At the same time, the proportion of households who said they would use a cash windfall to repay debt has rocketed higher, back to levels last seen in 2009.
The central bank cut its official cash rate by 50 basis points to a record low 1 per cent on August 7 and governor Adrian Orr called on consumers to spend more and businesses to invest more. Normally, RBNZ moves the OCR in 25 basis point steps, except in times of crisis such as the Christchurch earthquakes or the GFC.
"The survey, however, may suggest that the RBNZ's double-cut scared people more than it helped. Certainly, it raises questions about whether we will see economic activity firming through the back half of 2019 and early 2020 as the RBNZ is looking for," senior economist Satish Ranchhod said.
Economists are widely expecting the central bank to cut the cash rate at least once more this year, likely in November.
Ranchhod also pointed to a reluctance to spend on big-ticket items like household furnishings. The number of households who think now is a good time to purchase a major item fell to a net 15.1 per cent from a net 17.9 per cent in the prior quarter. That was the third decline in a row and the measure is now at its lowest level in two years.
The survey also showed that while New Zealand households are increasingly downbeat about the economic outlook, they are more optimistic about their own financial situation.
The consumer confidence index fell 0.4 of a point to 103.1 in the September quarter, below the long-run average of 111.1.
In today's survey, the present conditions index was down 0.2 of a point to 106.4 while the expected conditions index eased 0.4 of a point to 101.0. A reading above 100 indicates optimists outnumber pessimists.
A net 9.2 per cent anticipate a worse outlook for the wider economy over the coming year compared with a net 4.6 per cent in the prior quarter. A net 1.1 per cent are negative about the five-year economic horizon versus 11.9 per cent who were positive in the prior quarter.
"The fall in consumer confidence comes atop a more general deterioration in the economic landscape. Since our last survey, there has been a wave of negative headlines about conditions in the global economy," said Ranchhod.
"While households are obviously worried about the recent stream of bad news on the economy, they are more positive about their personal financial situation," he said.
A net 2.4 per cent said they felt financially worse off now than they did a year ago, versus a net 4.7 per cent who felt that way in the prior quarter. A net 13.2 per cent said they expect to be better off in a year's time versus a net 3.2 who thought they would be worse off in the prior survey.
Survey interviews were conducted over the period September 1-12. The sample size was 1,554.