A third of households cut spending on fresh food

Wednesday, 31 July 2024

Veteran Tony Coleman's wife Bev explains the retired couple's struggle to afford food to eat.

Retail spending in New Zealand has plummeted, with many households cutting essential items from their budgets to afford the cost of living.

“It’s really sad and striking to learn that about one third of New Zealand households have stopped buying fruits, vegetables, and meat on a regular basis,” economist Shamubeel Eaqub told a hospitality conference at the Te Pae convention centre in Christchurch on Tuesday.

In 2016, 87% of households questioned as part of the household economic survey bought vegetables weekly. By 2023 that proportion had fallen to 67%, meaning 33% of households did not buy vegetables.

Similar declines were seen across other categories of household spending, with 39% not buying fruit and 38% not buying meat.

“This recession is worsening poverty,” said Eaqub - who also said he was “certain” there would be an economic recovery within a year.

A third of NZ households have stopped buying fresh veggies, fruits and meat regularly, according to economist Shamubeel Eaqub.

Eaqub emphasised the health concerns that arise from such falling spending.

“We have problems with diet in New Zealand in terms of nutrition and quality of food. This data suggests there are real concerns out there,” he said.

“It’s just sad that some people are living in such poverty or, for whatever reason, are simply not eating real food.”

The knock-on effect of the cost of living crisis on the hospitality sector has been significant and “very uneven”, Eaqub told the conference, which drew about 250 business owners and hospitality professionals from around the country.

Eaqub said the target market for the hospitality industry was changing considerably, with those in the poorer segment really struggling.

“Even the middle classes are making big sacrifices. Some families are already cutting back steeply,” Eaqub said.

Tightening the purse strings at home amid the cost of living crisis has had an impact on the hospitality industry, economist Shamubeel Eaqub says.

He stressed the importance of empathy and understanding customers’ struggles to better serve their needs, saying: “The have-nots are doing it really tough.”

Overseas visitors are boosting sales in cafes and restaurants in tourist hotspots, but that only reflects part of what is going on in the hospitality sector.

Holiday arrivals from the US continue to improve, while most other markets have remained relatively flat - “not yet to pre-Covid levels”, Eaqub said.

As household spending on fruit and vegetables falls, there are concerns it could affect people’s health.

But the recovery from China has stalled, with arrivals 45% below 2019.

According to the latest statistics from Tourism Evidence and Insights Centre, a tool developed by the Ministry of Business, Innovation and Employment, domestic guest nights took a notable hit, falling by 4% to 1.62 million over the last year.

International guest nights saw a modest decline of 1%, to 579,000, marking the first year-on-year decline in years.

At the regional level, Rotorua continues to demonstrate one of the strongest recoveries in terms of guest nights, while Queenstown still has the highest average annual occupancy rate.

Stats NZ figures show retail spending on electronic cards fell by 0.6% ($40 million) in June and has trended down since peaking in 2021.

“What we are experiencing today is a double punch,” Eaqub said on Tuesday.

“We had Covid and the lockdowns, which created a significant disruption to our industry. We had only just recovered and now we’re dealing with the economic cycle, the recession.

“But I can give you 100% certainty that over the course of the next 12 months, we will experience a recovery.”

Stats NZ figures show retail spending on electronic cards fell by $40 million, 0.6%, in June and has trended down since peaking in 2021.

Interest rate cuts are key if the economy is to recover in 2025, Eaqub says.

“Real spending is now at the lowest level since September 2019. On a per capita basis, real spending is the lowest since March 2014,” said Eaqub.

Household spending has been crimped by the increasing cost of living, including housing, such as rents and mortgage payments.

“I fear there is more weakness in the second half of 2024, with many mortgages to refinance at higher rates — over $200 billion in the next 12 months — and increasingly likely job losses,” Eaqub said.

Interest rate cuts are key for financial recovery next year, he added.