Travel and DIY boom predicted as Kiwis shift spending priorities

Tuesday, 30 June 2020

The urge to spend money on DIY and renovations hasn't left New Zealanders following lockdown.

A mini boom in domestic travel and house renovations could be on the way, according to surveys of New Zealanders' spending plans.

A survey by Westpac McDermott Miller on leisure activities shows household spending has bounced back as Covid-19 restrictions eased, particularly in bars and home-related spending.

Tourism operators are praying the jump in domestic tourism during Queens Birthday weekend will continue as they grapple with a lack of overseas visitors.

However, Westpac senior economist Satish Ranchhod cautioned that the recovery was patchy and may not be sustained in the coming months.

''New Zealanders are in the mood to hit the town again, and we're also spending more on in-home entertainment.

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''However, households remain cautious about making major purchases.

''We’re also yet to see signs that households are planning to significantly increase their spending on holidays onshore.

But a survey by independent economist Tony Alexander disagreed.

Kiwis partied hard after lockdown, although they are likely to continue avoiding mass events.

Alexander, who surveyed more than 3000 people last week on their spending intentions, found strong spending plans for domestic tourism in the next three to six months, beyond the school holidays.

The difference might be partly a matter of timing – Westpac's survey of consumer confidence covered more than 1500 people in early June.

Alexander, a former BNZ chief economist, said a net 41 per cent of his respondents were planning to spend more in local travel, which was ''very good news'' for tourism operators.

''But I still think for the tourism operators it's going to be exceeding tough when you don't have international tourists coming through…

''I fully expect a number of operators are still going to be closing down over the next few months, despite the resurgence in people discovering New Zealand.''

People were also prepared to make an exception in their budgets for home renovations and alterations.

A net 21 per cent in Alexander's survey planned to splash out in that area.

People piling into the sharemarket despite fears of widespread unemployment have prompted warnings from regulators.

This was a bit of a puzzle, Alexander said. ''When you have a downturn and consumers are pessimistic you expect they'll cut back spending on durable goods – furniture, appliances, vehicles – and discretionary items –clothing and footwear.''

''But I would also expect in a normal recession that they would be pulling back on home renovations. That is what is vastly different here and I think it's been [people] staring at their walls [over lockdown].

''And this is consistent with what we're hearing from overseas as well, a lot of activity for tradies … It is a bit of a standout area and it presents an opportunity for people to get some employment.''

Selected types of investment were also in favour. Plans to buy a new property were largely static and fewer people were planning to splash out on vehicles (a net 14 per cent).

But a net 7 per cent of people planned to spend more on investment property, and a net 9 per cent were putting money into shares, more so among younger respondents.

Mayfield Motors dealer principal Simon Wakelin says business has been 'robust' since reopening post lockdown.

This was consistent with ''the many stories of young people in particular jumping into the sharemarket, in such numbers that the Financial Markets Authority has felt the need to give a warning about properly understanding markets,'' Alexander said.

Both Westpac and Alexander urged caution on the figures, saying they felt there was an element of catch-up involved in the spending resurgence.

''That's why I asked people why they were going to spend more, and I had a net 32 per cent spending money that they're not spending on overseas travel, and a net 27 per cent catching up on spending delayed,'' Alexander said.

The economic picture was still inconclusive, with electronic card spending predictably higher from April to May, but filled jobs data for May out this week also stronger than expected.

At the moment, the Covid-19-driven spending patterns ''tells us that underneath all the woe, there is not a belief that New Zealand prospects are dire,'' Alexander said.

Tourism New Zealand's new campaign is designed to change Kiwi attitudes to holidaying in NZ. (Video first published May 22, 2020)

Westpac's Ranchhod also noted the increased interest in home renovations, in-home entertainment and a lift in spending at bars.

Kiwi flooded bars and cafes after lockdown eased, with hospitality spending bouncing back from a 90 per cent decline during lockdown, to being just 9 per cent below in the third week of June.

''This lift in spending appetites has been particularly strong among those aged 50 and over and among women. It’s been seen across all income groups but was largest among those earning less than $50,000 per annum.''

But certain parts of the hospitality sector were doing better than others, with mass gatherings like sporting events, live shows and cinemas still suffering from consumer nerves.

Consumer confidence had declined and he predicted further softness in spending through the back half of this year, as unemployment increased.